Note from Annabella Quiroga published in clarin.com day 11/09/2018 – HTTPS://www.clarin.com/economia/economia/argentina-dolariza-economia-ecuador_0_ryn-iLHdQ.html

For most economists, dollarizing is not the solution.

It's a classic of Argentine history: every time the economy starts to get complicated mermaid songs appear sponsoring magical solutions. This time, with weight devaluing 100% so far this year and inflation moving to break the roof of the 40% annual, are heard again voices in favor of dollarization. However, analysts consulted by Clarín agreed that adopting the dólar as a national currency doesn't solve economic problems and leaves the country with fewer tools to get out of the crisis.

The dollarizing option put it on the table Wall Street Journal. Journalist Mary Anastacia O'Grady held in an opinion column that Argentina should "adopt the dollar" for, once and for all, "end the misery caused by weight.

“Markets now predict that the economy will contract more than 2% this year and that inflation will reach 40%. The question that seems to be on everyone's mouth: why does it happen again, under a president who should represent change? The answer: because Argentina still has a central bank. To solve the problem once and for all, must convert it to dollars”, Highlighted.

 

For the analyst, Argentina lives above its means, with high taxes and regulations that make many activities un competitive. "The effect remains the same: inflationed debt and an economy with devaluations or defaults, or both", warned O'Grady.

Also the Argentine economist Guillermo Calvo, professor of the Columbia University which gained media relevance more than 20 years for having fore <1>ed the Tequila effect, opened a door in that direction. “Dollarization is something you have to think seriously about later because that can help us have a more reliable financial and monetary policy”, said last week in an interview for the newspaper The Nation. However, Calvo clarified that dollarizing “would not alleviate debt and current account deficit problems, y would take away an instrument, as is the exchange rate, that can help adjust”.

With the day-to-day life of the local economy on men, Argentine economists of different tendencies went out to reject the initiative. For Carlos Rodríguez - economist at CEMA and former Deputy Minister of Economics at the end of menemism, when convertibility still existed- dollarization is not an alternative. “I've said it countless times.: you can't dollarize the one that doesn't have dollars and we don't have enough dollars. Besides, dollarization doesn't solve structural problems on its own. Dollarizing is an alternative B to a weight collapse. For now that doesn't happen and there are no dollars. It would require huge refinancing of assets in pesos. In addition doesn't solve fiscal or structural problems. Ecuador is dollarized and has the same risk premium as Argentina”.

 

Ecuador adopted dollarization 18 years and kept it still during Rafael Correa's socialist tinge rule. Between 2006 y 2014, Andean country grew to an average of 4,3% annual, thanks to high oil prices and significant external financing flows. The expansion of the economy and social spending allowed reducing poverty in the 37,6% to the 22,5%. But in recent years the economy is deteriorating because of the low oil and the lack of new investment. Today Ecuador has no inflation, but the country's risk is higher than Argentina's: 757 basic points against 745.

Eduardo Blasco, from the consultant Maxinver, was one of the analysts convened almost 20 years by the then president of Ecuador, Abdullah Bucaram in the months leading up to dollarization. Bucaram wanted several Argentine consultants to explain how the experience of the 1 a 1 in Argentina. For Blasco, dollarizing Argentina's economy would be like trying to solve an alcohol problem by locking yourself in a cell. “It's an extremely debatable issue, when you adopt such alternatives gets his hands tied to make monetary policies. It's a simplistic and extreme measure that doesn't solve anything”.

In the case of Ecuador, that the 2000 had high inflation in dollars, dollarization worked at first. “But Ecuador remains with fiscal and economic problems and high country risk. It remains a country highly dependent on oil and other primary products and has a very low industrialization”, Blasco explained. Instead, it details that “Peru continued to maintain its currency and did much better than Ecuador, Just they took things seriously“.

Also Federico Furiase, from consultancy EcoGo, explained that “without fiscal discipline, with low reserve level, structural problems of competitiveness and inflationary inertia, dollarization just puts the problems under the carpet. After, the setting is more aggressive”. For the economist, “dollarizing the countercyclical role of monetary policy is lost. The only way to maintain a competitive real exchange rate for our exports without impairing the purchasing power of wages is to gradually lowering inflation, for which it is necessary to lower the fiscal deficit. And because dollarizing doesn't solve structural competitiveness problems, fiscal deficit and inflationary inertia and encourages dollarization of contracts along the way, the output is not only with more adjustment in real variables, such as production and employment, but withfinancial disruption“.

Note posted on fortunaweb.com.ar and in the edition printed in the daily profile of the day 21 in January of 2017

Note of the chronicler of the 20 in January of 2017

http://www.cronista.com/finanzasmercados/Recomendaciones-para-acomodar-las-carteras-al-cambio-presidencial-en-EE.UU.-20170120-0052.html

The market participants are divided into two groups: on the one hand, they are conservatives, that you prefer to protect their money in the short term and at the other end, more aggressive investors are located, with yields to more long term.

Today is Donald Trump to the House white and with him, many doubts in the financial sector. To the investors, little they matter if the Tycoon American is misogynistic or xenophobic. Your questions go rather by how much volatility can be generated in the markets of the new President of the United States decisions.

The market participants are divided into two groups: on the one hand, they are conservatives, that you prefer to protect their money in the short term and expected to be more clear what will be the actions of Trump; at the other end, more aggressive investors are located, looking longer term yields, without attached to the situation. Today, and others are adjusting their portfolios to the Trump era and consulted specialists by The chronicler your opinion about what would be the best decisions.

For the most conservative, Sabrina Corujo, Research Manager of Portfolio staff, recommended distribute the capital of the following way: “40% in the Lebac; 30% in Llets dollar; 20% in Boñar 2021, City of Buenos Aires 2021 or the sovereign bond that is tendered yesterday to 2022; y 10% Bonar 2024”. At the time to justify your choice, the specialist analyzed: “Is a portfolio with low risk of market and virtually balanced between pesos and dollars. We take advantage of the positive real rate that keep the Lebac in pesos and the Llets than, with yields of the order of the 3%, It is located above for other alternatives of similar risk and term offered. Exposing ourselves to greater volatility, but in the search for earn high coupons without much increase the risk, We aim at participation in the short part dollar bonds and average curve”.

For Marcelo Elbaum, of Maxinver, the more conservative investor should aim at dolarizarse: “I would recommend investing a 30% sovereign bonds up to 2021, a 35% in provincial and corporate bonds with maturities of between 2021 y 2028, a 30% in bonds sovereign subsequent to 2028, and a 5% remaining would assign him to the American Government interest rate coverage. That coverage means that if the rate us from 10 years will be to 3% or even more, the price of the bond will be protected. But does not eliminate the 100% risk, dampens it”, explained.

In an exclusive report for your customers, the team's research of bridge headed by Ezequiel Zambaglione recommended to the more cautious position in alternative short dollar, It offers protection against interest rate hikes. “The Treasury bonds of United States that adjust for inflation (TIPS) and American companies with investment grade corporate bonds are presented as the best alternatives. To search for yields, the Argentine bonds in dollars with maturities of between 4 y 5 years are the most attractive, with yields on the order of 5%”, noted.

On the other side of the market, they are investors who support more volatility and dare to expect a return to long-term. For them, the bridge report encouraged to “search yields by taking advantage of the good prospects for the actions of United States, especially in the scenario of low of taxes, Since in the majority of them scenarios offer best returns expected that those bonds”. About the American equity, the paper added: “Shares of companies that generate their income mostly in the United States are particularly attractive, Since most would benefit from the tax cut and less affected a scenario where Trump delivers on its promise of protecting the industry through the rise of tariffs on imports”, said bridge.

Sabrina Corujo, for his part, whereas a more aggressive portfolio, recommended to allocate a 25% to actions (Pampa, Banco Macro, Holcim, Cresud and Transportadora de Gas del Sur), a 20% to Lebac, a 25% bonds Discount (DICA), a 10% in Boñar 2046 and/or PARY and a 20% in Boñar 2024 or the new sovereign bond to 2027 issued yesterday. “The largest bet, both in terms of profitability and risk, It will focus on actions where we remain positive under a medium-term fundamentals and flow horizon and at the longest part of the curve in dollars, with positions exceeding the 35%, for which is based on the possibility that Argentina compressed risk spreads of with respect to the region”.

In the case of Marcelo Elbaum, a portfolio more aggressive in it was Trump should contain a 20% in actions (15% in banks and 5% in YPF), a 15% of Lebac, a 10% in long adjustable bond by CER, a 5% of titles that fit by Badlar, a 20% of provincial and corporate bonds in dollars with maturities between 2021 y 2028, a 25% sovereign bonds in dollars with later maturities to 2028, and a 5% coverage of the American Government rate.

“If the measures that promises to Trump encourage global growth and that joins the local rally, the shares could go favored. In addition, considering that anticipate a devaluation of the weight between 18% y 20% for this year, It is attractive to invest in fixed income securities (sovereigns, sub-sovereign and corporate) dollar with yields above 7%, always with coverage of international rates”, said Elbaum.

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