Economic paralysis: Argentine central bank trapped for having lowered dollar

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Having unnecessarily lowered dollar from ARG$3.20 to ARG$3.08 has left nearly $3-billion losses in reserves. Yet, what's worse now is that Argentine Central Bank (BCRA, in its Spanish acronym) has been trapped inside efforts to keep exchange rate at current levels: letting it rise would entail motorizing savers' demand. Density is expected to grow again today in exchange agencies, looking for the classic shelter. No by chance did JP Morgan recommend yesterday in a report to include Gabon among purchases and Argentina among sales. But, how long can economy withstand current situation?

The most worrying thing in this sense is not the level of reserves. Government is clearly making a mistake when seeking to impose losses on those buying dollars at ARG$3.20.

It's also wrong when repurchasing bonds to artificially keep quotes. All this does not match former president Nestor Kirchner's strategy to make conflict last forever, taking it to the limit. Now, from $50.5 billions, BCRA has $47.8 billions in its coffers. It has enough oxygen.

What cannot be sustained is fall in activity. There are no indicators measuring in real time what's going on in production and sales of companies, neither are they necessary. All in all, other alternatives have been found for inflation with Argentine Statistics and Census Institute (INDEC, in its Spanish acronym). Forced production stoppages in car companies, fuel shortage, collapses in sales and building licenses are the ones which, as opposed to other crises in Argentina, mark the timing of current conflict. Is government aware of the seriousness of the situation as far as activity is concerned? In view of a report disclosed yesterday, certainly not. It's like a second round of INDEC and inflation. Yesterday, government revealed through e-mail a kind of press release called "Without slowdown", in which benefits of tax collection, car and cement production were stressed, including economists' outlook in poll about activity and GDP made by BCRA. There's something to highlight here: nobody in market wants to be pointed as the first one to forecast recession. Less in a poll made by an official entity.

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