BUENOS AIRES.- A devaluation of weight Argentina, dismissal of public employees, suspension of public works and reduction of subsidies for transportation and energy make up the adjustment plan announced in Argentina for him government of the economist Javier Miley to avoid an economic “catastrophe.”
The Minister of Economy, Luis Caputo, announced the adjustments two days after Milei took office as president, through a video recorded and broadcast on official social networks.
They include a devaluation of the national currency that goes from 400 to 800 pesos per dollar, that is, it loses more than 50% of its value.
Caputo warned that “we are facing the worst legacy in our history,” which he attributed to the fact that previous governments were “addicted to the fiscal deficit” in the announcement released almost two hours later than expected. There was no press conference.
Milei proposed in his inaugural speech a fiscal adjustment in the national public sector of “five points of GDP (Gross Domestic Product).”
Inflation is more than 142% annually and private economists estimate that the year will end with an increase in the cost of living of around 188%. Poverty has grown and in the first half of the year it reached 40.1% of the population of more than 47 million people. Meanwhile, indigence affects 9.3%, according to the latest official calculations.
“If we continue as we are, we are inevitably on the path to hyperinflation. We can reach levels of 15,000% annually,” the official insisted. “Our mission is to avoid a catastrophe,” he noted.
Among the measures are:
- Employment contracts with the State that are valid for less than one year are not renewed.
- Suspension of the official advertising schedule for one year.
- Reduction of ministries, from 18 to 9, and of secretariats, from 106 to 54.
- Reduction to a minimum of “discretionary” transfers made by the State to the provinces.
- Public works will not be put out to tender and those that have not started will be cancelled. Caputo defined it as “one of the main sources of corruption in the State” and added that “with us that will end.” He indicated that they will be carried out by the private sector.
- Reduction of energy and transportation subsidies. How much was not specified. “These subsidies are not free, they are paid with inflation,” commented the minister.
- Maintain social policies established in the 2023 budget, but without intermediaries.
- Set the official exchange rate at 800 pesos from the current 400 pesos and increase – not determined – a tax on imports and withholdings on non-agricultural exports.
- The import authorization system is void. “Whoever wants to import can now do so, period,” said the minister.
- Double the subsidy for unemployed families and increase social assistance for food purchases by 50%.
Debt with the IMF
Caputo did not mention two central issues for the future of the Argentine economy: external debt and exchange restrictions.
Argentina is tied to a program with the International Monetary Fund (IMF) due to the debt of 45 billion dollars that it contracted in 2018. Before April, it must pay 10 billion dollars with international organizations and private creditors.
“I welcome the decisive measures announced today by President Milei,” said IMF Managing Director Kristalina Georgieva on social network X. “An important step towards restoring stability and rebuilding the country’s economic potential.” , he added.
For years, Argentines have had restrictions on the purchase of dollars, what is popularly known as “cepo.” This strengthened an illegal market on which the prices of the economy are governed. The devaluation of the dollar in the official market aims to equate both quotes.
“The measures are all going in the right direction, with improvements in relative prices for the energy and external sectors, which means that the lack of energy and dollars is corrected. Strong fiscal bias,” highlighted the economist and opposition deputy Martín Tetaz. “However, I don’t like the fixed dollar or withholdings, even if they are temporary. A new shock monetary regime is missing, which conveys the certainty that the rules of the game change so that inflation collapses,” he noted.
None of the main officials of the outgoing Peronist government of Alberto Fernández (2019-2023) spoke out after the adjustment plan was announced.
The social leader Juan Grabois, former presidential candidate for Peronism and a leader close to the former center-left president Cristina Fernández de Kirchner (2007-2015), pointed out that Caputo announced “a social murder without flinching, like a psychopath about to die.” massacre their defenseless victims.”
“Your salary registered in the private sector, in the public sector, in the popular, social and solidarity economy, in the cooperative or informal sector, in retirees and pensioners, will reach you for half in the supermarket,” he projected. “Do you really think people aren’t going to protest?” she asked herself.
At the closing of his 17-minute speech, the Minister of Economy stressed that “this is the correct path” and assured that, if he went the opposite way, there would be greater poverty, greater inflation and suffering.
“If we finally do the homework that we have never wanted to do, let us allow ourselves to dream of returning to being that country that the world admired 100 years ago,” said Caputo.
Source: With information from AP
