2023-05-01 18:25:00
The former Minister of Economy, Domingo Horse warned that if the fiscal adjustment tries to imitate the one made between 2002 and 2003, “the economy is going to go into hyperinflation and following that you will not find any monetary regime capable of defeating inflation in a presidential term”.
Referring to the exit from convertibility in the governments of Eduardo Duhalde and Néstor Kirchner, the former minister in the administrations of Carlos Menem and Fernando de la Rúa maintained that seek the liquefaction of expenses and liabilities through a devaluation Without structural changes in the Argentine economy, it will not serve to face the inflationary process that the country is facing.
“The reform of the State, privatizations, the elimination of distortionary taxesthe opening of the economy and the nominal anchoring of inflation expectations are essential for inflation to be definitively defeated in a period of two years”, stated Cavallo in a document published today on his personal blog.
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Cavallo warned that if “It is trusted that the liquefaction of expenses and liabilities will do the job Without those organizational changes of the economy being necessary, there will be no way to nominally anchor expectations and inflation will continue to plague the already very impoverished Argentine economy”.
“What is needed is a reorganization of the economy and a fiscal adjustment like the one we did between 1990 and 1991”he stressed.
The former head of the Palacio de Hacienda was opposed to the adjustment that several of his colleagues proclaim: “Practically all non-Kirchnerist economists and political leaders agree that to stabilize and return to growth, a strong fiscal adjustment is needed that allows to stop increasing the indebtedness of the Central Bank”.
How to make fiscal adjustment according to Cavallo
“I maintain that if the fiscal adjustment is not carried out like the one implemented by the Menem government between 1989 and 1991, but tries to imitate the one carried out between 2002 and 2003, the economy will go into hyperinflation and following that you will not find any monetary regime capable of defeating inflation in a presidential term”, he indicated.
Cavallo established the differences between the two strategies. “An alternative is to use the reform of the state, privatizations and the opening of the economy. Another alternative is to resort to a strong ‘de-dollarizing’ devaluation that liquefies debts, salaries and pensions, provide strong protection for import substitution and generate fiscal resources through agricultural, oil and mining withholdings”.
LM
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