The Argentine press on Monday December 11 in Buenos Aires reflects the content of Javier Milei’s speech during his inauguration on Sunday, announcing a “shock” on public spending (AFP/Luis ROBAYO)
Budgetary, monetary, or both? Gradualism or brutal shock? Argentina was nervously awaiting on Tuesday a first set of austerity measures from the ultraliberal presidency of Javier Milei, without clear signals on the first day of government.
The new Minister of Economy Luis Caputo, a former member of the liberal government of Maurico Macri (2015-2019), must make a first series of announcements on Tuesday, presidential spokesperson Manuel Adorni said on Monday during his first briefing. press.
No details, but a reaffirmed priority: reducing the budget deficit. “Spending more than you have is over. The ‘there is no money!’ (launched on Sunday by Milei in his inaugural speech) is not a cliché. Fiscal balance ( …) will be strictly respected,” insisted Mr. Adorni.
President Milei reaffirmed on Sunday the colossal target of reducing the deficit by 5% of GDP, and warned that “the situation will get worse” in the short term, in parallel with stagflation in 2024 (inflation coupled with stagnation of the activity).
The first measures will be “in line with a strong budget cut”, summarized the spokesperson.
According to statements made in recent weeks, the following are in the crosshairs:
Subsidies for energy and transport in a structurally over-subsidized economy; monetary issuance by the Central Bank, which could be restricted or even stopped; a dense public sector, of more than 3.4 million people, or more than 18% of total employment, the highest ratio in Latin America.
But even there, the presidency blew hot and cold. Mr. Adorni mentioned an “inventory of statuses” of the central administration, ministries, universities, etc.
However, he tried to dispel the fear of brutal cuts in the civil service. “I don’t see any civil servant who has to worry about their job,” he assured. President Milei intends to “highlight the public employee”.
“What we are going to fight is what we call ‘militant’ employment, which exists for a political issue, brings nothing and takes away productivity, salary and functions from the employee who wants to work,” he said. he continued.
– The Milei office gets up early –
Public jobs of convenience are a recurring criticism of the liberal opposition towards the supposed “clientelism” of the Peronist (center-left) governments which governed from 2003 to 2015, then from 2019 to 2023.
Another expected aspect of the announcements concerns the price of a notoriously overvalued peso, at nearly 400 pesos to the dollar. A member of the future government had, last week, mentioned a “desirable” rate of 600-650 pesos to the dollar.
The investment consultancy firm MégaQM recently unveiled two options: that of a currency “shock”, a deliberately too strong devaluation, which would make it possible to accumulate dollar reserves, but with a “very high risk” in terms of social.
The other, a more “gradual” scenario, attempting to approach in stages a “balance” course, less socially costly, but not immune to relapses.
The financial daily Cronista noted Monday that “the indices to date suggest cautious first steps until the harvest” (end of the first quarter of 2024), generally synonymous with a massive contribution of foreign exchange reserves for agro-exporting Argentina.
In fact, in the tourist center of Buenos Aires, the “arbolitos”, street money changers at parallel rates, did not display frenetic activity on Monday, with an informal exchange rate, the usual barometer of ambient anxiety, rather wise at 980 pesos to the dollar. At 2.5 times the official price all the same.
Pending announcements on Tuesday, the Central Bank operated slowly on the foreign exchange market on Monday, like a quasi public holiday, officially to give time to the “new financial authorities” to settle in, including the president of the institution.
Milei, for his part, chaired a first meeting of his cabinet – deliberately restricted to nine ministers, due to austerity. Morning meeting, at 8:30 a.m., which its vice-president Victoria Villaruel says she wants to establish as “a very important habit, of civil servants who work early, like any citizen” of Argentina.
© 2023 AFP
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