Javier Milei’s advisor promises fiscal anchor and solve the Leliq problem without a bonex plan

Javier Milei’s advisor promises fiscal anchor and solve the Leliq problem without a bonex plan
September 21, 2023 – 21:02

Darío Epstein spoke before investors and fund managers. Despite the promises of dollarization, he said that the only “anchor” will be an adjustment of 5% of GDP in 2024. He spoke of continuing to roll the debt into pesos and freeing the exchange rate.

Dario Epstein He ended the talk for portfolio managers and investment funds by confessing that he had been “playing” the price gap between Argentine global bonds, that he sold everything and that now “If the AL30 drops to 25 or 26, I will be in trouble like a pig”. Epstein, who is director of Research for Tradersspeaks the same language as the audience and knows that, in his role as advisor to the candidate Javier Milei, It has to give some clues to the operators so that they know where a libertarian government could go. Nothing strange or different from what the rest of the candidates say. Beyond the fact that its political space promises dollarization to end inflation, He admitted that “at the beginning the only anchor we have is fiscal” and that is why it will not be possible to appeal to the cooling power of the dollar to calm prices.

The economist pointed out, in a talk organized by MegaQmwhich in the first year must be done an adjustment of 5% of GDP, which can be achieved by eliminating discretionary transfers to the provinces and reviewing pensions for people with disabilities, among other issues.

The other key element, he said, is to urgently resolve the accumulation of debt of the Central Bank, the so-called “Leliqs ball.” “I have a couple of ideas but since I haven’t discussed them yet I can’t tell them,” Epstein explained. What he did assure is that “We are going to respect the contracts” and that “there will be no surprises.” To this end, he clarified that he rejects the Bonex Plan as a solution, that is, that 10-year dollar bonds will not be delivered again as repayment of fixed terms, as former Minister Erman González did in the 90s, before the convertibility, but also rejected generating hyperinflation to liquefy the pesos. Epstein confesses that the libertarians’ team of economists “are very concerned” about the possibility of a hyper. “Massa was going 100 per hour kicking forward, but now he pressed the accelerator to 240,” he warned.

What would happen to the dollar if Milei wins

If there is not going to be dollarization, at least initially because there are no dollars, what do you think for the dollar? Epstein maintains that if the current and repressed emissions (Leliqs) are eliminated, it is possible to free the exchange market. “It will be the price determined by the market,” he says after clarifying that ““There will be no delay because it is bread for today and hunger for tomorrow.” Milei’s advisor stated that in the future “there is no problem in the flow” of foreign currency and estimates that next year the trade balance surplus “will be at least US$20 billion.”

Yes, he anticipates that The normalization of import payments is going to take some time. For example, this week the UIA came out to claim that companies are owing US$38 billion abroad. “Everyone who got into this mess a year ago has been reading in the newspaper that reserves are falling. They can’t say now, ‘we didn’t know there are no reserves.’ We will help whoever got in to get out, but they will have to understand that we have to do it responsibly,” he warned.

In relation to the debt in pesos of the Treasury, he reassured the audience, pointing out that “we are going to continue rolling it as much as we can,” Therefore, he discounts that a possible Milei government would receive support from the markets, because “they have been doing it with this government.” Regarding the future relationship with the International Monetary Fund (IMF), Epstein did not rule out that there could be a new program, although he clarified that “we are thinking everything as if we had no help from anyone.”

After an hour of talk, He barely spent a couple of minutes on the dollarization proposal. Although he considered that “you gain some things because it takes away politicians’ power to issue,” he admitted that “in the case of an external shock you have response problems.” “It is a trade off, people have to decide if they prefer to take away from politicians the possibility of issuing or avoid problems in the event of an external shock,” she considered.

Source: Ambito

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