The Minister of Economy emphasized that businessmen trust is more important for the Government than Congress approving the Base Law in the coming days. He spoke to a group of executives who support President Javier Milei’s postulates but have doubts about the Government’s ability to achieve a sustainable political scheme for reforms. Despite asking for trust, concerns that the Government has not been able to get Congress to approve a law after six months persist.
The formula of achieving fiscal surplus and maintaining a 2% growth in the official dollar to combat inflation remains firm in the Government’s decisions, despite recent financial market turbulence. The rise in the risk country rate, along with uncertainties about the Central Bank’s ability to continue buying dollars from farm exports, adds to the challenges. The idea that if the dollar moves, all prices move in Argentina’s bimonetary economy is a strong consideration for the Government.
There are discussions about potentially eliminating the 2% monthly growth fixing on the dollar for a few months to address current challenges. However, increasing reserves and maintaining exchange rate firmness presents a dilemma for the Government. The Central Bank’s liabilities still pose a significant hurdle, and as imports become increasingly expensive due to currency fluctuations, profitability becomes an issue.
The tension between increasing reserves and maintaining exchange rate stability adds complexity to an already challenging situation. As economic growth stagnates and inflation continues to rise, addressing exchange rate issues becomes critical for securing investment opportunities and ensuring long-term financial stability.
In summary, achieving financial stability while navigating economic challenges requires careful consideration of various factors such as reserve management and exchange rate stability. While some solutions may seem promising initially, they can ultimately create new problems or deepen existing ones. Therefore, it is essential for policymakers to weigh all options carefully before making any decisions that will impact long-term financial stability and investment opportunities in Argentina.
