How much the official dollar price can climb, according to Rubinstein

Gabriel Rubinstein, director of GRA Consultora explained how the momentum of the dollar continues in Argentina. The experienced economist, who was representative of the Central Bank under the administration of Roberto Lavagna and a member of the negotiating group for agreements with the IMF and the renegotiation of the public debt (2002-2005), believes that the government can resist a “maximum” devaluation of the official exchange rate.

But he warned that without an economic plan, reducing the deficit and therefore the monetary issue, upheavals in the foreign exchange market can continue. -Why is the parallel dollar increasing?

-The government has a significant budget deficit due to the pandemic although it is gradually reducing it. In Argentina, money is issued and, of course, part of this new money goes to the dollar as savings. It is independent of the increase or not in the rate, it is a structural demand for savings. When we want to see how cash with settlement (CCL) is, we project the issuance of currency. And there is a very close connection between the amount of money and the CCL. It can vary, if there is confidence it rises less if there is mistrust it rises more.

– How is the government doing to stop the rise of the parallel dollar?

– Until you dominate the deficit and dominate that there is no more monetary expansion, that will be the case. Saying that you can dominate the forex market is complicated. You have a huge gap with the official because having a double market with a 90% gap is very unstable. I do not see that a hyper or a riot is coming, but the situation is weak, fragile. I don’t think everything is going to go to hell but nobody can think of that in a balanced market.

-All this is happening despite the dollar being high in historical terms …

–It is a dollar that reflects general mistrust. He could be lower than the officer’s if there was confidence. Government does not inspire confidence. There are a lot of problems in the Argentine economy. Although they say the dollar is high, people prefer to save in dollars.

The pressure for a devaluation of 20 or 30% is there. You have to see what the Fund says. For the IMF, a gap greater than 30% is unsustainable. The likelihood of maximum devaluation keeps people in dollars. People say “I just want the dollars just in case”. It was a way for people to stay calm.

– After the elections, there will be a devaluation, will the official exchange rate have to be fair or can it hold?

–I believe the government will resist a massive devaluation. There will be an agreement with the IMF and the gap will gradually narrow. The official exchange rate is defensible in macro terms with the Fund, the problem is the spread. We will see how it happens. This is the basic scenario. But the game is not defined because the risks are there.

– When will the agreement with the IMF be reached? Before the elections, after …

–I think Cristina Kicrchner would benefit from an agreement with the Fund. Because if the economy does not break down, it will have fewer votes and it will go to defeat in 2023. It has an interest in finalizing an agreement with the Fund. I think it will be between December and March.

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