The chainsaw is already working. With great anticipation and two hours later than planned, newly appointed Minister of Economy Louis Toto Caputo announced a package of emergency economic measures., measures aimed at preventing an economic catastrophe even greater than the current one. “This is a country in which Argentines are becoming poorer,” Caputo emphasized, recalling that inflation is 300% and the debt is colossal.

“We are on the path to hyperinflation. We can reach 15,000% per year. The cost of milk will increase from 400 pesos to 60,000 in one year. We must understand the origin of this problem – the budget deficit. Debt, inflation, devaluation – we spend more than we collect,” he said in an edifying tone. “As a country, we focus on the consequences but never get to the root of the problem.. We’ve always spent more: in 113 of the last 123 years. And this is why we end up in recurring crises. And we were looking for false culprits,” he explained.

“We want to solve this problem at the root so that we no longer suffer from inflation and poverty. This represents an opportunity because for the first time a candidate comes to power who explains the problem and people vote for him. Society understands this. there is no more money,” Caputo said.

Below he listed the measures: contracts valid for less than one year are not renewed; the suspension of the national government directive is for one year (P34 billion in 2023); The number of ministries was reduced from 18 to nine, and the number of secretariats from 106 to 54; reducing to a minimum transfers from the national state to the provinces; The nation state has no intention of putting new public works out to tender and will cancel those that have not yet begun; reduction in energy and transport subsidies (paid adjusted for inflation); strengthening social policy; fairness of the official exchange rate: one dollar will be worth 800 pesos (was 400, so this is a devaluation), and the national tax will be increased, although export taxes will be eliminated after the emergency; and the end of freedom of action in imports.

This is the right way. “On the other path we will go through even greater poverty and greater suffering.”

Luis Caputo, Minister of Economy of Argentina

He wanted to clarify what the coming months would be like. “Within a few months we will be worse off than before, especially in terms of inflation.. For this reason, the President asked us to pay attention to who might suffer from this measure: we are going to increase the child benefit and the Alimentar card. We are confident that this is the right path,” he emphasized. “On the other path we will go through even greater poverty and suffering. “If we do our homework, let’s allow ourselves to dream of becoming the great country the world admired 100 years ago.”

Argentine specialist journalists stressed that this is a first step, an emergency package that sends a signal to markets, and not an economic plan. However, given the complexity of the undertaking undertaken by the Milai government, they also reminded that it wants to solve the problem at the root and from the very beginning. It took Macri a year and a half to try to implement reforms.

The spending cuts promoted by the government’s Economy Minister Javier Miley, an economist by training, will lead to higher prices for electricity, water, gas and transport. If a citizen of Buenos Aires paid about 85 pesos for a bus ticket, then without the subsidy he will have to pay 700 pesos. This will be difficult, although some social assistance will be maintained and even improved.

There are thus four pillars on which this first advance of the so-called Caputo plan is based: a tough government adjustment to balance public accounts, devaluation of the exchange rate, liberalization of fuel prices or tariffs, and the liquidation of outstanding Central Bank liabilities. Toto Caputo was already economy minister under President Mauricio Macri between 2015 and 2018 and then president of the Central Bank. Your previous experience is similar to dealer in private banking, including Deutsche Bank.

Unsustainable Elephant State

“There is no money,” is the mantra repeated by Argentine President Javier Miley, his press secretary Manuel Adorni and the new ministers. However, they add that measures need to be taken “urgently” to avoid disaster. After two days of stock exchange holidays, the Central Bank will resume its work this Wednesday. The President of the Central Bank, Santiago Bausili, very close to Minister Caputo, has called all the banks to a meeting this Wednesday. report on the measures taken and how they may impact their business.

A few hours before Minister Caputo’s earlier intervention, presidential spokesman Manuel Adorni suggested that the size of the state had already begun to shrink. “A state the size of an elephant cannot continue to exist because on the other side there are people who support it with their taxes and cannot put a plate of food on the table,” Adorni said first thing in the morning.

He recalled that there are 4.5 million poor people in Argentina, so he assured that there would be “an expansion of social containment.” The government is also going to review all recruitments over the past year. The goal is to eliminate so-called “military employment” associated with political reasons.

In turn, the press secretary indicated that the advertising schedule, that is, government-paid advertising space in the media, will be suspended for a year.

Picketers and left-wing political forces declared December 20 a day of mobilization.without even waiting to find out the details Caputo’s plan. This day marks the 22nd anniversary of the protests against Fernando de la Rúa’s economic plan. The president’s press secretary said on this matter: “Everything is within the law, nothing is outside the law.” The street will become a field of confrontation that the Kirchnerists will try to incite.

Weight of inheritance

In his first speech, President Miley, who clearly defeated the ruling party of Sergio Massa in the second round on November 19, already on Sunday foresaw that there was no alternative to an adjustment that could not be gradual. “No government has ever received a worse inheritance than what we are receiving,” Miley said. “This leaves us with a double deficit of 17% of GDP… The solution involves, on the one hand, a fiscal adjustment in the public sector of five points of GDP, which, unlike in the past, will fall almost entirely on the state.” not in the private sector.”

“The outgoing government has left us with hyperinflation and our first priority is to make every effort to avoid such a catastrophe, which will lead to a poverty rate above 90% and destitution above 50%. There is no alternative solution for correction,” he stressed. President of Argentina.

“There will be stagflation, but it will not be much different from what has happened in the last 12 years… This will be the last bad drink that will start the reconstruction.”

Javier Miley, President of Argentina

Miley concluded: “There is no alternative to adjustment and shock. This will have a negative impact on activity levels, employment, real wages and the number of poor people. There will be stagflation, but it is nothing at all like what has happened over the last 12 years, with GDP per capita falling by 15%. But he assured that it would be “the last bad drink to start Argentina’s recovery.”

This Sunday, President Miley signed his first decree creating a new government with only nine ministers. The new members of the executive branch were housed in the White Hall of the Casa Rosada without access to the media.

In a photo circulated on social networks, Miley is seen sitting in the center, surrounded by nine of his ministers: Louis Toto Caputo (economics); Guillermo Ferraro (Infrastructure); Mariano Cuneo Libarona (Justice); Sandra Pettovello (Human Capital); Patricia Bullrich (security); Louis Petri (defense); Diana Mondino (Chancery); Gullermo Francos (interior); and Mario Russo (Health).

The new chief of staff was Nicolás Posse, very close to Miley, whom he met when they both worked at Corporación América. Bullrich and Petrie led the nomination of the Together for Change party, which was ousted in the first round. Former President Mauricio Macri supported Miley as he defeated Bullrich, and his involvement eventually led to the promotion of the Libertad Avanza candidate. Miley’s party has only 37 deputies and seven senators. He needs to reach an agreement with Together for Change and the Peronist sectors to advance his plan.

Javier’s sister Mileya Carina, who receives a call from the president Boss, will be the President’s Secretary General. For this appointment, it was necessary to cancel a 2018 decree by which Mauricio Macri prohibited relatives of rulers from holding public office. Karina Miley is the president’s weakness, and because of her, he broke the rule designed to set an example.