The President spoke at the close of the meeting in the presence of the Minister of Economy, Luis Caputo, and the Minister of Deregulation, Federico Sturzenegger.
What Javier Milei said about inflation
In his speech, Javier Milei referred to the inflationary phenomenon in Argentina. Along these lines, the President began by recalling the situation inherited from the previous government: “In that sense, with great courage, with great bravery we faced This challengebecause specifically We received a country on the verge of default and hyperinflationwith twin deficits of 17 points of GDP,” he explained.
Along these lines, the top official assured that, upon his arrival, “the Central Bank had Negative net reserves of US$11 billion“and the country was in a position to “go directly to the worst crisis in our history” with a ““annual hyperinflation of around 17,000%”. Once again, the libertarian leader recalled that his working hypothesis is that “inflation is always – and everywhere – a monetary phenomenon” and stated that to end this problem “we must end the broadcast“.
Thus, the President assured that “the first stage was the zero deficit for cut off the broadcast to finance the fiscal deficit” and assured that this achievement was achieved during the “first month of management.” “Not only that, but we had to end what the president was doing quasi-fiscal deficit and ending paid liabilitiesonce we are done with the paid liabilities, We also finished with the topic of whores. And in that sense, we had gone to a program of zero excess money supplymeaning that the only way money was going to be issued was by the external sector, that is, purchase of dollarsassimilating the sale of dollars by the private sector as the counterpart to the demand for money. That is, with dollars, you buy pesos,” Milei explained.
On the current situation, waiting for the INDEC Inflation Indexthe President was blunt: “I understand that economists, as they predicted all kinds of calamities, do not want to see it that way because they will be exposed for their mistakes, but 54% annualized monthly is equivalent to 17000%. And the reality is that the latest wholesale data was 2.7%, that is, annualized that gives 35%. “Wow, it is a tremendous achievement worthy of historic recognition for Minister Caputo to go from 17,000% to 35%!”
In reference to the economic program that his Government is carrying out, Milei assured that it is based on three great foundations: “a ordered macroeconomics without tricks or shortcuts, to give a definitive solution to the problem of inflation; a deep cut in public spending to ease the burden of private sectorand an obsessive attention to deregulate and give back freedom to each and every Argentinian.”
To close the topic on inflation, Milei lashed out at critics who “predicted that inflation, for example, would not be able to break a floor of seven, and now we are seeing if it goes below four in retailers.” Not only that, but the libertarian leader doubled the bet and assured that “Salaries are outpacing inflation and so are pensions“.
Milei and the Central Bank reserves
In turn, Javier Milei also boasted of the fiscal adjustment carried out since the Libertarian Government. “This is how we achieve the largest fiscal adjustment in human history. To give you an idea, the fit, we found a consolidated deficit of 15 points of GDP, 5 in the Treasury and 10 in the Central Bank. Naturally, we were told that making an adjustment to the Treasury of one point per year was an enormity. Therefore, I think that the mildest thing we have been told about wanting to achieve a zero deficit in the first year of government, At least they would have called us crazy..
In this regard, the President highlighted “The enormous management of Minister Caputo” thanks to which it was achieved “the financial surplusthat is, the much talked about zero deficit for real, in the first month of management.” Milei also detailed that the government’s plan ended “with Treasury financing via monetary emission“, in addition to lowering”the interest rate” and progressively “clean up the Central Bank’s balance sheet“.
Milei, the dollar and the future of the exchange rate restriction
During the Council of the AmericasThe Argentine president also stressed the current situation of the dollar and one Possible exit from the exchange rate trap. In this sense, after explaining how the government applied the zero emission program, Milei explained: “One of the things we realized is that it was not enough, because in reality until We have not finished solving the stock problems, we have a clamp. And in that situation, it is not that individuals are buying pesos with dollars, but they liquidate the dollars because there is a clamp. Therefore, it is not true that there is a genuine demand for money; and from that point on we moved to the zero-emission system, while We have a clampdown because we have not yet finished resolving the stock problems.”
In this regard, the libertarian leader said that “in a malicious manner and/or out of ignorance, there is talk of intervention, that we were intervening in the exchange market.”
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Ignacio Petunchi
“In this case, as We have capital control by a problem of stock imbalanceswhich is becoming smaller and smaller, in this sense the only way to replicate the balance in non-intervention isfairly, withdraw the pesos that we issued by purchasing dollars from the cepo and, obviously, as there was a gap for every three dollars that are traded in the MULC and two have to return and one remains within the Central Bank and the variation in the amount of money is zero” detailed the Argentine leader. Then, Milei sentenced: “If you look, this new equilibrium It has less degree of intervention than we had before this.. So it’s not that we went to a more intervention level, but less intervention.”
The President explained that “in a world without intervention“The interest rate” has to be free because it is an intertemporal coordination mechanism and we should not touch it; the exchange rate would be free and therefore the variation in reserves would be zero and the variation in the amount of money would be zero.”
Regarding the lifting of the exchange rate restrictions, the economist did not specify dates and stated that “There is no point in making changes that cannot last.” in time. Along these lines, Milei stated that “no one is as eager” as he is to “get out of the trap” but that “Removing the patches without first solving the underlying problem would worsen the crisis we inherited.“.
In this context and after the measures, Milei explained that “the exchange rate began to fall; and the convergence between parallel exchange rates and the official one is being given from the top down and not as it has historically been in Argentina, from the bottom up. That is to say, we are not willing to devalue to ruin the Argentines, We are going to work on changing the levels of productivity so that Argentines do not have to become impoverished. because of the mistakes of poor quality economists and because governments of terrible and worse kind.”
The Argentine President thus discussed the problem of the exchange rate restriction and the value of the exchange rate in Argentina, although he did not provide further details on how and when the system will be removed.
Source: Ambito
