LatinFinance - July/August 2015 - 48

PARTING
SHOT
Normalizing trade and financial relations with the
rest of the world should be a priority for Argentina,
and will set the sovereign on the path to investment
grade, says Carlos Melconian

The pursuit of growth
For Argentina to return to the world, means at least three or four
issues. From the political side, set aside Iran, Venezuela, Russia,
our partners, first. Second, return to normalization on the trade
side. And the third one, the most popular, is to solve the holdouts
problem. So asking for a new haircut etcetera, etcetera - but at the
end of the day, solve this issue. That means to return to the financial
markets in a strictly voluntary situation. Then to look for some
stabilization program: a one-digit rate of inflation is possible.
The main goal of a [Mauricio] Macri administration is that at
the end of that administration, Argentina would gain for the first
time an investment grade rating. Excluding Argentina, Venezuela,
Bolivia and Ecuador, the rest of Latin America is investment grade.
It's a very important issue, because it's really trying to cut in half the
interest rate that Argentina eventually will pay to the market.
This is a new world. Regarding the cost of the interest rates
and the price of commodities, we are watching a strong dollar,
lower commodity prices. But even considering that, we are facing
a good world for Argentina in comparison to history and to our
disadvantage in the last 10 years, because we were outside of this
party for the emerging markets.
Then for organizational changes: trying to balance the fiscal
situation, to balance the foreign exchange market, etcetera. I call
these organizational issues: trying to get some structural fiscal
approach, trying to get some structural fiscal surplus, to return to
new statutes of the central bank. Trying to avoid the game as in the
90s that the treasury was printing money. These are organizational
reforms, structural reforms.
The fourth pillar is to gain competitiveness: to start to build
a new capital market - a domestic capital market. A domestic
capital market, pension reforms, it's a medium term idea. To gain
competitiveness it's not only to devalue the local currency - it's
wrong to look for competitiveness through devaluation. It could
be through tax reform, but we are thinking in different periods. If
somebody is thinking we will appear on the stage on Dec. 10 with
a tax reform, it would be impossible. So we have different stages -
short term, medium term, long term.
Short term is normalization of the situation: return to the world
on the financial side and trade side, and a stabilization program of
the macro issues. That includes the foreign exchange market. That's

48 L ATINFINA NCE.COM - July/August 2015

included. Import restrictions
and so on.
We are not speaking about
what will be the tools of the
measures for Dec. 10. But the
idea is to return to the free
market, without restrictions,
without capital controls.
That's the main idea.
Argentina didn't take
advantage of the last decade.
Now we are facing in the
future a new relationship
between the dollar and the
other currencies. But it is still
a good scenario compared
to the historical average. It's
worse compared to 2010
and 2011. But Argentina
only saw the party, it never
participated in the party. So
we are really free regarding
new debt, investment, new
capital inflows.
I'm not referring strictly
to liberalization. Without
taking into account what's
happening in the rest of the
world regarding industry,
trade, and so on. You need
to take advantage a lot only to normalize. You don't need the
situation to go to having absolutely zero restrictions on tariffs. Only
normalization, coming from close to a Venezuelan type situation, is
a lot for us. LF

THE MAIN GOAL
OF A MACRI
ADMINISTRATION
IS THAT
ARGENTINA
WOULD GAIN AN
INVESTMENT
GRADE RATING

Carlos Melconian is an independent economist and director of M&S
Consultores. He is helping the team of Argentine presidential candidate
Mauricio Macri. This is an edited transcript of an interview with Katie
Llanos-Small.
http://www.LATINFINANCE.COM
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