What is the “reasonable” dollar for the Milei government

What is the “reasonable” dollar for the Milei government
December 4, 2023 – 2:30 p.m.

The future official left some pearls for the country’s political and economic future. Dollar, STEP monetary emission and public spending. Everything he said in the note.

The future government headed by Javier Milei and his Minister of the Interior, Guillermo Francos, begins to give some definitions, both political and economic, anticipating a radical change on the Argentine financial horizon.

In the economic field, Franks He raised the debate with a forecast on the behavior of the dollar after December 10. Although he indicated that he does not see reasons for an immediate shot of the currencytheir estimate is in a range between $600 and $650 for the value of the official exchange rate.

Although some agree with the vision of Franks on the official dollar in the absence of expectations of devaluation, others emphasize the dependence of the value of the foreign currency on a variety of factors: inflation, fiscal situation and investor confidence.

In terms of economic policies, Francos ratified the government’s intention to eliminate monetary issuance and reduce public spending, measures that would be complemented by the elimination of withholdings on exports. While they could have a positive impact on inflation and economic activity, They could also trigger an increase in poverty rates and inequality by implying cuts in social programs and an increase in taxes.

In the political sphere, the Milei government’s intention to eliminate PASO and call extraordinary sessions is confirmed, which could strengthen government control over Congress, although it could also stir political tensions.

Francos’ words under the magnifying glass

However, beyond these definitions, a crucial challenge arises for the new government: the focus on imports. Argentina’s massive import debt of approximately $100 billion represents a significant obstacle to economic development by restricting access to foreign currency.

Solving this problem will require the Milei government the search for international financing or the reduction of public spending. If this is not achieved, there is a possibility that the dollar will rise, causing a negative impact on inflation and economic activity.

Milei’s government faces a momentous opportunity to redefine Argentina’s economic course. However, the challenge of imports stands as a crucial task that must be faced with determination to ensure the success of its management, according to City analysts.

Source: Ambito

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