Macri may have chosen the most dramatic way to devalue, but Kirchnerites should not escape responsibility
By Sebastián Lacunza
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@sebalacunza
Editor-in-Chief
The devaluation of the peso of about 30 percent may expand choices and opportunities, or may bring dark clouds over the Argentine economy. It may be seen as an urgent step for an administration that seeks a truthful approach to a stagnant economy or as a right-wing government manoeuvring to massively transfer income to the privileged classes, but few deny that in the short term, the appreciation of the dollar will erode the pockets of workers, the middle class, pensioners and those families receiving social programmes.
About three weeks before the first round on November 22, Mauricio Macri’s economic adviser and current Finance Minister Alfonso Prat-Gay said that the dollar would appreciate about 50 percent, but he predicted that there would be no problems ahead because the US currency “virtually does not affect anybody.” That said, in the wake of a Let’s Change victory, inflation began to accelerate as prices are likely to increase about five percent in December, according to private consultancies highly valued by Macri’s PRO party. We will have to assume Prat-Gay’s considerations as part of an electoral campaign, when everything is plausible to be said.
Prat-Gay was not alone on the track to promise. Two of Daniel Scioli’s main economic advisers approved the decision to devalue taken by the new government. Hadn’t Scioli promised that the dollar would remain in the range of ten pesos by the end of the summer? “The campaign is over,” Miguel Bein, one of the Scioli’s advisers who now introduces himself as an independent consultant, said last week.
It is a fact that such a devaluation, combined with no limits and controls for currency purchases, drastic cuts in export duties and coming increases in utilities rates may lead to devastating consequences for the poor. We shall have to wait and see whether the official statistics bureau can be reconstructed and inform us how much poverty has grown. While some (landowners, exporters) saw their profits up at least seventy percent overnight, others (employees) must wait for possible improvements in their salaries — if they shouldn't start worrying about keeping their jobs, that is.
Macri may have chosen the most dramatic way, but Kirchnerism should not escape responsibility for the devaluation. They left the government as the Central Bank reserves stocks were approaching a critical zone, trade and financial blockades everywhere did anything but encourage investments and people paid crazy prices in dollars for some goods. All in all, these distortions were merely symptoms of the major problem — inflation. For its part, the CFK government devoted its energy to falsifying the price index. Everything seems science fiction, but devaluation is among us.
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