The Limited Times

Now you can see non-English news...

What will be the price of the dollar from Monday: devaluation sung with price jump without ceiling

2023-12-09T15:59:14.541Z

Highlights: Businessmen estimate an initial devaluation of 50% in Milei's term and inflation of 20% monthly from December to March. The main relative price that will change from Monday will be that of the dollar and the starting value will be defined at the last minute. A dollar of $800 or more could add fuel to the fire of inflation at the end of the year characterized by rising prices and a sharp blow to the pocketbook for retirees and wage earners. The scope of the fiscal adjustment promised by Javier Milei will be decisive in defining what will be the anchor in the search for a reduction in inflation for the second part of 2024.


Businessmen estimate an initial devaluation of 50% in Milei's term and inflation of 20% monthly from December to March.


Hours before Javier Milei takes office as President of the Nation, certainties about what is to come in economic matters are equated with uncertainties.

The senior executive of one of the most important consumer goods companies in Argentina commented over the weekend on one of the central problems that companies have today, which is trying to define a macro framework to carry out the 2024 budget.

Inflation of 20% in December with a commercial dollar of $ 800 at the start of the administration of the designated minister Luis Caputo spilling an inflation of 20% per month for the first quarter and betting that the increase in the cost of living will tend to fall to 6% monthly in the second half of the year, when an improvement in economic activity could be noticed.

To the question of why it means a dollar of $800 and not $650 or $1,000, the reasoning revolved around the fact that finally the President-elect will lean towards a "controlled fiscal devaluation."

In other words, businessmen and bankers believe that Caputo's plan will contemplate a major devaluation (Massa raised the official dollar to $400 on the last day) of the order of 50%, maintaining the withholdings on exports from the countryside and the PAIS tax on imports.

In this way, Caputo will seek to overturn Sergio Massa's exchange rate scheme consisting of buying relatively expensive dollars to sell them cheaply and in a dosed form.

Maintaining or increasing the PAIS tax to make imports more expensive and, at the same time, increase revenue in the search for not devaluing further to avoid an even greater inflationary jump than the one that is occurring is part of one of the most sensitive questions about the new government.

On Friday, Shell took the lead with the increase in gasoline prices (it is striking that a liter of gasoline costs practically the same as a small bottle of mineral water in a kiosk) and the queues in some supermarkets reflected the fear of rising prices.

A report by the consulting firm Equilibra (Diego Bossio-Martín Rapetti) states that: "Inflation during the presidency of Alberto Fernández accumulated 916%, which yields a monthly average of almost 5% above the second term of Cristina Kirchner (2.2% monthly) and the administration of Mauricio Macri of 2.9% per month."

And he finishes with an important fact by saying that "in the last four years items such as clothing, sugar, candy, appliances, fruits and vegetablesaccumulated increases of more than 1,100% while utility rates climbed only 455%".

The change in relative prices promises to be forceful from Monday and will be carried over in the coming months.

The main relative price that will change from Monday will be that of the dollar and the starting value will be defined at the last minute despite the fact that the future chief of staff, Guillermo Francos, has advanced that it will be $ 650.

A dollar of $650 would be equivalent to validating the last Massa dollar for exporters, made up of 50% of the old official dollar of $370 and 50% of the cash with settlement.

Caputo's dilemma is that a $650 dollar risks going "short" in the face of the sharp price rally of the past three weeks.

But a dollar of $800 or more could add fuel to the fire of inflation at the end of the year characterized by rising prices and a sharp blow to the pocketbook for retirees and wage earners.

In addition, and beyond the devaluation of the peso, on Monday the exchange rate scheme to be followed in the search for a single price for the dollar and the reduction of the exchange rate gap will be known.

The scope of the fiscal adjustment promised by Javier Milei will be decisive in defining what will be the anchor in the search for a reduction in inflation for the second part of 2024.

Once again, but with very different characteristics with respect to the prospect of an economic deregulation scheme, we will have to spend a hot summer.



Source: clarin

All business articles on 2023-12-09

You may like

Trends 24h

Latest

© Communities 2019 - Privacy

The information on this site is from external sources that are not under our control.
The inclusion of any links does not necessarily imply a recommendation or endorse the views expressed within them.