Economy Minister Luis Caputo says the government’s failure to push through its sweeping ‘omnibus bill’ reform package “doesn’t affect” Argentina’s “economic programme in the least.”
President Javier Milei’s administration suffered a major setback in Congress on Tuesday when its controversial deregulatory reform package was prevented from advancing and sent back to committee stage for a rewrite. The bill’s future is unknown.
Reacting to the news, Caputo said in a television interview Wednesday that the government had drawn up an economic plan with the bill’s rejection in mind.
“The failure to approve [the omnibus bill] does not affect our economic programme, our commitment to stabilise fiscal accounts, in the least. It doesn’t mean a big problem for us,” said the minister.
A bullish Caputo revealed that inflation in January was close to 20 percent (it was 25.5 percent in December) and went on to predict that it would continue to slow in February and March.
Milei began his term by devaluing the peso by more than 50 percent, cutting state subsidies for fuel and transport, reducing the number of ministries by half, and scrapping hundreds of economic rules.
According to Caputo, the changes are already bearing fruit. “We’ve already achieved a financial balance. Without a law. So, we’re not improvising,” he said, referring to January. .
“That’s why we removed the fiscal package from the bill. The figures are better than what most analysts expected,” he added.
“I believe the treatment of the Omnibus Law was beginning to get dramatic. And we clearly know that we’re struggling against a handful of legislators who want no change. We already knew the possibility of its not being enacted was there,” the minister stressed.
He further claimed that “the law isn’t life or death because there are very few fiscal numbers there. The greatest adjustment of fiscal accounts was outside the bill.”
Nevertheless, he insisted that without the law “we’re going to go deeper into the adjustment of the items we already know.”
For Caputo, who said he is open to dialogue, the bill that foundered in the lower house seeks to “keep the people from being trampled by the State, as well as to develop the private sector.”
On the other hand, the official held that from the government “we always said that this first semester was going to be very tough – hence the more honest price being reflected immediately in inflation.”
“There’s no other way to solve the problem. People understand that and they tell me so in the street. They understand that this sacrifice has a purpose, that we will pull through.”
“The situation will start to be better once inflation begins to be controlled and we grow again,” concluded the minister.
Specifically on inflation, Caputo estimated that “it’s already going down.”
“In January it’ll be 20 percent, lower in February and probably even lower in March,” he boasted.
“This means the fiscal anchor is working. I believe we’ll have a much calmer second semester,” he added.
As for pensions, the minister stated: “We’re close with the opposition to arrive at a much more reasonable formula [to increase pensions], which helps protect pensioners from inflation.”
On television, Caputo guaranteed: “We’re going to take care of the peso, print an increasingly lower amount and people will take care of prices. They’re already doing it, they don’t just buy anything. There are prices that have gone down in nominal terms.”
The economy minister also claimed that the government “inherited the worst economic situation in history,” adding that Argentina was “on the verge of hyperinflation.”
Inflation is currently running at 211 percent per annum in Argentina. The INDEC national statistics bureau is due to report January’s figure on February 14.
Many analysts concur with Caputo’s view that consumer prices slowed last month. The EcoGo consultancy firm has projected an 18.6-percent inflation for this month, whereas Orlando Ferreres expects a number in the region of 18 percent. The Fundación Fiel Foundation estimates 21 percent.
In the Central Bank’s first REM market expectations survey of 2024, released on Tuesday, those surveyed estimated a monthly 21.9-percent inflation for January. For February they projected 18 percent inflation and 227 percent year-to-year.