The twilight of the Leliqs model

First, evaluate and badyze what is at the center of the debate, It should be noted that a decrease in interest rates does not in any way mean that liquidation letters will not be paid.. The weakness of the Argentine economy must be sought in the full liberation of the financial markets and exchange markets implemented by the government, a policy that does not even establish the moment when exporters must liquidate their sales and which has proven to be a resounding failure to control the Dollar and inflation. The endless flight of capital, which has squandered the country's efforts to re-borrow on the international markets and with MFIs, has put the dollar at the heart of the success or failure of the current model.

Like this to contain the price of the US currency, the Central Bank raised interest with a dual purpose: peso badets do not go to the US currency and the contraction of the economy has the effect of lowering demand. What was once the Lebacs, now the Leliqs, whose stock continues to grow and currently stands at $ 1.18 billion, or 40% of the reserves or 85% of the monetary base, with a rate of annual interest close to 60%. This combination resulted in an expense for public coffers, which in June alone cost about $ 56,944 million and reached $ 297 billion in the first six months of the year.

The possibility of lowering Leliq rates to develop the economy and improve the social situation must be included in a general economic program

The policy of contraction of monetary expansion with higher interests is very counterproductive and risky because it restricts the current money supply to the detriment of a larger currency in the future, ie the problem will only be solved for later, waiting for a miraculous solution, read that the economy and public finances improve, which never happens in this contractual model. A pressure cooker effect is generated, which ends sooner or later to explode, as was the case with the exchange rate jump in 2018, which has increased by more than 100%. Although the interests of the Leliqs are paid by the Central Bank and not by the Treasury, this is only an accounting aspect for badessing the sustainability of macroeconomic policy. In this sense, there is also a return of information on the causality of the problem: if rates are high due to lack of trust; high rates do not help or contribute to the drift of the economy, in a compound that the government does not know, can not or will not leave.

The possibility of lowering Leliq rates to develop the economy and improve the social situation must be understood as part of a general economic program. Loss of interest is not risky if it is accompanied by an expansive program that restores confidence in production and not to financial speculation. If the productive sector is more attractive than the financial sector, capital is not directed to the dollar as a safe haven currency. By lowering rates, funds are being made available to invest in SMEs and trade, thereby stimulating the real economy. This must go hand in hand with a defense of local production, at the level of international trade and a tariff policy according to the reality of the country. In addition, Decreasing expectations of devaluation is a step forward in this task.

Setting up a foreign exchange market different from the current one, with proper regulation of the dangers of the exit from the country's current policy, which does not mean "a return to stocks" can help. It also goes hand in hand with the need to renegotiate debt maturities for the next mandate. The IMF alone will have to pay $ 46 billion. If the whole new operating system is properly structured, coordinated and implemented, lowering the Leliqs rate is not a danger either, but it is a natural part of the solution.

The increase in the number of retirees or free drugs is becoming a reality without compromising the coffers of the state, simply by changing the direction of economic functioning. To measure what is being debated, only what has been paid for by Leliq's interests during this part of the year is enough to finance 34 years of free medicine for all retirees. To this must be added the same interests as those of the rest of the government bonds, such as the Letes, for example.

The new economic policy would, by further controlling the dollar, reduce inflation. Lower inflation expectations would allow savers to not charge high rates to preserve their savings, leaving aside the possibility of a race. Today, the money supply of the Leliqs is an unproductive economy that does not turn into real economic activity, simply because sectors with high potential, SMEs and trade, are not profitable and the resources of productive sectors are transferred to financial capital, which does not work or does not produce. It is only a dam to contain the dollar at the expense of factories and employment. What the country needs is simply to change course from the real economy to the rest of the sectors.

(*) Director of the Bachelor in Economics of the National University of Avellaneda and member of the Collective of Political Economy of Argentina (EPPA)