Rubinstein, an economist who defends fiscal balance and condemns the issuance

The economist Gabriel Rubinstein, chosen by the empowered Minister of Economy, Sergio Massa, was a guest columnist for the daily PERFIL a handful of days ago. The following are some of the main economic guidelines that he developed about the challenges ahead in Argentina in his July 16 column.

“In Argentina, the fiscal balance is on the ‘right’, and the fiscal deficit on the ‘left’. And it doesn’t matter if no one wants to finance it, and this leads to high rates of inflation, which tend to hurt the poor much more than the rich,” he shot.

“I would also like to explain this to Wado de Pedro (strikingly extolled by Eurnekian, Funes de
Rioja and others), Cuervo Larroque, Máximo and Cristina herself”.

What follows is an exact extract of the keys on which Rubinstein reflected in his recent article.

“If instead of intervening by supporting prices, it had limited itself to issuing money for the Treasury, before each bond maturity, which would be a reasonable alternative strategy (for me), that money would have gone to the banks (after returning to the market). of the dollar, overheating the free dollars), and the BCRA would have captured them in Leliq. The strategy would have been very similar to the one actually carried out”.

“To avoid the monetary issue, which, although sterilized, still produces a rise in the free dollar, the alternative would have been to ‘reprofile’ the bonds”.

“The effects of a reprofiling would be very negative:

a. The reputation of the state. that is already very bad, it would go down even more: how will local and foreign investors look at a country that, in the face of any difficulty, does not pay its debts? How will they judge a State that uses default, not as a tool of ‘last instance’, but as one of ‘first instance’?

“Wouldn’t there be some portion of depositors, who, seeing how their ‘colleagues’ investors default (including themselves, who have deposits and bonds), would withdraw deposits from banks and buy dollars, producing the rise in the dollar that is supposed to wants to be avoided with reprofiling?”.

Furthermore, knowing that the ‘backing’ of deposits is largely made up of the Leliq (another State bond), beaten from time to time (“the Leliq ball”), wouldn’t a default of the bonds in pesos be a ‘ called’ to withdraw deposits in pesos from banks?

The fiscal balance is “on the right” and the fiscal deficit is on the “left” and it is a fallacy

“Therefore, I consider that the action on this issue has been correct, although it only makes sense if it connects with the fiscal improvement promised by Batakis. Pesce’s is a paracetamol to lower the fever, waiting for the antibiotics that Batakis supplies to combat the infection.

“An issue that left a bitter taste is related to the foreign exchange market. Having stopped paying for all kinds of imports for three days created chaos in the real economy, which, in my opinion, could have been avoided. * “But, in general, and given the circumstances at times very dramatic, the actions of the Batakis-Pesce tandem, at least so far, seem correct and auspicious. Logically, it must be endorsed day by day with more actions according to it”.

“At the moment, with the bond market more normalized, the aim should be focused on the ‘delivery’ in fiscal matters. Many economic analysts want to ‘feel’ that the fiscal goals for this year and for 2023, agreed upon with the IMF (quite lax by the way), will be effectively met. We would like to see, almost game by game, how they will be achieved, beyond the single account and the freezing of vacancies.”

“And I would like, and I think many of my colleagues too, to be able to see a much clearer and more transparent roadmap for reservations. If we are allowed to save, travel abroad, pay with a card abroad, at a value of a dollar different from that of the MULC (for example, a MEP market), OK. If with that, and some additional measure, the purchase of supplies and imported goods for current and widespread use (for example, coffee!) is decompressed, it is understood in this economy in ’emergency’, that it flirts with hyperinflation”.

“Facing the crisis with a certain suitability in fiscal matters, reserves and peso market rollover takes us away from the most feared scenario, which is the hyperinflation scenario (and confiscations), with which we have been toying in the first days of July, so too reckless.”

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