Journalist:
In his recent analysis of the Argentine economy, Domingo Cavallo raised concerns about a possible significant reduction in inflation and warned of a looming deep recession. The former Minister of Economy also cast doubt on the feasibility of successful exchange rate unification in the near future. He pointed out that prices have strong inertia due to real salaries and pensions hitting their bottom, suggesting that they will need to increase monthly to keep pace with inflation. Additionally, Cavallo observed a deep recession evidenced by dramatic declines in activity in sectors like construction during the first two months of the year.
When considering the combination of declining inflation, economic activity, and rising dollar prices, Cavallo emphasized the importance of closely monitoring the real exchange rate in the official market, the evolution of dollar deposits in the banking system, and the flow of dollars into the local capital market. He expressed skepticism about successfully unifying and liberalizing the exchange market by mid-year and urged caution and strategic decision-making to avoid potential failures. Cavallo recommended adjusting the pace of devaluation of the official dollar in line with inflation rates and implementing measures to foster exchange reunification in a structured manner by 2024.
Cavallo concluded that achieving macroeconomic stability is crucial before attempting to unify and liberalize the exchange market. He cautioned against taking a rushed approach as it could lead to adverse outcomes. Instead, he stressed
