What will be left of Argentina – 11/25/2023 – Vinicius Torres Freire

Javier Milei’s victory caused a sensation due to the caricatured and lunatic character of the elected president of Argentina.

It then raised analytical guesses about changes and configurations of the “ideological map” of Latin America, even though Latin America does not exist.

Next came speculation about what relations between the neighboring government and Brazil would be like and about the future of Mercosur, which exists, but as a tiny mummy. More important, however, is knowing what will be left of Argentina.

Milei doesn’t know what to make of the mere creation of his government, let alone his program. In recent days, dollarization seems to have become a distant topic. The rest of the economic plan is a now contradictory mess.

Newly elected, Milei and his coalition said they would hold the main positions in the ministries. Milei had also practically appointed his dollarization guru, Emilio Ocampo, to the Central Bank. The group of Mauricio Macri, former president (2015-19) and second-round ally, would be in the second tier, “technical”. The “caste” (traditional politicians and others) would be left out.

At the end of the first week of the elected president and 15 days before inauguration, Milei nominated Ocampo and others close to him. Patricia Bullrich, the defeated candidate of the Macrista coalition, was appointed to the Ministry of Security.

Non-Kirchnerist Peronists gained positions in the first echelon, among many others from the “caste”. Even counting the vague promises of an alliance, Milei does not have 30% of the seats in the Chamber.

The largest group of ministers for now is that of Milei’s former colleagues at Corporación America, owned by businessman Eduardo Eurnekian, a holding company for airports, energy, mines, agriculture, civil construction, etc.

Luis “Toto” Caputo, an investment banker who held senior roles in Macri’s economic team, would be Economy Minister. According to reports from journalists and financial consultants, Caputo said in a meeting with businesspeople and bankers that the plan will be shocking, but orthodox and without surprises.

Almost at the same time, Milei’s office released a note saying that the closure of the BC (Central Bank) “is not a negotiable issue”.

Closing the BC is an exotic idea, to say the least, although we don’t know what it means. Functions of a BC may be the responsibility of a regulatory agency, such as the supervision and regulation of banks, although supervision will be very weak if carried out separately.

But who would carry out monetary policy and control inflation? Basically, does it mean determining interest rates through the sale and purchase of public bonds, controlling to a certain extent the excess or shortage of currency? Who would help banks in a liquidity crisis (which requires currency creation, by the way)? The market? Would currency and credit management be privatized?

Milei’s main problem is that the BCRA finances government deficits, issuing currency through the Treasury, and it always will, he thinks. Very libertarian, moreover, believes that the creation of currency, the administration of its value and the risk management of the entire system (from banking to inflationary) should be the responsibility of the banks themselves or similar, at their own risk, being punished in the market for its excesses.

It is possible, but it is a recipe for recurring and explosive crises.

Don’t even ask yourself who is responsible for maintaining international reserves. As the discussion is stated in vague and crazy terms, in addition to being a complicated and long subject, it is not possible to go into details.

What is meant here is that Milei in theory wants to turn the financial and economic system inside out, in a country falling from the abyss, when he doesn’t even know what direction to give the core of his government team.

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