Argentina in shock: devalued its Milei currency and introduced strong fiscal regulation with increases in taxes and prices

“We are facing the worst legacy in historyA fiscal deficit of 5 percent of GDP, a Central Bank without a dollar, and inflation that punishes Argentina every day. If we continue as we are We are heading towards hyperinflation. “Our mission is to avoid this disaster,” Caputo said.The biggest problem is the budget deficit: We spend more than we collect. We never solved the problem. We are addicted to vulnerabilities and that is why we have been constantly falling into crises and looking for fake criminals for 100 years. What we have come to do is to tackle this problem at its root.” Prior to the television intervention, increases of 100 per cent in food prices were reported. Foreign Minister and economist Diana Mondino ruled out the possibility of a Government intervention to stop the anticipated price stampede.”Value will be what the market decides“.

Caputo appreciated Milei’s courage in starting the program. “A candidate comes into government and explains this and people vote for him. We are facing a historic opportunity because he has managed to make society understand that there is no more money.” The Minister did not hesitate to admit that very difficult days were approaching. “We will be worse than before for a few months. It’s better to tell an uncomfortable truth than a comfortable lie. The President asked us to focus on those who are suffering the most. “We will double food and financial aid plans for families.”

bitter pill

Milei predicted this last Sunday There is “no alternative” to this type of arrangement. The “bitter pill” will fall mainly on the State and, as he predicted: initially will cause more poverty, unemployment and recession According to Latin Focus Consensus, inflation could exceed 222% in 2024. For the President, seeing the “light” at the end of the tunnel is the only effective medicine. The new president has done nothing but polish the same speech the president gave in 1989 Carlos Menem to implement a similar neoliberal plan. Menem jumped from Peronist populism to neoliberalism, accompanying the political movements characteristic of the fall of the Berlin Wall. Then Argentina had a “major surgery without anesthesia“. The parity between the peso and the dollar, maintained on the basis of privatizations and foreign debt, lasted a decade and ended with the so-called fiscal corralito, a social epidemic and the fall of the Government of President Fernando de la Rúa.

Argentina is once again listening to the same sick body images as if they were new and trying the same recipe in a much more serious economic and social situation than thirty years ago. poverty is close to 45 percentInflation that will be over 150 percent this year, currency reserves in the BCRA of approximately $21 billion, and a foreign debt of $419 billion 291 million, aggravated by a $45 billion loan from the International Monetary Fund (IMF). 2018 by Mauricio Macri’s administration.

The government will spend as much money as foreseen in the budget for the end of the year, without updating it according to inflation. This way, The increase in the cost of living will act as a natural pruning and expenses will drop significantly by nearly 60 percent in real terms. It is no coincidence that the word on every economist’s lips right now is this. “liquefaction“, which is a way of saying that inflation itself will be the enforcer of fiscal regulation. This will affect public employee salaries, pensions and benefit plans. But it will also affect overall economic activity because public works, which Caputo said is important to freeze Many industries are needed.

Challenge in Congress

The far right also needs to outline the measures it will send to Congress, from taxes to privatizations to a radical reform of the state structure. This road map was prepared by Federico Sturzenegger, who was the President of the Central Bank during the Government of Mauricio Macri, and Eleonora Urrutia, the wife of Hernán Büchi, who pioneered neoliberal economic reforms in Chile during the General’s dictatorship. Augusto Pinochet.

conservative revolution What Milei proposes will not pass easily in Parliament: His party, La Libertad Avanza (LLA), has only 36 out of 257 MPs and seven out of 72 senators. It will need the support of the traditional right, as well as other opposition forces.

Buenos Aires opposition stronghold

One of the features of the political process that has begun is that the province of Buenos Aires, the main economic and electoral region where the scourge of poverty is concentrated, is governed by Peronism. “Let me summarize what was said today: Long live Social Justice, dammit!“said the governor, Balta Kicillof, the second time he assumes this position, and in an obvious reference to Milei. Former vice president Cristina Fernández de Kirchner attended the ceremony and gave an insight into where the power to challenge the LLA project would be. The Governor acknowledged that it would be very difficult to coexist with a national Executive who has the legitimacy of elections. The State will need the Nation like water. “The people of Buenos Aires evaluated that the deficiencies in terms of housing, education, health and infrastructure were not met” neither with a chainsaw nor with adjustment“, aforementioned.