Wednesday, June 12, 2024

ECONOMY | 31-08-2023 14:32

Ramiro Marra: ‘Dollarisation would take between nine months and two years’

La Libertad Avanza’s mayoral hopeful for Buenos Aires City puts timescale on Javier Milei’s plan to adopt the greenback, but presidential candidate says it will “depend on the people.”

Ramiro Marra, the La Libertad Avanza candidate for Buenos Aires City mayor, says that dollarising Argentina’s economy could take up to two years to become a reality.

Speaking in an interview with Reuters, Marra attempted to put a timescale on Javier Milei’s flagship policy and said, should the presidential candidate win office, the process of dollarisation would take between nine months and two years to complete. 

He also warned that “hard months” lie ahead for whoever wins the election.

"It has to be understood that administration proposals do not happen by magic," he told the news agency.

Marra, part of Milei’s inner circle, also said that the presidential candidate would slash export duties for the agricultural sector if elected to office, though he failed to say exactly when that would happen.

"We believe that we must take our foot off the agricultural sector," he said, criticising the impact of “inefficiencies from the creation of direct and indirect taxes.”

Questioned about the challenges of governing without a majority in Congress, Marra said that La Libertad Avanza would look for ways to bypass congressional disputes, intending to “sow the seed” for widespread economic reform.


Greenback timelines

Milei, who finished first in August 13 PASO primaries, and his team are coming under greater scrutiny as the presidential election draws closer.

Pushed to be more explicit about his plans to dollarise this week, Milei said in an interview with Radio Continental on Wednesday that his team are studying the feasibility of dumping the peso for the greenback. He warned, however, that the speed of the process would “depend on the people” and their adoption of the US currency.

Explaining that dollarisation could only take place once greenbacks represented “two-thirds of the money supply,” and that millions of low-denomination banknotes would have to be dealt with, he declared: "The faster people want dollars, the less time it takes. The longer we take to resolve the operational issue of the small notes, the longer it takes.”

Emilio Ocampo, an advisor to Milei on the issue, said at a seminar this week that dollarisation should be completed by April or May 2025. 

“For this to happen, we need to have political backing, which will allow us to stabilise the economy very quickly," he added. 


‘Fiscal disaster’?

British consulting firm Oxford Economics this week criticised Milei’s plans, warning that the move would imply “a fiscal disaster.”

"Dollarisation is neither a necessary nor a sufficient condition to ensure sustainability,” warned the London firm in a report. It proposed that a "fiscal adjustment could maintain monetary sovereignty and provide a more balanced and credible context for stabilising the economy.”

The analysis also emphasised that "to dollarise, a much more depreciated peso in conversion would be necessary, which would lead to a large additional devaluation of the value of savers' deposits.”



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