Carlos Rodríguez, a former “senior adviser” to Milea, said the current exchange rate policy was “unsustainable”.

Carlos Rodríguez, who was nominated during the 2023 election campaign Javier Milea as “Chief Advisor” alongside the former Minister of Economy Roque Fernandeztoday she increased the caliber of her almost daily criticism of the government and especially the exchange rate policy.

On Friday, in a speech on economic policy at the University of CEMA (Center for Macroeconomic Studies of Argentina), which he co-founded, Rodríguez warned that “the best time to get out of the trap has passed.” he pointed to the narrowness of the supposed “BCRA cleanup” – which, in his view, was largely a transfer of debt to the treasury – and pointed to the leadership of the economic team, saying: “I’ve always been against the group of financiers who are in charge of the Ministry of Economy”, in addition to that as proof of the difficulties that economic policy is going through, he pointed to the fact that the banks did not renew the $2 billion of Treasury debt that the government tried to refinance during the week.

Now Rodríguez, who insists on comparing the current policy of increasing the official dollar by 2% per month with the failed “Tablet” used by José Alfredo Martínez de Hoz, the longest-serving minister of the military dictatorship (and even includes a copy of his paper on the subject, published by Columbia University) doubled down on his criticism, clarifying in a post on the social network X (formerly Twitter) that what he is advocating is not just the devaluation of the peso.

“I do not recommend devaluing and continuing with the same rotten system where there is only one player on one side, which is BCRA, assisted by exchange controls, CEPO, all kinds of regulations, taxes and rates. I say we must completely free the exchange market. Remove the BCRA from the foreign exchange market and ban it from interfering with the interest rate. Let the free market determine the exchange rate and the interest rate,” Rodríguez said.

According to him, “it should have been done on December 10.”

“Now,” he continued, “we’ve already been put into a regime of controls so complex that the cost of leaving is rising. The current exchange system is not working and the situation is getting worse. Paying new swaps for exorbitant rates perpetuates an unsustainable system. “They are opening the door to Kirchnerist populism, as Macri did then.”

One of the comments on Rodríguez’s post was Roberto Cachanosky, another liberal economist, highly critical of Milea and official economic policy. “That’s right, we don’t have to devalue: we have to free the foreign exchange market. But the lost cause defenders will jump on you and tell you that if the exchange market is released, everything will blow up. If this happens, it means that the current exchange rate is out of balance and the explosion will worsen over time. And I agree that they are working to bring back Kirchnerism,” Cachanosky noted.

Most professional economists agree on the criticism of the official exchange rate policy. Even the former Minister of Economy Sunday Cavallo, whom Milei declared to be “the best economy minister in history” (a condition he now attributes to the current portfolio holder, Luis Caputo), is skeptical about the usefulness and sustainability of official exchange rate policy.

In a recent presentation, Cavallo said it was unclear how repayments on the dollar-denominated debt due in 2025, about $9,216 million, would be refinanced, and he wondered how much of Argentina’s trade surplus next year would swell. Central bank reserves, taking into account that 20% of exports, practically equivalent to a trade surplus, are settled in the dollar market “Cash With Settlement” (CCL), a tool provided by the Economía to try to control the exchange gap.

To overcome this limitation, Cavallo proposed on his blog to remove the blend (which would reduce the exchange rate that exporters receive) but compensate for it with an equivalent exchange adjustment that, he said, “if done pari passu with the reduction of the ISVS tax, until its complete elimination at the end of the year, it would be a perfectly compensated devaluation, which would not have any effect on the inflation rate.”