Memoria Anual

From 1935 to 1989, the BCRA presented a summary of what had been done in its Annual Report.

Executive Summary.

At the end of 1981, the Argentine economy was facing several difficulties that imposed serious limitations on its capacity for growth. These difficulties can be summed up very succinctly in:
a) acceleration of! inflationary rate,b
) accentuation of the recession that had begun at the end of 1980,c
) heavy indebtedness of! sector privado_ as a result of high real interest rates in recent years, and
d) high level of external indebtedness with a strong proportion of maturities in the short market.
The modifications made in the course of ! The economic management implied a different emphasis on the policies implemented to reduce the intensity of the problems enunciated. In view of the interrelationship between them, the different policies, by giving priority to the attempt to solve certain problems, had a negative influence on other fields.
2. In addition to the internal difficulties mentioned above, it is necessary to consider the international context in which the economy operated. In particular,. The negative effect on the domestic situation resulting from the international economic recession and high interest rates in industrialized countries should be cited. The economic recession, together with record cereal production, led to a sharp reduction in international export prices that was considerably higher than the decline in import prices, which meant a deterioration in the terms of trade. On the other hand, high nominal external interest rates, together with the fall in export
prices (15 o/or between the last quarters of 1981 and 1982) gave Ingar strongly positive real interest rates.
Both factors, together with a sharp reduction in the supply of funds in the international market, which worsened for Argentina during and after the The war in the South Atlantic were important elements to explain the reduction in economic activity during 1982.
3. In 1982 the inflationary rhythm accelerated while the economic recession was accentuated, measured through the evolution of! Bl’.llto Internal Product. However, as a result of certain changes in economic policy, these two variables had a different behavior over the course of the year. year. The evolution of both variables in 1982 had as one of its main objectives the reduction of the inflation rate. To this end, after the unification of! meat market in December 1998, which led to an increase of! type of meat! 40 or/or for most commercial transactions, the public sector froze the salaries of its agents and other current expenditures and investment expenditures were sharply reduced in real terms. This led to a lower increase in the supply of money which, together with the suspension of adjustments in public tariffs and salaries of the people, private sector set by the Government gave Ingar to a reduction of! inflationary rhythm.

This policy exacerbated other problems of the economy, ta! as the recession deepens and the deterioration of! real wage. In turn, the fall in the level of economic activity and positive interest rates in real lands led to a worsening of the equity situation of companies.

The conflict of! South Atlantic by increasing the uncertainty of! The private sector had an unfavorable impact on the priority objective of economic policy and generated an inflationary resurgence. At the same time, the restriction of the supply of international funds as a result of! war, together with the trade restrictions applied by certain countries, especially those of the United States, European Common Market, led to a worsening of the situation of! external sector. In order to! In the month of April, the sales of foreign exchange for any reason were subject to prior consultation with the Central Bank. The restriction of transfers abroad led to a deferral in the payment of foreign commitments, which was still maintained at the end of the year.

In July 1982 the new economic authorities gave priority to a policy aimed at reducing the liabilities of the economy. private sector and to reactivate the level of economic activity. The reduction of the liabilities of! The private sector was produced as a result of a series of measures in the monetary and financial field, which are discussed in detail in the respective chapter, among which the reduction of nominal interest rates and their sharp fall in real terms stand out. The increase of! The inflationary rhythm recognizes as the causes the important monetary imbalance, as a consequence of the decrease in the demand for money, the appreciable rise in the price of money. type of meat (around 27 o/or for most commercial transactions) and the rise of inflationary expectations. It is worth noting that the price agreement with the private sector was made after the financial measures that favored it had been taken and after there had been strong price increases.

The monetary imbalance, in addition to being a factor of great importance in explaining the inflationary resurgence, by increasing the demand for goods produced an increase in the production of! industrial sector during the last semester of! year.

The policy of reducing the level of real indebtedness of! The private sector had its maximum expression in the months of July and August. This, together with the refinancing of Financial debt improved the equity situation of companies and reduced their short-term obligations. At the same time, the sharp fall in the real interest rate revived demand for goods and made it possible, after ten quarters of steady decline, for industrial production to increase in the third quarter of the year compared with the same period in 1981. as discussed in detail in the chapter on economic activity and prices. This increase in industrial production was aided by the sharp decrease in imports, as a result of! increase of! real exchange rate and certain quantitative restrictions on the entry of imported products.

The negative effects of this policy, at least in the short term, were the aforementioned acceleration of! inflationary process that reached6 during the third quarter the highest levels of the last six years and a substantial increase of! in the non-institutionalized market in relation to that of! financial market. The effect of this disparity on the balance of payments is discussed below.

In this regard, it is worth mentioning that the possibilities of maintaining interest rates significantly lower than the rate of devaluation in the commercial exchange market depended on the fact that individuals could not change their position in foreign currency. To this end, capital movements
had to be isolated in the foreign exchange financial market or in the non-institutionalized market and commercial transactions in the commercial exchange market. However, this was not fully achieved; on the one
hand, the withholding of exportable products, especially grains, was equivalent to an outflow of capital through the commercial exchange market, and on the other hand, the commercial market fluctuations, as a result of the disparity between the commercial exchange rate and that of the non-institutionalized market, and the intervention of the Central
Bank – contrary to what was expected – in the financial exchange market, prevented commercial transactions from being totally isolated from financial ones. As a result, there was a deterioration of the trade balance.

With the purpose of improving the situation of! In the external sector, it was decided to reactivate as of mid-August the auctions of Treasury Bills that had been suspended in July. Since the Bills yielded a significantly higher interest rate than those of the regulated deposits, there was a significant transfer of funds in favor of the public sector. This created an imbalance for the public sector since it paid 11 o/o through the Treasury Bills and received 5.60 o/o in August and
7.70 o/o in September for the rediscount of! Central Bank for loans at regulated interest rates.

The new economic authorities, who took office at the end of August 1982, on the understanding that the economic policy of the previous months had substantially improved the patrimonial situation of the country. private sector indebted to the financial system, decided to reduce the monetary imbalance as a way to keep the inflation rate at a tolerable level and at the same time achieve an improvement in the situation of! external sector. To this end, during the last quarter the interest rate was significantly increased in real terms, although it continued to be, in the regulated market, negative in real terms.
At the same time and taking into account the low level of! real wages, a policy of wage recomposition was initiated in the public and private sectors. On the other hand, the policy of trying to reduce the fiscal imbalance through the recomposition of the tariffs of the companies of the Argentinian Economy is continuing. public sector, which had fallen in real terms to the lowest levels in recent years.

From the third quarter onwards, a policy aimed at unifying the foreign exchange market was initiated. To this end, the exchange rate applicable to commercial transactions was determined as a proportion of! commercial exchange rate and of! financial exchange rate. Asia mid-September the exchange rate for commercial operations was formed with 85 o/o of! commercial exchange rate and
15 o/or financial exchange rate. The proportion of foreign currency traded in the financial exchange market was gradually increasing, as detailed in the chapter on! extreme sector, to finally achieve the reunification of the exchange market on November 1. As during this period the financial exchange rate has changed the evolution of prices, the variation of prices, and the change in prices. exchange rate in real terms for commercial operations was substantial. As this exchange rate policy was anticipated by the private sector and therefore interest rates continued to be lower than the expected variation in the exchange rate, there was, during those months, a withholding of exportable products.

Notwithstanding the above, the salient feature of the economic policy initiated at the end of August was to try to alleviate the emerging restrictions of extreme debt, which implied at that time a clear limitation to any policy aimed at the recovery of the economy. level of economic activity. Thus, in September, the economic authorities began negotiations with regard to the renegotiation of the maturity of the foreign debt and the financing of private banks of the country. and resources of! International Monetary Fund.
The restriction imposed by the extreme sector on the growth possibilities of the Argentine economy had never reached such a degree in the past. of seriousness such as the one generated in 1982. Regardless of the reasons that gave rise to external indebtedness, which have been different for different economies, the current international situation shows that the problems facing Argentina are common to many developing countries. In this context, Argentina has undertaken the negotiation of its external debt in such a way that, at the same time as it meets its external obligations, it is possible to achieve a maturity structure that makes the recovery of the debt viable. level of economic activity and that, in general terms, facilitates the implementation of! economic program of! next constitutional government.