José Luis Machinea (Puerto Madryn, 1946) was president of the Argentine central bank between 1986 and 1989 and minister of the economy between 1999 and 2001. He then held the executive secretariat of the Economic Commission for Latin America and the Caribbean (ECLAC) until 2008. It can be said that he is an expert on Argentine crises. Now consider it essential that Mauricio Macri and Alberto Fernández reach a sort of agreement.
Question. What can you expect for this Monday?
Answer. The government seems to have made the decision to put a lot of money on the market and this can cause, in some way, stop or reduce the purchase of dollars. The question is: how long? If the uncertainty continues, it will not have a permanent effect. Then there is the issuance of dollar deposits, which are the ones that are falling. This does not bother me because they have a 50% reserve requirement: they can fall by half and there will still be money in the central bank. It would be more worrying if the pesos deposits were lowered, because it would mean that people go out to buy dollars. This has not happened so far. In this country, when the dollar becomes more expensive, people buy it more and more.
P. How many similarities are there between this crisis and that of 2001?
R. When I left the ministry in March 2001, the deposits were at their maximum. From there the people started to withdraw deposits and, although the arrival of (Domenica) Cavallo was an improvement in the country risk, it did not last long. A liquidity problem occurred because many debts were due each month. Cavallo tried to build a bridge with a loan to finance two or three year maturities. Interest rates were very high, 10 or 12% on debt, and fell into insolvency.
"In this country, when the dollar becomes more expensive, people buy it more and more."
P. What lessons did that crisis leave?
R. I have been in all crises, even in that of (Raúl) Alfonsín. In the crisis there is always an economic component and a policy. In Alfonsín there was a very deteriorated economy and (Carlos) Menem appeared saying that he would not pay the debt for three years, that he would double salaries and lower taxes. This accelerated the run (compared to the weight). He tried to negotiate the transition with Menem, but he didn't want to. It was an economic problem that became explosive when politics complicated the situation.
P. Does it link that crisis to the current one?
R. The economy has problems, at least, since May last year. Solvency problems were complicated by liquidity problems. So the political factor was added. It can be assessed whether the statements of (Alberto) Fernández were reasonable, but what exists is a presumption of the markets according to which a Fernández government will be similar to that of the Kirchnerism. And the markets are working, even if Fernández tries to prove that it will be different.
P. Why is it so difficult for Argentina to control inflation?
"The Argentine crisis leaves the IMF in a complicated position ".
R. Because with an inflation of 20 or 25%, wages and rates are adjusted for past inflation. C & # 39; is an inflationary inertia. Although a very restrictive monetary policy is applied, it cannot be stopped. This economy has had a high inflation for 70 years. One of Macri's problems was to think that monetary policy would solve the problem. Good for the Federal Reserve or the ECB. Here you have to combine fiscal, monetary and income policy.
P. What will the next government inherit?
R. If there is no consensus, the government that will come will have a much more complicated situation. If the deposits in dollars and pesos start to go, you will not have local funding. Nor will it be external.
P. Isn't Fernández's goal that Macri takes on the full political cost of the crisis?
"Macri thought that monetary policy would fix everything."
R. But part of that cost will be that there will be no financial system for granting credits. This is a problem for everyone, so I say a certain consensus is needed. The crisis will not be as bad as that of 2002, but there will be hardly any investments and if deposits continue to fall there will be no funding on the domestic market.
P. You know multilateral organizations well. What is the position of the IMF with the crisis in Argentina?
R. It is in a complicated position. I'm not saying the Fund's bet was wrong, but it went wrong. (Christine) Lagarde is gone and it is clear that the Fund's bureaucracy now carries much more weight. Without leadership, the Fund's bureaucracy is imposed, it fears to blame it and that is why they say "let's finish this story".
"The crisis will not be as bad as in 2002, but there will be no investment or funding"
P. How do you see the future relations between the IMF and Argentina?
R. Argentina must reschedule the deadlines and therefore must interact with the Fund. The Fund will establish the conditions and a negotiation is planned. Being extremely aggressive with the Fund, while paying politically, can complicate future relationships and interrupt access to credit.
P. Can we expect Macri and Fernández to reach some kind of agreement?
R. C is the temptation of the opposition to say "the worst, the best", but in this case it is worse for everyone. Achieving a certain consensus is indispensable. If Macri and Fernández will not agree, we will all suffer: this government, the neighbor and the people.
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