Javier Milei: recommendation

Transcript context

…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. e 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. Essentially, what we did was implement a fiscal adjustment at the Central Bank, amounting to 10% of GDP. So if you ask me, it’s clear that we have not only made the biggest fiscal adjustment in the history of humanity, because we made a fiscal adjustment of 15 points of the GDP, but also most of that went back to the people as less seigniorage, as a lower inflation rate. It’s true that we temporarily raised the country tax, but we lowered it in September, and now in December, we’re going to eliminate it. Today, for example, we also announced that in December we are eliminating import taxes. In fact, in that regard, what you have is that we return to the people 13 and a half points of GDP because the real tax burden is the size of the state. So while back in December we were discussing hyperinflation, today we are discussing 30-year loans. In other words, all those resources that the national government used to take are now back in the private sector. And that’s what has allowed it to be very dynamic. And this has two very strong impacts. The first one is that if you look at wholesale inflation, it went down from 54% to 2%. So it went down by 27 times. It was divided into 27. So we had inflation at the rate of 17,000% annually, and it’s now close to about 28% a year, but it’s not only that. You could consider consumer inflation, the latest consumer inflation rate was 2.7%. Now, it happens that we essentially, due to a matter that is related to the Central Bank’s balance sheets and also due to the debt stocks, we still have controls in place and we are eliminating restrictions, day by day. Now, the interesting thing is that we have a 2% monthly devaluation standard, and there’s international inflation of course, which means that you then have to subtract two and a half points from the inflation observed by the consumer. This indicates that inflation in Argentina, the true inflation, not the induced one, but the actual monetary inflation is 0.2% per month. At 0.2% per month, this equates to 2.4% annually. What I’m saying is, the original discussion was about whether inflation could reach 17,000%. Now we are bringing inflation down to levels of 2.5% annually, and that is amazing. And we achieved this by considering a number of factors. The first one is that we did not experience a previous hyperinflation, which would’ve simplified the process of implementing a stabilization program. Typically, when hyperinflation occurs, monetary assets are diluted, leading to a natural restoration of demand. And besides, we did not resort to any expropriation. For example, before the Convertibility plan, which was the most successful program in Argentina’s history, Argentina experienced two instances of hyperinflation. During Alfonsin’s administration, inflation reached 5,000%, and under Menem was 1,200%. h was the most successful program in Argentina’s history, Argentina experienced two instances of hyperinflation. During Alfonsin’s administration, inflation reached 5,000%, and under Menem was 1,200%. Additionally, there was the BONEX plan, under which debt was exchanged on a compulsory basis. In other words, what we did instead was clean up the Central Bank balance sheet. So with that, we cleaned up the Central Bank’s balance sheet. We cleared a loss of $45 billion, all voluntarily. And the most amazing thing is that we did it in just six months, and at the same time, we have not controlled prices. And at the same time, we have not controlled prices nor have we fixed the exchange rate. And this is very important. All previous stabilization programs in an effort to show quick results used to do this. What they would do is, before announcing the plan, they would adjust the rates. And once the rates were adjusted, they would launch the plan. But in our case, we couldn’t afford that luxury, so we had to implement it on the go. And also over the past few months, that is to say companies brought in rates that covered only about 10%, whereas today they cover 80% so you get the picture. Just imagine the adjustment we are making. And in that sense, it is also incredible what we have achieved because if we were to work with the inflation we have in our country today, considering the exchange rate situation, the figures are even better than during the convertibility program, which was the most successful economic program in Argentina’s history. And in fact, there is an article called Passing the Buck, which is by Gerardo della Paolera, Bózzoli, and Irigoin that demonstrates that Menem’s first government was the best government in history. And basically, it argues two things in the success of the stabilization of the convertibility program. So if you take a closer look, when you examine it carefully, when you account for all these factors, our disinflation process is actually much more genuine. And not only that, it’s also much deeper. We are restored freedoms to Argentinians while simultaneously implementing a structural reform eight times larger. And we accomplished this with only with 15% of the representatives, 10% of the senators, and within the first six months of government. In other words, our deregulation agenda continues daily and we still have 3,200 structural reforms pending. This will ultimately make Argentina the freest country in the world. Moreover, to have a sense of magnitude, the reforms that we already have made with the executive order 7023, and with the basis law, we have actually jumped 90 places in terms of economic freedom. What this means is that today, Argentina has institutions similar to those of Germany, France, Italy, and we obviously want this to continue. And let’s say we are going to surpass no doubt the levels of economic freedom that Ireland reached in its best moment. And not only that, we’re going to exceed the levels of economic freedom of Australia, New Zealand, and Switzerland. We are undoubtedly going to be the freest country in the world.…

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