No place for inflation or gov’t spending in Libertarian Milei’s Argentina
ALBAWABA – Far-right libertarian President-elect Javier Milei’s Argentina will undergo economic shock therapy to balance the country’s budget in 2024 in a bid to avoid hyperinflation, he said Wednesday.
He promised to drastically cut government spending because “there’s no money”, Bloomberg reported. Adding that failure to do so would further boost consumer prices, already up more than 140 percent on an annual basis.
Milei provided few details of how he would balance the budget, saying his still-unnamed economic team would tackle the central bank’s balance sheet of short-term debt. Interest payments on peso bonds by the central bank amount to 10 percent of gross domestic product.
Milei’s Argentina is promised to be rid of inflation within the next 12-24 months. An election propaganda poster of Argentine Economy Minister and presidential candidate for the Union por la Patria party, Sergio Massa, is vandalized by graffiti reading "140% inflation" in Buenos Aires on November 20, 2023. (Photo by JUAN MABROMATA / AFP)
Milei won in a landslide victory in Sunday's presidential election, trouncing Economy Minister Sergio Massa by 12 points with a pledge to halt decades of unbridled state spending.
In fact, he pledged to "end the decline of Argentina".
The 53-year-old outsider vowed to "very quickly put public accounts in order". Milei has drawn comparisons with former US president Donald Trump and Brazil's Jair Bolsonaro for his abrasive style and controversial remarks, according to Agence France-Presse (AFP).
US Dollar to become the currency of Milei’s Argentina
Milei also earlier vowed to ditch the ailing peso for the US dollar and get rid of the central bank, which he accuses of fueling inflation by printing money to finance government overspending.
On Tuesday he said, "Empirical evidence for the Argentine case says that if you cut monetary emission today, it takes between 18 and 24 months to destroy (inflation)".
Milei said the priority was "to close the central bank, then the currency will be the one that Argentines freely choose".
Javier Meili’s Argentina is heading for a drastic shift with the far-right libertarian candidate arriving in office as his supporters celebrate after polls closed during the presidential election runoff outside the party headquarters in Buenos Aires on November 19, 2023. (Photo by Luis ROBAYO / AFP)
International Monetary Fund (IMF) Managing Director Kristalina Georgieva congratulated Milei. She said she looked forward to working with him "to develop and implement a strong plan to safeguard macroeconomic stability and strengthen inclusive growth for all Argentinians".
Milei also suggested his government may cut ties with China and Brazil, saying "We don't make deals with communists."
Notably, Milei’s Argentina is not the first Latin American country to adopt the US dollar.
Ecuador adopted the dollar in March 2000, El Salvador on January 1, 2001, and Panama since 1904.
In fact, the US dollar has circulated as the official currency of Panama for longer than any other Latin American country, alongside the local balboa.
Like Panama, Peru and Uruguay also have a dual-currency system, with the US dollar circulating alongside the local currencies.
