“It is becoming quite clear that Milei’s program will succeed if society can bear the consequences of the adjustment,” said the former deputy minister of the Economy. “I’ll put it from another angle: Milei’s program will succeed if inflation goes down. And it seems to me that it is clear that for inflation to go down, it is key that the government is able tothe support society this level of recession, this growth of inequality and higher unemployment,” he said in dialogue with Futurock.
Regarding the economic plan, the analyst asked, “Why would society be willing to put up with an adjustment of the magnitude of Milei’s?” In that sense, he said, “the most obvious answer is because having 211% inflation in one year is also an adjustment of enormous magnitude.”
The economist also said: “I get the feeling that people are putting up with it because nobody wants a 2001, nobody wants to go out and there are 20 dead people, banks closing, there are five presidents in one week (sic).”
The consequences of the adjustment, according to Álvarez Agis
Álvarez Agis warned that if Milei “does well with the adjustment, we are going towards a country with greater primary activity, in which we are going to export things that do not need a competitive exchange rate to do so. And we are going towards a country that will most likely will be deindustrialized, although more open to the world in terms of trade, with low inflation and credit.”
On the other hand, he pointed out that if the economic program continues its course, in the medium term a more unequal society would crystallize. “We have a regression in inequality “We have reached the levels we had in 2006, 2007, when we still had remnants of the 2001 crisis,” he said. “The question is how (society) put up with 10 points of inflation per month and having to go to the supermarket the first 4 days of the month, because if not, at the end of the month, milk would cost 15% more. So, it is as if we put society to choose between two evils: either you have a lot of inflation and you cannot live because of the inflation, or you lose your job in a very unequal country,” he said.
The exit from the exchange rate cap
“With the restrictions, it is very difficult for investments to come in. And creating a RIGI to give investors a kind of protection from the restrictions does not leave investors at peace, because what you are saying is that for the ‘new’ dollar, for those who dare to invest in Argentina, there is something like a libertarian country. There is no restrictions, there are fewer taxes, there is a flexible labor regime. Now, all of us who are here with a knife and fork, see the new kid who comes in and we say, ‘Do they lower your taxes? Do they let you use your dollars? And not me.’ It is not very sustainable that scheme,” the economist said.
Asked if the lifting of the cepo would imply a devaluation jumpÁlvarez Agis responded that this will depend “on the conditions under which you lift it.” “Probably, if you lift it today, yes. That will cause inflation to rise and the economy to go into recession again,” he said.
Source: Ambito
