spending booms that occurs as a result of the issuance of spurious currency, or equivalently the issuance of currency to maintain an exchange rate above the market can only be inflationary.
SOME BACKGROUND
Whatever else was said, the inflationary process in Argentina resumed from the moment the government of Dr. Duhalde decided to pursue a policy of high exchange rates with the aim of making Argentine market competitive in the international arena. This policy was staunchly supported by chambers of commerce, as the UIA, and also for institutions that bind agricultural producers.
The thought of using a device assumed that Argentina's currency would become a country with high growth and development prospects is at least simplistic and hasty. The effects of printing money to sustain an exchange rate are devastating for the value of that currency. Buy more expensive it can be bought cheaper for several years (the dollar) through the use of issue can not be neutral in any way you want to use analysis.
The truth is that in this model hitches all, including the State itself, which thus could apply the tax gravosísimo exports, called by a failure of origin: deductions for such exports.
While out of the recession, the model will not significantly affect prices, but the initial jump caused by the devaluation scam that left on the road to all those who had some form of legal tender currency convertible and a remove ceased. Once the huge idle capacity originating from the huge investments of the hated 90's began to fill, prices began rising career.
As is known, almost from the beginning of Dr. Kirchner government, as Minister Dr. Lavagna, criteria were strengthened price controls arrangement known, and applied and changed tax rates on exports that were changed to punish or benefit some primary production sectors, to the extent that prices will accommodate state interests, not economic reality. That famous description of distortionary tax and short-lived implemented by the government to export taxes became the overnight in a way to force producers to lower domestic prices not to be punished with higher retentions.
appeared in 2006 export permits and the general ban on meat exports. Both measures, as well as all controls en las empresas, manifiestamente inconstitucionales pero aceptadas en un contexto determinado de amplio silencio de parte de empresarios e incluso de medios de comunicación.A todo esto, el sector industrial no sufría los embates de esta errática política intervencionista tendiente a paliar los efectos producidos por el impulso inflacionario que ella misma generaba. En efecto, la industria en general podía percibir los valores de sus exportaciones al valor inflado artificialmente del dólar, sin quita ni retención alguna. Unos cuantos sostuvimos ya en aquellos años, que la situación no podría sostenerse indefinidamente, y que más temprano que tarde por algún lado reventaría.
Los precios international raw materials were a factor in this scenario. Argentina was favored in the famous song by the terms of trade, wiping out the historical theory that they always would be disadvantageous for agroexportadores.Efectivamente countries, international prices helped greatly to an economic policy that he had no pillar that is the maintenance of a high expenditure through the use of issuing currency to buy dollars expensive and then apply taxes on exports to generate a fictitious surplus and then go out in public works spending or subsidies.
A HAZY THIS
What has been observed in the last 4 years is a spiraling rate of inflation once again and tried to overcome by interventionism and arbitrariness of all known. As early as 2007, the INDEC intervened in order to lower rates and do not recognize the phenomenon only partially. Currently the exchange rate is lagging behind even though the Central Bank is buying to not let fall. This is a sophism. Exporters are forced to liquidate their dollars and convert them into pesos, and then if they want, they can buy with those dollars to pesos before had to sell, with certain limitations and caps. In an open economy probably many of those dollars not enter the circuit weights, then falling sharply the supply of dollars and thus neutralizing the issue of currency without a major effect on the exchange rate.
But why the dollar is delayed. The reasons are several. On the one hand, the State sells dollars but sometimes seeks to restrict demand through red tape (stops, buyer ID, tax information, etc.). As at the same time, I can sell at least a good party without major problems. And thereby preventing the price drops, but that the price rise, as indeed has been doing. It is therefore the Central Bank itself determines using this procedure what kind of change that should govern. And it does so in order to keep more or less stable and thus artificially try to mitigate inflationary impulse injection of money. The old trick of the exchange rate is delayed so as to control inflation.
The dollar lost value against other currencies is not reflected at all by this policy, which does do Brasil, for example. So improving foreign trade with Brazil, which houses the international real value on the dollar. In other words, in Brazil if the dollar depreciates in the world, also depreciates in real. In Argentina, no. The announcement of a stable exchange rate makes people tend to divest their holdings by purchasing goods such as cars or apartments with their tickets saved in the mattress.
also favors placements in pesos because any positive interest rate is in dollars. Placements and help build a loanable fund to purchase goods such as appliances, clothing or travel fees. But keep in mind that such deposits in pesos are not usually a very long time, because the uncertainty about how long you can sustain a given exchange rate is always present. It also encourages capital flight at the time. The exchange rate appreciation is always an incentive to purchase, it always increases the demand for what is cheap and useful. In turn, high inflation encourages consumption. People are burning money if you have to keep it at home, (which is usually the case for fear of leaks and all the tax has generated a number to any bank deposit), because in this case suffers from the effects of full the devaluation of the currency. All reactions described have a common bond, and this is the lack of credibility in the local currency and the uncertainty as to whether at some point one can destroy megadevaluación savings. The expectation is not to happen in the short term, and peso deposits that lie within that range. While the Central Bank has reserves to meet any run more or less serious, the extraordinary risk of devaluation is low but not zero.
COMPLEX FUTURE
The government aims to maintain high level of economic activity without caring too much spurred inflation, especially considering that 2011 is an election year. Irrespective of the strategy will work. Brazil is absorbing a large part of exports, especially in the automotive category. Prices of raw materials tend to stick which emphasizes the use of export tax and production incentives soybean, which no member of the government oust. In an inflationary scheme quickly follows the population weights, because it is more reliable hold the property as much as possible. But as so often happened in recent history, when the exchange rate stabilization is induced and maintained artificially low, encouraging the purchase of foreign exchange and therefore the outflow of capital. Even if the government tries to encourage investment truth is that it does not grow to the uncertainty, led by the increasingly apparent lack of legal certainty. Why soy has ceased to be a weed. According to the latest report from ECLAC, in 2009 America South received investments of $ 54.454 million. A Brazil were 25.949 million to 12.702 million Chile, Colombia 7.201 million, 4.895 million and Argentina. The rest to other countries in the region. There is no relationship between the amount of investments received and the size of the economies involved, except of course the case of Brazil. Under Argentina, and very close, is Peru, with 4,760 million dollars of foreign investment. Looking at the Global Competitiveness Index, we find that the issues that affect our country are: instability of public policy, inflation, access to financing and corruption. For these reasons on a scale of 139 countries, Argentina is in the post 87 If we have to say once nuesra opinion just as we have always said: the main problem in Argentina is anomie, legal uncertainty, lack of attachment the law. We may be more or less static, more or less regular, more or less progressive, so we can not do what is happening to us as a country depending on how we get up every morning, breaking from the Constitution down, everything.
GROWTH AND INFLATION
growth today shows the economy of Argentina has to do with monetary incentives and public expenditure exacerbated. It also links with the prices of raw materials. Help even the new debt swap. Works security for payment of the debt even with the use of reserves. But it is known that both the spurious issue of currency as the payment of external debt by end use of reserves to be serious inflation. And this must be added the amendment even the money of the current plan year, which was planned issuance of 19 to 30,000 million pesos for all of 2010, if that is true. So, beyond all, the reality is that this scheme can not last. Neither lasted too the other, the high dollar, the price controls, the closure and limitation other meat exports. The limitation of imports.
All detours that take place in an office and apply the piece above the Constitution and laws, can only be more temparano unfortunate consequences rather than later. The danger of stagflation is just around the corner.
