Far from the campaign promise that Javier Milei outlined throughout 2023, Melconian, who had been “chosen” by Patricia Bullrich, started the speech stating that the alternative of dollarization is far from to be fulfilled due to the “lack of dollars.” He also added that there is little chance of moving towards “tax reductions” in 2025, and detailed how to get out of the currency peg, one of the issues that is keeping the markets awake at night.
The political situation
“Milei is like that, she doesn’t do it, she is like that,” Melconian said at the beginning of his presentation. In his presentation, he mentioned his participation in another event in Uruguay with the four presidential candidates and drew a parallel with the political situation in Argentina.
“Milei has an asset for politics that is a great liability for the country: There’s nothing in front of it, unfortunately. Milei makes mistakes and those in front of him make even more mistakes. I saw this firsthand when I spoke in Uruguay where the four Uruguayan presidential candidates spoke. They were all possible presidents. Argentina needs to reconstitute politics. The future political spaces in Argentina. Who are the two or three leaders I saw in Uruguay? Who follows Milei?“, he wondered.
Regarding investments, Melconian said that Javier Milei’s big problem is his personality and compared him to the icebreaker Almirante Irízar. “Milei is the Irízar, a ship seeking to break the ice. Can there be any order in this? No, because he will always be messy, it is his personality, it is stronger than him,” he said.
For Melconian, Milei maintains his hard core at 30%, he analyzed that hard Kirchnerism will have 15% while the PRO and the UCR remain with 2%. He admitted that he still has no answer regarding the future of Argentine politics.
The coming year of 2025: the analysis of the Budget
In another part of his speech, he referred to the first figures of the Budget and stressed that on the economic front, the only tangible achievement of the Government has been the fiscal surplus. For him, in 2024 the game was played with more “liquefaction” than chainsaw.
“There is a budget to play with four goalkeepers and a forward. Why? Because the smoothies will come from the deliquescation. So here the President is preparing and saying there is a section of public spending where I cannot do anything about diluting it because it is established by law, basically some social policy issues. So he says, if I do not have the revenue to maintain the same fiscal surplus as this year, I will have to operate in discretionary spending,” he said.
And he outlined the government’s plan for cutting rates for next year: “continue with infrastructure, go for the rates on a more complicated path, because a lot has been done in terms of fixing the tariff mess that was left, but fundamentally in the N1 segment (high income). That is, what remains to come in the tariff segment of electricity, gas and bus tickets is rather lower class and middle class.” “So – he added -, in terms of political costs to reduce subsidies, there is a conflict there,” he explained.
Meanwhile, he said that there is a fiscal challenge in terms of income in public accounts due to the removal of the PAIS Tax. “Unfortunately, There is very little chance of tax cuts”he added.
The Milei vs Bausilli debate
In another order of his presentation, Melconian stated that there is a short circuit with Santiago Bausilli, president of the Central Bank, in relation to inflation and recession. “A weak appearance of what is called monetization and credit has begun to occur, that all assets when they grow at a rate lower than the inflation They are liquefied, which is what happened in the first half of the year and is what deepened the recession.”
According to him, when Argentine assets and their flows begin to grow above the inflation rate, among other things, because inflation went from 25% to 4% per month, the inverse process begins to occur. “And this is true for an ultra-monetarist, Austrian, anarcho-capitalist, who is not going to do anything that prevents the disinflation process to bring inflation to zero. He wants to cut off all the taps,” said the analyst.
He also explained that the increase in the amount of money and credit allows us to find a floor in the level of activity, but casts doubt on the process of disinflation. “That trade off The disinflation-activity ratio has to be defined in the next 3 to 6 months. What is the ideal? That inflation continues to fall and the economy reactivates. Is it possible? It is difficult. And what is the President going to opt for? If he had to choose, he would prefer inflation, which is its direct offspring, to continue falling and he would pay less attention to the level of activity.he added.
The foreign exchange restriction proposal: how to get out of it?
In the almost final part of his speech, he said that it is The dividend restriction is “uncontinuable” of companies because foreign companies are more interested in dividends than in Argentina’s country risk.
Regarding the value of the dollar, he said that this exchange rate is far from the Martinez de Hoz dollar (equivalent in today’s numbers, $600) and far from a convertible dollar (in today’s numbers, $700) although he gave signals of an eventual delay in the exchange rate, he avoided saying it clearly. According to him, The dollar at $800, with which the Government devalued in December, should be worth around $1,500 today.
“We must understand that Argentina is not on the threshold of a currency tragedy due to numerology,” he explained and clarified: “You are not even on the threshold of tragedy, nor do you have any more room.”
About the exchange rate trap He stated that the Government should maintain it in terms of consumption abroad and take it out for companies. In relation to the first, he raised that this segment will coexist with the cepo. “The cepo there is unliftable, because “How much should we put the dollar sacrificing the poor?”he asked while adding that 800 million are going for the account services which includes expenses on tourism and credit cards abroad.
The second element he raised is linked to the “fiscal ultramonetarism” advocated by Javier Milei, which, in his view, “makes the private sector spit out dollars.”
And the last element, not minor, is the dollar blend that “its days are numbered.” “If this does not change, Argentina will have a trade deficit and if Argentina has a trade deficit, it is finished. These are three things that are simplified when we talk about lifting the restrictions,” he concluded.
Source: Ambito
I am Pierce Boyd, a driven and ambitious professional working in the news industry. I have been writing for 24 Hours Worlds for over five years, specializing in sports section coverage. During my tenure at the publication, I have built an impressive portfolio of articles that has earned me a reputation as an experienced journalist and content creator.
