2019 elections and economic crisis: Bloomberg was right

The badessment made recently by the agency Bloomberg Evaluate the Argentine economy as the most vulnerable in the world to international fluctuations, which represents a forecast that has just been corroborated by the aggravation of the conflict between the United States and China.

The fall in the interest rate on federal funds and the resurgence of the threat of rising rates launched by Donald Trump they provoked a reaction from the currencies of the Chinese who, although they died, marked a scenario of monetary and exchange rate impulses in other economies, such as that of India and other emerging countries, which have accentuated. precarious international financial stability.

The effects on the Argentine economy were quickly felt, with a simultaneous rise in the price of the dollar and the reference interest rate monetary policy (LeLiq rate).

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The Federal Reserve lowers the interest rate and the Central Bank of Argentina picks it up

In the last column we had warned about the gravity of a central bank acting against the global current, guided by very short-term electoral factors. It is inexplicable that, in June, the governing body validated a 5.4% drop in the value of the dollar, which showed a financial income in hard currency of 10%, so that in July, conversely, it caused a devaluation of 4.1%, neutralizing the aforementioned financial products.

These fluctuations in interest rates and the devaluation of the heat of the surveys are undressing a stop of irresponsibility in monetary and exchange rate policies. International turmoil came in August with a 300-basis-point surpbading the LeLiq interest rate and a wholesale devaluation of 1% in less than a week.

Although all developed and emerging economies adopt expansive monetary policies, lowering its interest rates to foster internal activityand at the same time, they accept the depreciation of their currencies to protect themselves from external shocks, the Central Bank of the Argentine Republic the interest rate rises to contract the means of payment and stop the devaluation. This irrationality has cost the governing body and the people of Argentina USD 2,268 million in international reserves between July 16 (date of entry of the last disbursement of the IMF) and August 6 (latest available data).

We have seen months of currency and exchange rate inconsistencies in search of convince the Argentines that everything is fine because the "dollar endures". However, while this adjustment occurs, the deterioration of the level of internal activity becomes unsustainable on a daily basis.

In any case, some benefit from these government decisions. The journalist Julian Yosovich published in The chronicler that, so far this year, Carrying profits in dollars reached 11.3%, level of hard currency financial earnings not published worldwide.

The Bloomberg news agency's rating of Argentina's vulnerability is based on the achievement of this fabulous gain in arbitrage between interest rates and devaluation rates.