January 20, 2022 5:54 pm

Why is the government short of dollars

It is not difficult to imagine what happens when the same and identical good is sold at different prices in two very close stores. People will go to the cheapest place. Soon queues will form and the owner of that place will have to decide who to sell to and who not, and will impose certain conditions that will be displayed in the window. On the buyers side, the ingenuity will emerge to meet or appear to meet these conditions. If, for example, I only sold to blond people over 6 feet tall, the use of dye and shoes with a concealed higher heel would spread. And they would continue to drop the stock of the good despite the fact that every day I added new conditions to the window sign.

Understanding this case, it is easy to understand what happens to the Central Bank and the Government when they try to install the change control The exchange stocks. In this case, the good is the dollar, or more generically the currencies. The idea of ​​controlling the price of the dollar usually emerges when the ruler assumes that he can thus limit inflation, which actually has other causes. You will become aware of the latter when a significant exchange rate lag has already accumulated and the gap between the price of the regulated dollar and that of the market becomes unmanageable.

Except for a war or a drought, the scarcity of a good in the economy is usually the consequence of interventions in the market. It could also be the case of the closure of borders and the prohibition of importing, but strictly speaking, scarcity -defined as an existing demand that is not satisfied- occurs when a price is arbitrarily set below that which the market is willing to pay given the quantity supplied. At that price there will be a shortage and many will not be able to buy.

In our country there is currently a shortage of dollars at 105 pesos, but there is no shortage of dollars at 205 pesos. Dollars are scarce for the Government or, actually, for the Central Bank, which is the body that manages the reserves in the official market. The national sport today is trying to get the cheap dollars by walking through the maze of exchange regulations. Exporters are obliged to liquidate foreign exchange on the official market. Since the exchange rate gap is so wide, many of them resort to under-invoicing, leaving part of the sale abroad in related firms, whether for advice, distribution or other figurative purposes. Importers, who have access to the purchase of the official dollar, over-invoice and obtain foreign exchange that they can trade with a profit twice the amount paid. And so countless artifices arise through loans, repayments or credit cards.

The concentrated capital and the conspirators who leak foreign exchange are blamed. But it is chosen to pretend to ignore the true reasons for the problem, which are simpler to explain

Savers, who in their absolute majority prefer to save in dollars, also aspire to buy them cheaply. They are the first to which the Central Bank makes access difficult. In a short time, the available reserves disappear and are no longer enough for government payments. Imports are being limited and the private sector is forced to restructure its payments abroad. The economy slows down and the official exclamation arises: there is a shortage of dollars!

The old and failed ideological theories that try to transfer blame appear immediately from the ruling party, ignoring a reality that is much simpler to explain. There is talk of the recurring crises in the balance of payments, the deterioration of the terms of trade, the imposition of the central countries on the peripheral ones. The concentrated capital and the conspirators who leak foreign exchange are blamed. But the real reasons for the problem are unknown – or perhaps they are pretending to be unknown.

There is inflation because there is a chronic and growing fiscal deficit that has finally required a significant monetary issue. This is the consequence of a disproportionate increase in public spending. There is no confidence and, consequently, the interest rate is high. There is no investment, no growth, and no job creation. It is saved in dollars and preferably outside due to bad memories of confiscatory measures. An exchange stocks in a context of strong fiscal imbalance ends in devaluation.

Reduce public spending, respect private property, carry out the essential structural reforms, regain the indispensable confidence and with it investment, growth and employment. They will then see that there will be no need for any foreign exchange stocks or intervention and, finally, there will be an abundance of dollars!


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