4/8/2024 - Politics and Society

Good in accounting, in economics remains to be seen

By Horacio Gustavo Ammaturo

Good in accounting, in economics remains to be seen

On October 20, 2023, once the candidates for President of the Nation were defined, the blue dollar, today referenced as free dollar, reached a maximum of 1,225 pesos per unit.

During the months after the elections, and even after Milei's candidate for president was defined, there was speculation that a strong appreciation in the exchange rate would take place, whoever wins.

The extremes that were considered were between 1,500 pesos for the most conservative, reaching 3,000 or 5,000 pesos for some extremists.

However, as we enter March, the third month of the year and the fourth of the new president's term of office, the much beaten peso has appreciated by more than 20% since that October minimum, that is to say that today, with the same pesos more dollars can be bought.

All this, after a brutal devaluation of the official exchange rate.

Clearly, the Argentine market had stopped using the official dollar as a commercial reference. In fact, the previous government had designed compensation mechanisms to seduce exporters to liquidate foreign currency and higher costs through taxes or payment deferrals for importers.

Likewise, the devaluation and the state's disintervention in price setting allowed suppliers of goods and services to increase their prices, consequently the effect of the increases had a double impact on consumers' pockets: on the one hand, prices went up in pesos, with the excuse of the devaluation; on the other hand, these increases were boosted by the effect of the peso's appreciation. That is why we find products that have increased up to 100% in their prices considered in dollars in only three months.

Meanwhile, there is a very curious circumstance. Most wage earners' incomes have increased in dollar terms and their purchasing power has decreased.

Today, compared to last year, Argentines have more purchasing power in another country, since they earn more in dollars, and less possibilities in their own country, due to the increase in prices in hard currency of most goods and services.

What is supposed to be a liquefaction of debts or structural costs of the State due to the effect of the devaluation could be only a matter of accounting or numerals, since, practically, only for accounting purposes the companies used the official dollar since mid 2023, many of them, handled a double accounting taking as a reference the alternative exchange rates, CCL or Mep.

From the blender to the mixer.

In terms of "free dollars", we are facing a real amase or increase of debts and costs, far from liquefaction.

From October to date, prices in hard currency have increased by at least 22.5% for those that remained in constant pesos, adding the corresponding increases for those that received updates, something that reaches services, products or salaries.

It is likely that we are facing an accounting phenomenon, in which the ordering of the numbers evidences the deep distortion that existed in the relative prices in our economy, however, we must be extremely careful to avoid that the correction ends up originating new distortions, only that in this case the beneficiaries of the reallocation of resources could be much less.

For the time being, the measures are putting the books in order, but there is still a long way to go before the economy is in order, meaning that people's incomes are in line with the prices of the products they need.

There is still a lot of work to be done. This has just begun.

Only to observe that orderly poverty is insufficient.

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horacio gustavo ammaturo

Horacio Gustavo Ammaturo

I am Gustavo Ammaturo. I have a degree in Economics. CEO and Director of infrastructure, energy and telecommunications companies. Founder and mentor of Fintech, DeFi and software development companies. Blockchain Product Designer.

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