The Argentine’s life in recent months has become waiting. In general, no one risks making big deals or making big decisions before it is decided, this Sunday (19), who will be the country’s new president. This is because the future of the population’s money depends on which plan the winner will apply. to contain annual inflation of 143%
Until now, the Peronist government of the unpopular Alberto Fernández has been managing the situation with palliative measures, in a scenario in which his Economy Minister, Sergio Massa, is a candidate to succeed him and, in practice, has been managing the country for a few months. On the other side, ultra-liberal deputy Javier Milei, who promises radical changes.
The former economics professor’s main proposals are to dollarize Argentina, eliminate the Central Bank and drastically reduce the State. The Peronist and career politician proposes continuity, betting on improving exports in some sectors to obtain more dollars and maintain prices.
The two, however, still leave many doubts about how they will balance the books without first further impoverishing a population that sees its wages melt. Out of fear of attrition, both have so far avoided announcing a name for Argentina’s most important ministry — Massa has only stated that he will call someone from outside his political force.
Below, see what each one proposes to resolve the crisis, in three main axes.
Milei’s plan is based on the book “Dolarization”, by economist Emilio Ocampo, announced as the man who will take over and close the Central Bank in his eventual government. He plans a model of free competition between currencies, as occurred in El Salvador, that is, for the peso to continue coexisting with the dollar — a currency already widely used by Argentines — until a total transition.
He also argues that “no monetary reform can work if the two sources of money printing are not neutralized: the fiscal deficit [despesas públicas maiores que receitas] and the quasi-fiscal deficit”, the internal debt of the Central Bank itself. The agency sells public bonds to banks to remove the pesos that it itself printed from circulation and needs to pay interest, generating more debt.
Part of Milei’s plan is to buy these bonds (called Leliqs) back, stop printing money and then release dollar trading, which is currently very limited. The main criticism from several sides is that it would be very difficult to put the plan into practice in a country that has very low reserves of the American currency, due to its recurring crises and external debts.
Massa often repeats that the four pillars of his economic policy will be: fiscal balance, trade surplus (more exports than imports), exchange rate competitiveness (a strong currency) and tax reduction. He has difficulty, however, convincing voters why he didn’t do this while he was Minister of Economy, for the last one year and three months.
It is generally justified by citing the historic drought that the country faced until the beginning of the year, which brought down rural exports. The end of this drought, therefore, is one of their great hopes for increasing production next year and obtaining the dollars needed to regularize imports, pay debts and adjust accounts, curbing inflation.
To this end, he is also betting on the mining sector, with the large lithium reserves that are beginning to be explored. In the energy field, it counts on the completion of the gas pipeline that would allow Argentina to stop importing gas and supply itself with resources from Vaca Muerta, an extensive shale gas geological formation. “The gas and oil pipelines solve a lot of the macroeconomics for us,” he said.
2. Public spending
Milei promotes the so-called “chainsaw plan” in the state, a term that has disappeared from his vocabulary since he was behind Massa in the first round and has moderated himself. Now, one of her focuses is convincing people that she will not cut social plans, despite having already said, a few months ago, that “whoever receives a plan should go to work”.
In any case, his proposal continues to be to streamline the public sector as much as possible, reducing the current 18 ministries to 8 —with the extinction of departments such as Culture, Science and Technology and Women—, and privatizing large public companies such as the oil company YPF, the airline Aerolíneas Argentinas and the communications agency Télam.
Massa has also said that he wants to reduce spending, with “a profound change in public administration, the unification of public companies” and “more efficient State contracting”. Questioned by Sheet in October about how he will do this while maintaining the subsidy policy, he responded that he has already been taking “subsidies from those who don’t need them, but protecting those who do need them”.
“An Argentine worker would pay ten times more on the train and seven times more on the bus if we removed the subsidy. They [Milei] propose taking it away, I propose protecting it as a form of indirect salary. Until they recover their income, Argentine retirees and workers are not in a position to pay out of their pockets,” he declared.
Fiscal responsibility is one of the main goals that Argentina has to meet for the billion-dollar loan agreed with the IMF (International Monetary Fund) in 2018. Both candidates have committed to paying the debt, although Massa says he wants to renegotiate the program because the considers it “inflationary”.
3. Economic opening
Milei promises a unilateral “Chilean-style” trade opening to the world market. It is betting that the reforms will make Argentine companies competitive, which they are not today. He wants to strongly reduce taxes, reduce export fees and duties and eliminate import tariffs for inputs, helping the countryside to “return to being the breadbasket of the world”.
Despite the desire to open up, he has already stated that he would leave Mercosur and that he would stop speaking to the presidents of Brazil and China, but that this would not affect relations between companies. It was up to his possible chancellor, Diana Mondino, to say that the rupture would not be so sudden. But she admits that a possible Milei government would seek free trade agreements outside the South American bloc, which is against the statute.
Massa has sought to oppose Milei, saying that “the opening of the economy means the closure of small and medium-sized Argentine companies.” Breaking with Mercosur, Brazil and China, according to the campaign, would mean breaking with the country’s largest trading partners, which would cause the loss of millions of jobs.
The Peronist places great weight on his foreign policy as a way of obtaining the dollars he so desperately needs, with three pillars: more exports of value-added products (and not just manufacturing), more foreign investment and more tourism. Just like Milei, who will eliminate restrictions on purchasing American currency within 12 months.