How to “kill” the dollar in the campaign, the dilemma that has already reached the Treasury and the IMF

Argentine officials, bankers and economists passed through Washington this weekend. Nicolás Dujovne, Minister of Finance, and Guido Sandleris, head of the Central Bank, participated in the Spring Assembly of the IMF. Representatives of banks and economists, meanwhile, went to meetings in parallel to the summit, where they also saw investors, clients and the Washington bureaucracy.

The three main questions that were heard about the country were: the high and rising inflation registered by the economy, the possibility of Cristina Kirchner winning and how the dollar would behave in a context of uncertainty about the electoral result and, even, an eventual ballot.

On the first issue, inflation, those responsible for economic management advanced in meetings in Washington that the CPI for March (will leave on Tuesday) “would give about 4.3%.” Around an important official was even said “closer to 4.5% than 4%”. There is concern in the economic team about the impact of that news. To top it off, according to private data, inflation in the first week of April was 1.5%. This does not mean, say the government, that this month’s CPI be above March.

If the dollar rose 3.3% since October and the monetary base increased slightly, what generates the acceleration of inflation? This is the question that investment banks and investment funds ask for these hours.

One of the explanations is that the behavior of people and companies is governed more by their beliefs that costs will rise in the coming months and not by what Dujovne or Sandleris say. This is typical of a high and not moderate inflation regime. “Today nobody looks at the Central Bank when it comes to projecting a price or a cost,” warns Marina Dal Poggetto, director of the Eco Go consultancy. And he adds: “Nobody wants to decapitalize.”

There are firms that prefer not to sell because they do not know if they will win or lose by disposing of their inventories, taking the money and recomposing the stock. They prefer to keep the assets and not have cash. The Government intends to send a signal in this regard with a price announcement this week. Although for a macroeconomist it is just that: an announcement, not a stabilization policy.

The second question of the weekend went through the figure of Cristina Kirchner. “Will it win?” Was the most heard question, perhaps discounting the candidacy of the former president. And then, perhaps related, speculation about the behavior of the dollar as the elections approach and the chances of Mauricio Macri being re-elected will decrease. Or even a CFK-Macri ballot.

Attentive, the economic team took note twice. In the immediate term, try to cushion the bad inflation data of this Tuesday with agreements, auctions and the ratification of the plan with the IMF. But for later, near the elections, it looks for tools to shield the noise of the dollar from the images of Macri, María Eugenia Vidal and Horacio Rodríguez Larreta.

The economic and IMF authorities insist that the area of ​​non-intervention of the dollar would not change in the coming months. “We are going to see how it works now that the dollars of the harvest enter plus the start of the auction”, it was heard to say in the organism this weekend. However, there are talks and projections to give the Central Bank more room to face the volatility of the dollar in the campaign. The bank could lower the rate of updating of the dollar price of the band (it had started at 3%, then it was 2% and now 1.75%). In the Government they discount that given the evolution that drags, it would go down again. A weighty economist who visited Macri days ago believes that directly “should be fixed, at least until the elections.”

The Washington bureaucracy is already aware of these footnotes. Eduardo Levy Yeyati, Miguel Kiguel and Marco Buscaglia wrote a paper entitled “Argentina, a case of control of dollar volatility”.