Both the president Javier Milei, as the Minister of Economy, Luis Caputo, emphatically ratified the course of economic policy. When speaking at the closing of the 41st Annual Congress of the Argentine Institute of Finance Executives (IAEF), held this Tuesday, the head of the Treasury Palace stated “optimistic” and anticipated a rapid “V”-shaped economic recovery. For his part, the president referred to a fundamental issue when explaining What is your “endogenous dollarization” model like? just as anticipated Ambit.
Ruling out a possible alteration of the exchange rate policy, Caputo maintained that “We have to gain competitiveness by lowering taxes, not by devaluing. Devaluing is the mistake that has always been made.” And, in case there was any doubt, he added “We are not going to move in any way from the fiscal anchor. “You can rest assured that there will be no exchange rate or any other shocks.”
Both Milei and Caputo made it clear that There is no date to lift the trap. The head of the Treasury Palace explained that “If we had removed the trap from day one it would have been a calamity.” In a more political interpretation, the President said that the previous government reduced remunerated liabilities to one day with the expectation that his administration would not take into account the problem of stocks and would free the market, unleashing “hyperinflation so that in January there would be another government.” , but we didn’t give it the pleasure.”
Precisely, Caputo referred to the progress on the monetary and exchange level by specifying that “In these four months we have purchased 16 billion reserves and we have managed to compress the broad base by 44%. A phenomenal job has been done in this regard, “We are closer to releasing the stocks, but we are not 100% ready yet.”
However, he hinted at the possibility of speeding up the process if there was greater support from the International Monetary Fundalthough he relativized it by pointing out that ““We are beginning to work on a new disbursement program with the Fund.”
After a theoretical explanation about the origin and functions of money as well as the analysis of the different anchoring mechanisms, President Milei explained his model of ““endogenous dollarization”.
Fundamentally, Milei’s idea is close all the taps of the monetary issue – fiscal and quasi-fiscal deficit – and keep the amount of pesos constant in the economy so that, as transactions increase, due to the recovery of activity, the money needs are solved by putting into circulation the dollars (or other currencies) in the power of the people.
In the halls of Congress, it was said that investors have doubts about the possibility of the return of a populist government. Milei gave a response by pointing out as a sample to guarantee over time the no monetary issuereiterated that they will send a bill for consideration “a crime against humanity” and that the president, the Minister of Economy and the legislators who print money go to prison.
Referring to the Treasury deficit, he acknowledged that “we got out of hand” since they aimed to cut the equivalent of 5 points of GDP and ended up being 7. From this point of view, previously Caputo announced that there will also be a surplus in May.
The President explained that It remains to finish cleaning up the Central Bank’s balance sheet. In this sense, he praised the “enormous work” that the head of the entity has been doing, Santiago Bausili “which has already recomposed 25,000 million dollars” of the imbalance of 45,000 million dollars left by the “disaster” of Kirchnerism.
He also highlighted the work of the Secretary of Finance, Pablo Quirnowhich in the last public debt tender managed to have one third of the remunerated liabilities held by the BCRA become dependent on the Treasury, thus eliminating an endogenous emission factor.
He added that, along with the elimination of remunerated liabilities, when the problem of puts (options to purchase securities by the BCRA) is ended, the issuance of financial origin will end.
So, “By cleaning up the Central Bank we will be able to choose this zero emission regime and with the competition of currencies it will begin to happen that the peso loses relative weight… and then let’s say we automatically dollarize, we end inflation forever.” In this way he concluded that “We take the knife from the murderous monkey that is politics, they are not going to screw us anymore with inflation and we are going to get to work.
Source: Ambito
