The Minister of Economy Luis Caputo He anticipated that this Thursday the International Monetary Fund will discuss the disbursement of USD 800 million to Argentina and said that from that moment the Government will begin the negotiation of a new program. “It will take a while but it must be agreed with the Fund and eventually (we hope) with that new program new money arrives“said the minister. These additional dollars, he assured, are a decisive step towards exiting the exchange rate.
The head of the Treasury Palace defined the inheritance that the Government received as “a country with fiscal cancer and monetary and financial metastasis,” at the opening of the seminar “The rebirth of freedom in Argentina and the world,” which will close President Javier Milei and the businessman Elon Musk.
Before a friendly audience, which interrupted him with applause in different passages of his speech, Caputo made a passionate defense of economic management and asked those present not to fear when there is noise in the market: “This is not what you saw 50 timesthis time the macro is ordered.”
“More than six months have passed, so it is good to make a small summary of what has been received. The situation was truly dire. The combination of the worst of the Rodrigazo, the worst of the inflation of Alfonsín and Menem and the crisis of 2001. A fiscal deficit of 5 points, a quasi-fiscal deficit of 10 points; So a consolidated deficit of 15 points, which is brutal,” said the official.
Furthermore, at the Cato Institute event in Buenos Aires he expressed that upon assuming office they found “a totally bankrupt Central Bank, 11.5 billion dollars of negative reserves, 3 monetary bases in remunerated liabilities, at a rate that implied issuing one more monetary base every 3 months and a half, along with inflation above 200 and most of the prices depressed.”
“It is very good that the Bases Law passes, it is a law for Argentines, an accelerator, an enhancer of the economic situation, but it is not going to alter the fact that the country is going to recover”
“We had a country with fiscal cancer and monetary, financial, exchange and institutional metastasis. “He was a patient who was closer to passing on to the other side of life than to recovering,” he stated. “We had to do a whole surgery that very few people expected. Things were done in a period of 5 months that had not been done in 100 years,” he said.
“Typically to lower inflation, the first thing central banks do is raise rates, is what the manuals say. For Argentina at that time it would have been a mistake because raising interest rates is done to decompress credit, the secondary generation of money and for the economy to slow down,” he stated.
“Why is it different in Argentina? Because there is no secondary creation of money. If we raised the rate, the only thing we would have done was exacerbate the monetary disaster, because endogenous liabilities would have multiplied; we would have had to print a monetary base per month,” he explained. Thus, “it would have been impossible to get out of the exchange trap, because today we would have 6 or 7 more bases that would have earned 150% in dollars and they would be waiting for us to open the trap to leave.”
Regarding the Base Law, he said that “there is a lot of talk about the law in a binary way. If it happens it’s good, if it doesn’t it’s a disaster; It is not like this. It is very good that the law passes, it is a law for Argentines, an accelerator, an enhancer of the economic situation, but it is not going to alter the fact that the country is going to recover.” “The macro order will continue and the country will recover the same; The course is not going to change, it is very important that this be incorporated,” he stated.
“It is not binary. I hope there is responsibility on the side of Congress and that the Law comes out. But we are going to continue; Everyone knows that this law benefits all Argentines and that is why the opposition does not want to approve it, they are people who have no interest in the country doing well. They are in politics for the business and they want to manage it,” Caputo added.
The minister said that the opposition asked themselves “what happens if four or eight more stay?” How do we manage the business? What he is contributing, what the people are supporting is what also baffles the opposition,” he clarified.
“People support the change, they are making an important effort, but the difference is that there is hope because the majority of people understood that it is the right path and that we do not get away from a 100-year-old model in a couple of months; The vast majority of people already understood that they do not have to go back there. Let’s not get caught up in 30 people in the Senate attacking these achievements,” she stated.
Regarding the rise of the dollar and the country risk in recent weeks, Caputo assured: “I don’t want to sound arrogant, it doesn’t scare me. I know the cloth well, I went through 500 crises in all the countries of the world. There is a crisis if there is macro disorder, today there is none. Surely there will not be a crisis. Don’t eat any other story. Everything you see in Congress is all staging. The only thing that matters there is money. “If suitcases arrive, if they fix something for their provinces, if they give them positions, boxes,” he shot.
“Surely there may be a little more volatility but there is no economic basis for anything to happen. Do not underestimate the fundamentals. Politics has always ruled over the economy, Today the economy rules over politics. It is a change of era. “This president is not going to change an inch where he asked us to go,” the minister said.
On the other hand, he announced that “we are in the process of evaluating the Fund, which will be on (Thursday) the 13th. From there we will begin to negotiate a new program, which I have had since August of last year. I told the Fund itself personally in October and November. It will take some time but it must be agreed with the Fund and eventually With this new program comes new moneyCaputo assured.
“To get out of the trap there are four conditions: fiscal balance, solving the stocks of inherited dollar demand, the flows (75% of that is solved). And the fourth is that there is a reasonable relationship between reserves in the BCRA and remunerated liabilities. We’re not there yet. lthe fourth is the one we still have to continue working on”, he stated.
Finally, he assured that as minister he will promote the transfer of public works started to the orbit of the governors’ spending: “We do not have to use public works to do politics,” he said and anticipated that “discretionary transfers will continue to be zero.”
