To begin with, he denied his responsibility in the 118% devaluation in December. Said: “I am amused by the comment of some analysts saying “Milei devalued”… I did not devalue. In other words, the devaluation was already there; That is, it was just a matter of being honest.” It is the same terminology that the teams of Mauricio Macri When they talked about “sincerity” and devalued, they raised the interest rate, generated high rates on public services and went into debt to pay the vulture funds. It is no coincidence that the names of that time are repeated in today’s economic teams.
The Government does not want to take responsibility for the devaluation, but it claims to lower the monthly inflation rate. Indeed, in recent months the price indices have been showing a downward trend. It seems obvious, but it needs to be said: to go down, you first had to go up. And when did it go up? When this government devalued, it was barely assumed. The average INDEC CPI for the year 2023 until November was 8.6% monthly. The following month, the CPI went to 25.5%. From there the downward journey began. Already in January it fell to 20.6%, still very high values. We had to wait until April to have a value similar to the 2023 average. The September numbers, so celebrated by the Government, are the same as those during 2021, full recovery from the pandemic (GDP grew 10.4%, recovering what was lost the previous year).
There is an explanation: the change in relative prices. During the first months of the government’s administration, inflation was caused to regressively redistribute income through almost unstoppable prices and rates and salary income, pensions and public spending that were lagging behind. In this sense, the President has just expressed at the IDEA Colloquium that “it was important to make the adjustment during vacations, so that people would not find out as much.”
For his part, the Minister of Deregulation and Transformation of the State, Federico Sturzeneggercommented that the time had come for the “deep chainsaw”, one more step in the reduction of the State. Furthermore, and addressing the businessmen present at the Colloquium, he requested: “You have to ask us to lower spending, because every expense we lower is a tax that we charge less. Banish asking to lower taxes, which is a privilege for a sector”, reinforcing the concepts that the Government has presented as preliminary in the preparation of the 2025 Budget project.
Continuing with relative prices, it is important to analyze another very important price in the economy: the exchange rate. The strong devaluation was followed by an exchange regime that sets a monthly variation rate of 2%. So, we find ourselves with a first frenetic moment, which they call sincerity, and then with an artificial stillness, criticized by consulted orthodox analysts and by the sectors that always benefit from a higher dollar.
Thus we arrive at this paradoxical situation, in which we have a libertarian government that once again sees “the light at the end of the tunnel” because it shows some biased macroeconomic data, but that in reality has been achieving a reduction in inflation thanks to its intervention in the economy, in the most important market such as the exchange rate, helped by the recession generated, among other variables, by the “correction” of relative prices.
At the BCRA Conference, in a hypothetical analysis, the president commented: “Why is it bad that there is deflation if deflation is a form of returning income to the rest of the population? Yes, obviously, against the State. That’s very good.”
I think it is worth noting the negative consequence that could have on financial operations, and therefore on the economy in general, if at the time of paying debts, debtors find themselves in the unpleasant situation that the prices of their products and assets they became lower. Let’s remember the deflation of the nineties, how the recession was suffered and how that whole process ended.
At the same BCRA Conference, he referred to the future closure of the host entity, a monetary authority so necessary to regulate a vital and sensitive system such as currency and finance for any country that aspires to development, and much more important if This development seeks to improve income distribution.
National Deputy Union for the Homeland – President Solidarity Party
Source: Ambito
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