Marcó del Pont briefs Senate on 2010 Monetary Programme update details

As she briefed the Upper House Economy Committee, Central Bank (BCRA) governor, Mercedes Marcó del Pont, defended the extension of the 2010 Monetary Programme by $49 billion pesos, and explained that "the alternative was to allow the dollar to float, limit purchases in the exchange market, and for the peso to appreciate, which is what happens in most countries."

Del Pont stated "another option was to raise the interest rate or limit credit," but that she rejected that path, since "the government has no intention of cooling the economy, which has grown 9.1 percent this year."

The BCRA head justified the modification of the Monetary Programme "fundamentally due to the intervention in the exchange markets, given the lower demand of dollars, the increase in credits, and the greater growth of the economy."

She added that the transfers provided to the Treasury, amounting to $25 billion pesos, were also influential, although this aspect is seen compensating greater deposits of the public sector, which is linked to the increase in tax collection.

Marcó del Pont highlighted that "the anti-cyclic measures and the deceleration of capital flight elevated activity and downgraded the projections made in September of last year."

The governor stated the change in portfolios that belonged to economic actors in 2008 and 2009 "produced a certain demonetization of the economy," although she highlighted that "the process of inflexion in the demand of dollars by particular agents."

"The progressive remonetisation is associated to a credit growth superior to what was originally projected; we modified the Monetary Programme because we witnessed a more vigorous expansion, which demands more money for transactions," Marcó del Pont said.

She also assured GDP growth had been projected at 2.5 percent, while the best estimations currently speak of 8.9 to 9.5 percent.

The BCRA head clarified that "sustaining a Monetary Programme like the one before would have needed a counter-action policy, which would have brought consequences such as the restriction of credit and currency appreciation, as well as others in terms of economic growth and employment."

She also indicated that "the only variable we modified was that of real growth; we did not touch prices so that it would not appear that from the BCRA a superior growth of implicit prices was being validated, above the estimated 8.9 percent."

Marcó del Pont announced that the Central Bank's projection of economic growth for the third trimester is of 9.2 percent and of 9 percent for October-December.

She mentioned domestic consumption and the recovery of investments as dynamic sources of growth. Both registered levels that exceeded historical records.