Javier Milei: evaluation

Transcript context

…So you became president 11 months ago. Can you, again, describe some of the actions you took? For example, you cut half the number of government ministries, layoffs, removed price controls. It’ll be interesting to lay out the first steps and what’s next. If you allow me, I will first give you a description of the situation we received, and based on that, I will tell you each of the things we did. When we first took office, basically what we found was that in the first week of December, inflation was rising at the rate of 1% per day, which means 3,700% annually. In the first half of December, it had accelerated to 7,500% annually. When you look at wholesale inflation in December of last year, it was 54%, which if annualized would equate to an inflation rate of 17,000% per year. And in addition, Argentina for the previous 10 years had not been growing, with a drop in GDP per capita of approximately 15%. And the reality was that nearly 50% were living in poverty. Now, later I will get deeper into that discussion, and the reality is that we had a fiscal deficit, which amounted to 15% of GDP. Five points were in the Treasury, 10 points were in the Central Bank, which was endogenous monetary issuance. And the reality is that we also had interest-bearing liabilities at the Central Bank, equivalent to four monetary bases maturing in one day, meaning we could have quintupled the amount of money in one day. We had peso-denominated maturities, amounting to the equivalent of $90 billion. The Central Bank had negative net currency foreign reserves, minus $12 billion. We had commercial debts in the Central Bank equivalent to $50 billion. There were company dividends held back amounting to $10 billion. Therefore, if we had instantly opened up… You see, I say we are liberal libertarians. We are not liberal fools. That’s what some anarchist liberals suggested, meaning that we basically open everything on the first day. So in that context, of course, if we had done that, we would’ve encountered hyperinflation. Therefore, that would have led to the number of poor people being around 95% and probably, and by December, the Peronist party would have organized supermarket’s lootings, and would’ve done all sorts of things, and would’ve probably been ousted. And by the first part of the year, the Peronists would’ve gone back to office. So to us, it was crucial to end fiscal deficit. and would’ve done all sorts of things, and would’ve probably been ousted. And by the first part of the year, the Peronists would’ve gone back to office. So to us, it was crucial to end fiscal deficit. One of the things we promised during the campaign had been to reduce the number of ministries, and indeed we reduced to less than half the number of ministries because we went to nine ministries, today we have eight. We have also laid off a large number of civil employees. Today, I can say that we’ve already dismissed about 50,000 of them, and we practically don’t renew any contracts unless the positions are absolutely necessary. At the same time, we have stopped public works and we have eliminated discretionary transfers to the provinces. We have also diluted public sector wages. Also, we have eliminated economic subsidies by restoring utility rates to the right levels. And in that, let’s say, in this context, we achieved fiscal balance as far as the Treasury is concerned. This is very important because in the last 123 years, Argentina had a deficit for 113 of them, and in the 10 years it did not have a deficit because it was not paying the debt. So that was absolutely false, and they told us it would be impossible to do that. We had planned to do so within a year, and they said it wasn’t possible to adjust by more than one percentage point, and we achieved fiscal balance in the month of January. That is the first month of administration. At the same time, we also cut social plans linked to intermediation. This is very important because we knew we were going to make a very tough adjustment, and we knew that this was going to have a court in social terms, and we knew that we had to offer support during the first month, I mean, the first quarter and second quarter in office. One of the things we did was to eliminate what are known as poverty managers. That is intermediaries. Basically, people have a guard through which they receive assistance, but it happens that they had to provide a counter service, and that counter service was verified by a group called the piqueteros. So in that context, when they were going to sign, the counter service took away half of the money. So by removing that payoff, they stopped extorting them, stopped stealing their money, and with the same amount of money, they received double the resources. And of course, we also provided an additional boost. So let’s say that this is related to the five adjustment points in the Treasury. Now, what happens, as we began to achieve fiscal balance and no longer needed to issue money to finance ourselves, and as we also met interest payments and some capital repayments, one of the things that happened is that the debt market began to be recreated. So we were able to take debt out of the Central Bank and transfer it to the Treasury where it should have always been, and that meant an adjustment of approximately 10% of GDP. Everyone said this would be impossible and couldn’t be fixed.…

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