Lacunza, Milei both warn against lifting FX controls suddenly

Two opposition figures in Argentina with differing views struck the same chord Tuesday, warning against lifting the country’s strict currency controls right away when a new government takes office in December.

Hernán Lacunza, Argentina’s former economy minister and now a top adviser to opposition presidential candidate Horacio Rodríguez Larreta, said lifting currency controls from one day to the next is “impractical” and would create “chaos.”

“Can you lift them in a day? I would like to because the currency controls are an abnormality, they’re a tourniquet that you apply when you have haemorrhaging,” Lacunza said at a business conference Tuesday in Buenos Aires. But “first you have to stop spending what you don’t have and then you’ll be able to lift the currency controls.”

Argentina’s election cycle is heating up after last Saturday's deadline for candidates to declare. Investors see ending the byzantine controls as a key priority for the next administration to attract foreign investment, eventually slow inflation that’s over 114 percent and return Argentina to some degree of economic normality. Argentines vote October 22 and the new government takes office December 10.

Lacunza implemented the first round of controls in late 2019 during a severe currency run, but since then current President Alberto Fernández has significantly tightened controls, adding multiple taxes on exchanging pesos for dollars and restricting businesses’ access to greenbacks.

Outsider presidential candidate Javier Milei, a critic of both Rodríguez Larreta and Fernández, proposes a dramatic solution of making the US dollar Argentina’s national currency and ending the peso. Despite major differences with Lacunza, Milei also emphasised that his plan wouldn’t include ending controls overnight.

“Any solution that talks about lifting currency controls from one day to the next implies that it’ll create hyperinflation,” Milei said Tuesday. “I’ve never said that it would happen instantly.”