Upon assuming the presidency on December 10, 2023, Javier Milei had one main concern: avoiding the dreaded hyperinflation, “and we can say that this objective is being met,” said Argentine sociologist and environmental analyst Rolando Díaz, interviewed by THE AMERICAS DAILY.
Díaz explained that the uncontrolled issuance of money by the previous administration left a bomb waiting to explode. To get rid of this “ghost” Milei applied an adjustment planby reducing public spending, halting the issuance of money and seeking fiscal balance at all costs. “To tell the truth, the objective of stopping the inflationary spiral is being achieved to date.”
Argentina has a cumulative inflation (January-June 2024) of 79.8%but there is a clear monthly deceleration trend endorsed by the National Institute of Statistics and Census (INDEC) of Argentina, which announced that the CPI for June stood at 4.6%, the second best figure in the last two years.
Javier Milei’s government managed to slow down the Consumer Price Index (CPI) in the first half of the year, through economic measures, to achieve an annual inflation rate (June 2023 to June 2024) of 271.5% (the final score of which still reflects Alberto Fernández’s administration). This measurement until April was 290%.
Meanwhile, The monthly index remained in single digits, after the “chilling” peak of 25.5% in December 2023In February 2024, the real break began to occur, reaching 13.2%, followed by a CPI that began to take the slow lane month by month.
In January, the CPI was: 20.6%; March: 11%; April: 8.8%; May: 4.2%, the lowest value since January 2022; and June, 4.6%.
However, expectations were that this month would exceed the May record, attributed to the delay in increases in tariffs and fuel taxes.
But, Since the fifth month of 2024, the beginning of a path of “stagnant” inflation began to be observed or “braking”, a technical scenario that remains on the Central Bank’s radar.
Political cost
The political and social cost of this orthodox adjustment has been assumed with determination by Milei along with his Minister of Economy, added Díaz, who recognizes that it was not easy to assume the mandate 45 days after the unions, “were asleep during the last administration,” suddenly woke up and called for a general strike, causing the country to be set alight in social protests, and it did not happen.”
“Paradoxically, those who suffered and suffer from this adjustment, that is to say, the salaried workers and especially the retirees, far from taking to the streets to protest, support the government and this is shown by all the opinion polls where President Milei’s positive image has not diminished and remains at 55%,” the expert noted.
IPC menor
The Government is aiming to reduce the CPI to figures closer to 2% in line with the policy of crawling peg (periodic mini-devaluations) of the official exchange rate so that the gap with the parallel or bluewhich marks the real economy, is not wide.
Once these two rates come close, one could consider eliminating the inherited exchange restrictions. However, both President Javier Milei and the Minister of Economy, Luis Andrés Caputo, insist that the end of these monetary controls cannot be done overnight due to the shortage of foreign currency.
Rolando Díaz referred to the statements made by the economist and rector of the Argentine University Torcuato Di Tella, Gerardo della Paolera, who expressed the convenience of lifting the exchange rate restriction. Díaz recalled that the academic said: “I don’t know why the government didn’t do it. Milei received a country as if it had been defeated in a war and made progress, but there are other fundamental issues that need to be resolved. The cepo is a Kirchnerist phenomenon or a Cuban economic phenomenon, it is a troglodyte measure that destroys the economy.”
Another point
The other macroeconomic point that suggests that Argentina is on the right track is the Gross Domestic Product (GDP)Although the International Monetary Fund predicts a 3.5% contraction in 2024, for 2025, the multilateral entity maintains the expectation that Argentina’s GDP will advance by 5%.
From January to March of this year, the economy shrank by 5.1%. However, analyses point to a clear difference between what happened in the first quarter and the previous recessionary benchmarks. “The fall attributable to the beginning of Milei’s administration coincides with a stabilization plan that has managed to reverse the path of hyperinflation and end the public deficit by applying a historic cut in spending.”
Caputo himself has stated that the country has begun to see light. without falling into default, into a new debt crisis or into another spiral of hyperinflation.
There are many people internally who are asking Milei and Caputo to lift as soon as possible the restrictions that have limited access to foreign currency since 2011.
But The removal of the exchange rate restriction is categorized as a third stage of the entire plan. What is true, Rolando Díaz added, is that the dollar blue that at the end of 2023 it was around 1,600 pesos and everyone was talking about “a dollar flying to 3,300 and 4,000 pesos today is quoted around 1,400 pesos”
The Argentine expert pointed out that the measures are being complied with: prices are free, subsidies for services are being lifted. “and wages after the brutal adjustment are progressively gaining purchasing power. For example, the minimum pension last December at the end of the government of Alberto Fernández and Cristina Kirchner was $96, today it is $177, at the free dollar price.”
Although for the analyst Inflation control is the main support of the government, it is a necessary but not sufficient condition. for sound administration.
He also believes that the open-door policy for foreign investment has not yet yielded the expected results. But he acknowledges that “the patience of the majority of citizens still gives credit to the current administration. The inherited disaster was so great with the experience of Peronism in government, this is the main endorsement of this administration.”
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Source: INTERVIEW WITH ARGENTINE POLITICAL ANALYST, ROLANDO DÍAZ/ LAS AMÉRICAS NEWSPAPER
