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Dollar, inflation, wages and rates: Martín Guzmán’s definitions of the four key variables of the economy

The Minister of Economy, Martin Guzman, dismissed that the government go to devalue the peso after the legislative elections in November and assured that the current value of the dollar is “fine”. For the official, “all the indicators are showing robustness” so he ruled out that there is an expectation of devaluation, as warned by several economists and even a Wall Street giant.

The official also predicted a 7% economy growth for this year, above the forecasts contained in the Budget and even higher than those prepared by international organizations such as the International Monetary Fund (IMF) and the World Bank (WB).

Guzmán celebrated that “the economy is going through a recovery process despite the pandemic. The vaccination have a positive aspect economically ”.

On inflation, insisted that the government expects a slowdown process which, in his opinion, began in May (when the Indec CPI reached 3.2%, he maintained that June will have a similar level to the previous month and trusted that lower figures will be seen from July.

Although he did not make public if he already manages a new inflationary goal of 40%, which buries the original forecast of 29%, Guzmán emphasized that the commitment remains firm officer of what wages earn you this year to prices.

The concepts that Guzmán offered in an interview with the cable channel C5N can be summarized in the following points:

Dollar and eventual devaluation

“The Central Bank’s reserves have increased, the prices of the commodities that we export are on the rise. The real exchange rate is fine, all economic indicators show that we are more robust. ”Guzmán remarked that“ the real exchange rate is fine. We are getting stronger ”.

“We resolved the debt with private creditors, we reached an understanding with the Paris Club. That means there is less of a dollar debt burden to deal with. We are negotiating with the IMF, the Central Bank has been accumulating reserves, the increase in the price of commodities for a country that exports these products presents us with more favorable prospects ”.

“All the economic indicators are going in the direction that tells us that we are more robust. We have more favorable terms of trade. There is no expectation that there will be a devaluation after the elections ”.

Inflation versus wages

“The commitment to recovering the purchasing power of wages remains absolutely firm. It is a necessary condition for the economy to settle. Growth in the purchasing power of wages means more demand capacity. The parity companies never had a ceiling, we want wages to grow significantly well above inflation ”.

Regarding inflationGuzmán explained that “there was a very strong food inflation throughout the world, an increase in commodity prices and the behavior of supply and demand changed very strongly due to the pandemic and that affected Argentina.”

“Since March, inflation has been declining, when it reached its highest level. We expect inflation in June similar to that of May and then going down ”.

“Price agreements are one of the elements to attack inflation and in this context price agreements are necessary and play an important role. There were deviations in the first five months of the year but what we see is a month-by-month reduction in inflation ”.

New rate hike and segmentation

Asked if the authorized increases of less than 10% for electricity and natural gas services will be the only ones for the year, Guzmán said that it is “an issue that will be monitored based on the growth of the economy; the main objective is to be able to advance in the segmentation of subsidies to help those who are going through situations of greater vulnerability ”.

The role of the State and public spending

“In a context of recession like Argentina has been coming for three years and with the pandemic, the State must inject money into the economy so that this money multiplies so that this fiscal injection generates growth in private activity. That is what has been happening, public spending has been growing above inflation, growing in real terms and there is a forward projection of a deepening of this growth in spending in real terms. We must not confuse a reduction in the fiscal deficit with a reduction in public spending, with an adjustment ”.

“For us, reducing the deficit is important because it helps us finance development. A country that has its most solid accounts is a country that has better credit and stronger currency, therefore a more capable State to implement the productive policies that Argentina needs to have a virtuous development process ”.

Vaccines and reactivation

“The economy is going through a recovery process despite the pandemic. Vaccination has a positive financial aspect. Argentina has managed to access a large number of vaccines to protect the health and economy of Argentines. Public policies were implemented to protect the population and the economy and that is why we have a more robust economy. It is no coincidence that today it is recovering at the speed at which it is doing, it is the consequence of public policies that preserved the productive capacity of our economy. The industry today is growing ”.

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