2024-02-29 21:50:24
The dollarization of the Argentine economy seems to be an agenda mobilized by President Javier Milei himself and a handful of economists and that excites a part of the population tired of inflation and exchange rate instability. But while Milei and his followers can obtain immediate political gain, do theyWho are the actors in the Argentine economy that would benefit from dollarization and who would be harmed? In other words, what is the political economy of dollarization? Page 12 consulted several economists about this topic.
Winners and losers
For Genaro Grassoeconomist at the Cultural Center of Cooperation (CCC)among the winners of dollarization are “the international banks debt placements, since if the Central Bank cannot issue or place bonds in local currency, there would be many more incentives to place in international markets, which implies a greater volume of commissions from the placement banks.
In the list of winners also appear, according to Grasso, “multinational service companies (typically public services), who could charge their services in dollars and freely send them to their country.
In turn, “those actors who operate with a very high level of tax evasion and use of cash/activity illicitand that therefore, see the ‘inflationary tax’ on their holdings reduced: from real estate companies and private developers to criminal organizations trafficking in people and illicit substances. In the middle are those activities that are managed with high tax evasion but depend on the internal market, such as tourism or gastronomy or retail trade, which would benefit from stability but be harmed by the recession necessary to sustain dollarization. “These sectors may be harmed by dollarization but have expectations of benefits in this regard.”
Among those who would lose, Grasso lists: 1) los tradable in general: the countryside and agroindustry, and with less profitability cushion, the regional economies and industry; 2) companies linked to the public work, because of the adjustment necessary to carry out this type of economic policy and because if it is financed in dollars there is no way to save them or liquidate those debts; 3) the workers, especially unionized, given that adjustments are usually made through flexibility and unemployment; 4) the banks deposit collectors, who lose the possibility of bailout by the Central Bank.
“Neither the IMF nor the US are in favor of dollarizing, because for them Argentina’s problem is excess pesos/debts, and by not having the opportunity to liquefy them with a devaluation, You lose an important tool to make the adjustment. Likewise, the US may put its reputation at risk if dollarization fails. It should be remembered that the US is not a significant trading partner, its currency does not reflect competitiveness like that of Argentina, and although it is an important partner in terms of FDI, so are Mercosur, Spain and China. Tie yourself to American competitiveness “It could be a problem if our trading partners, more closely associated with the BRICS, decide to adopt other trade, exchange or monetary policies.”
Crystallize the regressivity
“The dominant sectors, whatever their structural insertion, interpret that the Milei government can be a opportunity to consecrate its long-awaited redefinition of the economic, political and social matrixand definitively subordinate labor to capital, removing all its historical conquests and returning that new irreversible situation at the conclusion of this structural change with the dollarization of Argentine society”, raises the recent document “The theory of the cycle of eternal return. Challenges faced by the popular sectors in the current stage”, prepared by Eduardo Basualdo and Pablo ManzanelliFlacso researchers.
“What we propose is that The fraction that historically pushes dollarization is international financial capital, but which currently would be the antidote to avoid the ‘cycle of eternal return’ of national and popular governments. Local economic groups, which historically opposed this policy, They could accept it so that with dollarization a new distributive matrix can be crystallized (strongly regressive for the popular sectors) after the brutal adjustment that is being deployed. That is the historic opportunity that synthesizes the interests of those who lead the dominant sectors, and for which the determined state control of local groups over energy policy (and therefore of Vaca Muerta) is not a minor issue,” Pablo said. Manzanelli to this newspaper.
Stability at any price
Fabián Amico, economist at CITRA (UMET – Conicet), analyzes that “dollarization has an implicit and explicit promise of stability durable. There is a part of truth in terms of inflation, because by suppressing the peso, there is no exchange rate and there is no inflationary impact of the devaluation. To achieve this supposed horizon of stability, all degrees of freedom in economic policy must be cut.”
“Let’s think that the BCRA was created by Raúl Prebisch to get out of the currency board schemes, which were so harsh that made a flexible adjustment of the external situation impossible. In other words, the BCRA was not created to defend the value of the currency, nor was it created with that objective, nor was any central bank in the world. These institutions were created to deal with situations of public spending expansion, finance the government’s public debt, create a financial market and particularly, deal with the external vulnerability of the economy. “Complete dollarization seeks to eliminate an organism that would allow us to deal with external shocks.”
“Dollarization aims to generate a deterioration in the productive structure in order to achieve stability, limiting all degrees of freedom of economic policy and reducing the possibilities of dealing in the long term with the problem of external restriction, both on the financial side, because savings can no longer be encouraged in domestic currency, as on the real side because there is no capacity to make industrial policy to diversify the export basket, so that the export and import structure is frozen forward. It is a situation where too many things are sacrificed to achieve remote or disputed stability,” Amico concludes.