“Anti-system” President Javier Milei chooses a former minister for the Economy portfolio

2023-11-29 19:14:00

The break ultimately seems less brutal than expected, following a thunderous and excessive presidential campaign. Ten days following his historic victory in Argentina, becoming the first libertarian president in the world on December 10, Javier Milei appointed his Minister of Economy. And while we might have expected a radical choice, given his “anarcho-capitalist” and anti-State positions, the elected president chose a form of continuity. It is in fact Luis Caputo, former Minister of Finance under the Macri presidency in 2017, who will have the heavy task of the Economy portfolio, in a country on the verge of bankruptcy.

President Milei, who had already announced that he would keep only eight essential ministries (instead of the previous 18), chose this economist, a former trader on the New York Stock Exchange, and was also briefly at the head of the central bank under the presidency of liberal Mauricio Macri (2015-2019).

This choice is all the more unexpected since Luis Caputo was reserved on the dollarization of the Argentine economy, the solution advocated by candidate Milei to stop the devaluation of the pesos and chronic hyperinflation. But the end of the central bank that accompanies it is still in sight, according to Bloomberg, at a deadline ” middle term “indicated Luis Caputo whose mission was to quickly reassure the banks following the election.

Aged 58, Luis Caputo led the economics team during the transition, before his official appointment. He accompanied Javier Milei for two days to the United States, where the future head of state met advisors to American President Joe Biden. Mr. Caputo also participated in a technical meeting with the International Monetary Fund (IMF).

Stagflation to come

Argentina is one of the countries most indebted to the Fund in the world (44 billion). Also, the economist Milei warned that his country’s recovery will not be rapid, even mentioning a period of stagflation to come (high prices, low growth).

Rising prices ” will stay high » car “it is already affected by what has been done in monetary policy over the last two years”he said, criticizing the monetary issue of the outgoing government.

“There is going to be stagflation because, when you put the budget in order, it will have a negative impact on economic activity,” he warned, estimating the time needed to be between 18 and 24 months. to put an end to inflation”, once order has been restored to the budget.

But recently, Javier Milei, the anti-system candidate elected to lead Latin America’s third-largest economy, called Mr. Caputo “ best finance expert in the country.

“When we look at the nature of Argentina’s problems, when we see that out of the 15 points of budget deficit (according to Javier Milei, Editor’s note), ten come from the central bank, it is clear that the first problem to solve is that of the Leliqs”, he told La Red radio. And, according to him, Luis Caputo is best suited for this.

Leliqs are a short-term debt instrument issued in pesos by the central bank to support the national currency. But, for Mr. Milei, they are currently at a level of insolvency that threatens Argentina with “ hyperinflation ».

Under the mandate of Mauricio Macri, the Minister of Finance Caputo was in particular credited in 2017 with the so-called “operation century-old bonds »an issue of 100-year bonds which had found takers on the capital markets, a signal then considered positive despite the crisis the country was going through.

Aid to the “vulnerable” will continue

In addition, his absolute priority of budget cuts with a view to “balance, non-negotiable”, will negatively affect GDP, he conceded.

For 2023, the IMF in its latest projections predicted a contraction in GDP of 2.5%.

However, he assured that social assistance would be maintained to cushion the impact of budget cuts.

« The only wallet that will stay open » will be the one of the future “Ministry of Human Capital”to compensate for possible “ negative social effects » of these measures and provide support to those most “ vulnerable “, he said.

On the other hand, he suggested that he was going to attack social organizations and movements, which, according to him, “ forcing people to demonstrate.”

Argentina has 40% of people below the poverty line and 51% receive some form of subsidy or social assistance.

(With AFP)

Inflation, deficit, recession: the challenges of Javier Milei, new ultra-liberal president of Argentina