Tuesday, November 28, 2023

ARGENTINA | 20-11-2023 12:51

Javier Milei says it could take two years to tame Argentina's inflation

President-elect says it will take between 18 and 24 months to bring Argentina's rampant inflation under control as he outlined his plans to reform the economy.

President-elect Javier Milei said Monday that it could take between 18 and 24 months to bring Argentina's rampant inflation under control, as he outlined his plans to reform the economy.

Milei won a resounding victory in Sunday's presidential election, trouncing Economy Minister Sergio Massa by 12 points with a pledge to end decades of unbridled state spending and "end the decline of Argentina."

"First, we will start with the reform of the state, to very quickly put public accounts in order," the libertarian economist told Radio Mitre.

In a series of morning radio interviews to lay out his vision, he said he had a "clear plan" to tackle annual inflation that has hit 140 percent and a poverty rate of 40 percent.

During the campaign, Milei vowed to ditch the ailing peso for the US dollar and get rid of the Central Bank, which he accuses of fuelling inflation by printing money to finance government overspending.

"The empirical evidence for the Argentine case says that if you cut monetary emission today, it takes between 18 and 24 months to destroy [inflation]," he said.

"Closing the Central Bank is a moral obligation. Dollarisation is to get rid of the BCRA [Central Bank]. We propose that the currency should be the one chosen by individuals," he said. "Argentina is in an extremely delicate situation and we are with the best professionals to rebuild the country."

On his plans to reform the government, Milei said "everything that can be in the hands of the private sector is going to be in the hands of the private sector," including the state oil company YPF and state media.

He said he would push for the elimination of strict currency exchange controls – with analysts saying the official rate of the peso to the dollar is an expensive fiction.

However, Milei said he would first seek to resolve the Leliqs note debt issued by the Central Bank.

"It is not possible to solve the problem of the exchange-rate cepo if the problem of the Leliqs is not solved. It is the other side of the coin," Milei told Radio Rivadavia.

"If the problem of the Central Bank is not resolved, the shadow of hyperinflation will follow us at all times," he said.


Argentines can choose currency

Asked about his dollarisation platform, Milei said the priority was "to close the Central Bank, then the currency will be the one that Argentines freely choose."

Milei said he will meet with outgoing Peronist President Alberto Fernández, without saying when.

"He called me to congratulate me and invited me to a meeting to make the transition as orderly as possible," he said. 

Milei also indicated that he will travel, privately, to the United States and Israel before taking office on December 10.

The 53-year-old is inheriting a country whose coffers are in the red, with US$44-billion debt with the International Monetary Fund looming over his incoming government.

IMF Managing Director Kristalina Georgieva congratulated Milei and said she looked forward to working with him "to develop and implement a strong plan to safeguard macroeconomic stability and strengthen inclusive growth for all Argentinians."

Monday is a public holiday, meaning the impact of Milei's win on the volatile peso has been delayed.

Argentina has in recent years strictly controlled the exchange rate of the peso and access to dollars, leading to a thriving black market for greenbacks.

This so-called "blue dollar" exchanges at almost three times the value of the official rate, and analysts warn the peso is ripe for a sharp devaluation.

Asked whether he would scrap restrictions on the purchase of foreign currency that have been in place since 2019, Milei said "it is not an option to maintain the cepo ["clamp, trap"] that hinders the economy."

Congratulations poured in for the new leader of Latin America's third-largest economy, including from Brazil and China – who he had previously vowed to cut ties with, saying "we don't make deals with communists."

Milei toned down much of his more controversial rhetoric after winning the backing of much of the centre-right opposition, and it remains to be seen which of his policies will materialise.

Following Milei's victory, Brazil's President Luiz Inácio Lula da Silva wished "good luck and success" to the new Argentine government.

However, reports from the O Globo newspaper that Lula would not attend Milei's inauguration as he was "personally offended" by the abuse trained at him by Milei.

Former president Jair Bolsonaro, who has been invited by Milei to the ceremony, will attend.

China said Monday it would continue working with Argentina, congratulating the president-elect on his victory.

"China has always attached great importance to the development of China-Argentina relations from a strategic and long-term perspective," Foreign Ministry spokeswoman Mao Ning said at a regular briefing. 

Milei also said Monday that he would shun the presidential office at the Casa Rosada in order to work from the Olivos presidential residence. 

The libertarian plans to set up an office on the second floor of the main building on the outskirts of Buenos Aires so he is able to work around the clock.

"I am going to move to Olivos and settle there so I can work from the time I wake up until I go to sleep," he said, confirming that his partner, comedian Fátima Flórez, would not live there with him.



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