Former Economy Minister Domingo Cavallo warned that the Government has been resorting to a series of economic measures to improve the salary of people’s pockets but that generate distortions increasingly strong and risky for the stability of the economy. “It is not ruled out that this prediction threatens to provoke inflationary adjustment before November and the Central Bank is forced to raise interest rates and dispose of many reserves. “
Cavallo wrote on his blog today about government measures that, according to him, isolate the country from the world. But also on specific decisions with a view to obtaining electoral revenue and that Cavallo warned “are very dangerous.” The article is called “Growing International Isolation and Three Economically Very Dangerous Electoral Weapons.”
The increase in salaries and public spending in general above the rate of inflation, the expected easing of fiscal behavior in the second semester, the increase in the dollar less than inflation (in June it rose at the lowest rate in 18 months) and the The use of reserves to contain the exchange gap are “electoral weapons that are very dangerous,” said Cavallo.
“The Government hopes that with these three weapons it will be able to win the November elections, especially in the Buenos Aires province, Bet people will feel a economic improvement due to the decrease in the monthly rate of inflation and some recovery of the purchasing power of income“.
It could work?
Cavallo says yes. But he is emphatic about the risks.
“It is not impossible for this to happen [N.E.: la recuperación de los ingresos de las personas] , but since market operators and those who follow economic events with experience and careful observation will predict that the accumulated pressure will end in a devaluation explosion, it cannot be ruled out that this prediction threatens to provoke the inflationary adjustment before November and the Central Bank is forced to raise interest rates and shed many reserves. If you don’t, the explosion can occur just before the election “.
Juan Carlos Fábrega, former president of the Central Bank in the second term of Cristina Kirchner, also considered this week that there will be a devaluation in the dollar. But unlike Cavallo he spoke of a correction “controlled” and after the November elections, which will be between 15 and 20%. The former official assured that “the Government will make a titanic effort to keep the official exchange rate as controlled as possible” and that “there will be no exchange rate jump” after the elections.