La Nación – Argentina is original, so much that unlike what happens in most Hollywood movies, it builds the bad guy of the film, weak and dismissive. But do not make mistakes with that weakness; It is lethal.
In the 83 years of life, the central bank consumed 59 presidents, something like one every 1.3 years. Just to serve as a comparison: the Federal Reserve of the United States sat in the main chair 16 officials in 104 years, one every 6.5 years. But the victims of that villain are not only counted in the monetary entity, they are in every corner of Argentina.
Who is it about? Who is responsible for such drainage? The peso, the Argentine currency, as weak as it is violent. Determinant when deciding the fate of one of the most important positions for the management of the economy of a country.
For 70 years, Argentina has not been able to cope with inflation, a theme solved in the vast majority of the world’s territory. Two digits of price increase only seen in a handful of countries. The rest, even those in Latin America, poor or rich, developed or not, think and think about other problems.
But there the country is bogged down, in a dilemma of constant price increases.
The presidents of the Central Bank are nothing more than the fuses exposed to the weakness of the peso. It has not been possible to build a reliable currency for seven decades in the country. The citizens, the businessmen, the investors, whether local or foreign, all flee at some point from the weak peso. No one is left with the slightest suspicion that preferences turn green. And those runs against the battered villain of the film end up ejecting presidents and officials.
The weakness of the peso leads to similar behaviors in all economic agents, whether they are large investment funds or workers who almost reach the end of the month.
Few understand what happens when the peso weakens. Aldo Abram, economist and director of the Libertad y Progreso Foundation, explained it yesterday almost with the tone of a teacher: “The work of the plumber costs the same as before; the bread is worth the same. The issue is that the peso that one has to pay has less value, therefore, more are needed to cancel the same good or service “.
The process is clear: for some reason – distrust, volatility or own mistakes – stops demanding pesos. Simple and disconcerting then the local currency, battered and vengeful, and with everything lost, takes a victim.
Even with the recent news of the departure of Federico Sturzenegger, the economist Luis Secco reviewed the role of central bankers around the world. In the last years they have gained prestige, basically since they managed to eradicate the inflation. “Recently, they raffled one of the biggest global financial crises in history [for 2008/2009] without the devastating effects that could have occurred if they had not taken the reins of the problem from the beginning,” he says.
A repeated story
But none of that applies in Argentina. “Here, the presidents of the Central Bank are remembered more for their failures than for their achievements, and this is because Argentina is a country (maybe” the country”) that has not been able to give itself a currency. In addition, inflation has been endemic for no less than seventy years”, he concludes.
Since the seventies, the Argentine currency lost 13 zeros. If the bankers had not imposed the amputations every so often, a peso would be 10 quadrillions. Impossible to think about those figures.
Abram says that this zeroing is a scam to the Argentines. “Like that’s not a reason to deny the peso!” He exclaims.
There are concrete examples of these days that can be useful. A few weeks ago, the Central Bank tendered Lebac, the famous peso-denominated bills that became a topic of conversation, even at bar tables. A lot was said about the 40% annual rate, something like 3.33% per month.
Now, those who were seduced by that rate have lost a lot against the dollar in recent weeks. So far in June, the peso lost 15% of its value against the dollar. Hence the contempt for the local currency.
Last night, the Central Bank circulated the call for tenders for the next Lebac tender. It will be a challenge; the eyes of the City will settle on the Central Bank Tuesday afternoon. Will the investors remain in pesos or will they demand a bigger rate to remain? Will they run to the dollar? Or will an attractive bond appear for banks to disarm their exposure in letters in exchange for another role? Finally, it is about not staying with local currency or leaving them loose in the market, just a month where the bonus will inject millions.
All for the peso, weak, but lethal; vengeful when it is despised. So much that he earns the zeros that history amputates him with ministers of Economy and with presidents of the Central Bank.
Written by Diego Cabot