Ex-economy minister: “impossible” to eliminate cepo overnight

“Lifting the ‘cepo’ or dollarizing the economy are unfeasible shortcuts,” Hernán Lacunza said

Hernán Lacunza, the Economy Minister of former president Mauricio Macri’s administration, said it’s “impossible” to eliminate the currency restrictions from one day to the next.

“I would love to, but it’s unfeasible,” he said at a congress held by the Argentine Institute of Finance Executives (IAEF, by its Spanish acronym). “With this exchange rate, we have more demand for foreign currency than supply. Therefore, even though the cepo is increasingly strict, the government has lost more than US$40 billion in almost four years.”

The official exchange rate today is 266 to the dollar, but on the parallel market (known as ‘blue’), the greenback costs 496 pesos.

Mauricio Macri swears in Hernán Lacunza as Economy Minister. Source: Télam.

Asked whether it would be possible to eliminate currency controls from one day to the next like in 2015, Lacunza said: “Historical moments are never identical, what is done may be appropriate at one moment but not another. The situation today is different from 2015.”

In 2015, when Cristina Fernández de Kirchner finished her term as president, people were allowed to buy up to 2,000 dollars per month, and had to pay 20% taxes to withdraw the bills from the bank. In December of that year, a few days after former president Mauricio Macri took office, it was announced that all currency controls were being eliminated.

Can the cepo be eliminated in a day? I’d love to, because it’s an abnormality,” he continued. “It’s like a tourniquet for when you suffer blood loss. Can you live with that for four years? No, you’ll develop thrombosis. We can’t be okay with abnormalities,” said the economist, who is one of JxC presidential candidate Horacio Rodríguez Larreta’s economic advisors.

To Lacunza, to lift the restrictions it would be necessary to address problems with fiscal deficit, issuance and macroeconomic imbalances. “You have to stop spending more than you have. And then you can eliminate the cepo,” but that wouldn’t mean doing it from one day to another, he said.

“Lifting the currency controls in a day, or dollarizing the economy, are unfeasible shortcuts. Dollarizing is jumping off a cliff, it’s dangerous,” he added.

The story after 2019

In 2019, after the then presidential candidate Alberto Fernández won over Macri in the August primary elections, the dollar-peso exchange rate skyrocketed by 38% in a day and prompted Nicolás Dujovne to resign as Economy Minister. Lacunza took his place, and, together with Central Bank president Guido Sandleris, decided to bring back the cepo shortly afterwards.

At first, the new currency controls stated that people couldn’t buy more than US$10,000 per month, but a month later that amount was reduced to just US$200, where it has remained ever since. Fernández’s government has added restrictions to who can buy dollars, excluding those who receive government welfare or energy subsidies, among others.


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