BUENOS AIRES, Dec 10 (Reuters) – Argentina’s liberal economist Javier Millay took office on Sunday, saying he needed a sharp and painful way to resolve the worst economic crisis in decades, with inflation heading towards 200%. In his first speech, he warned that there was no other option than a fiscal shock. %.
“We have no choice but to adjust to the shock,” he said as he headed to parliament after receiving the presidential baton and sash, drawing crowds of supporters despite Milley’s assertion that the economy would worsen in the short term. cheered. “I don’t have any money.”
Mr. Millay, a 53-year-old former television critic who made a name for himself with expletive-laden rants against rival countries, China and the Pope, was the leader of Alberto Peronist leader Alberto, whose government was in trouble for failing to curb soaring prices. He will be taking over from Mr. Fernandes.
“The outgoing government has put us on a trajectory towards hyperinflation,” Millais said. “We will do everything we can to avoid such a catastrophe.”
The speech was light on details, but said key measures would include fiscal adjustments equal to 5% of gross domestic product (GDP), saying the cuts would be imposed on “the state, not the private sector.” .
The wild-haired outsider is a big gamble for Argentina. His shock-therapy economic plan of deep spending cuts has been well-received by investors and could stabilize an economy in trouble, but it will leave more people in poverty, with more than two-fifths already living in poverty. There is a danger of being pushed into .
But the voters who led Millais to victory in a November runoff against the ruling Peronist coalition candidates are willing to roll the dice on his sometimes radical ideas, including closing the central bank and dollarization. He said that he intends to shake it up.
“He is our last hope,” said Marcelo Altamira, a 72-year-old doctor, blaming the “incompetent and incompetent” government for years of economic boom and economic crisis. The outgoing Peronist government had “destroyed the country,” he said.
boom and bust
The challenges are enormous. Argentina’s net foreign exchange reserves are estimated at a $10 billion deficit, annual inflation is rising at 143%, an economic recession is on the horizon, and capital controls have distorted the exchange rate.
For decades, Argentina has experienced boom-and-bust cycles, printing money to finance regular budget deficits, causing inflation and weakening the peso. The situation has worsened in recent years, with reserves dwindling after a major drought hit key cash crops soybean and corn earlier this year.
In her speech, Millais warned that unchecked inflation could reach 15,000 per cent a year and vowed to “fight tooth and nail” to eradicate it. He also warned of a $100 billion debt “bomb.”
Major grain exporters will have to reconsider their harsh $44 billion loan program with the International Monetary Fund (IMF), while Millais will have to improve ties with key trading partners China and Brazil, which he criticized during the campaign. You need to navigate relationships.
Milay will replace center-left President Fernández, who resigned in unpopularity, but his liberal coalition has a small bloc in parliament and will need to negotiate with rivals. He allied himself with major conservative groups.
It’s already having an impact. He has softened his tone in recent weeks, filling his first cabinet with mainstream conservatives rather than ideological liberal allies and putting more radical ideas such as dollarization on the back burner.
That’s helping to energize markets and reassure voters.
“I think he’ll do a good job,” said Laura Soto, a 35-year-old restaurant worker in Buenos Aires. “For legal and parliamentary reasons, he’s going to have to focus on being more consistent in the end.” Ta.
He said more radical social ideas he talked about during the campaign, such as loosening gun laws and restarting debate on abortion, which was legalized in Argentina three years ago, are also unlikely to materialize.
“Change was needed.”
To resolve the economic turmoil, Millais elected mainstream conservative Luis Caputo to head the economy ministry and installed Caputo’s close ally Santiago Bausiri as central bank governor.
A source on his team told Reuters that Milley is expected to draw up a more detailed economic plan on Tuesday or Wednesday.
Guests at the ceremony included Ukrainian President Volodymyr Zelenskiy, Hungarian Prime Minister Viktor Orbán, and a U.S. delegation.
Also in attendance were right-wing former Brazilian leader Jair Bolsonaro and Uruguayan conservative leader Luis Lacalle Pou. Chile’s leftist President Gabriel Bolić also attended, but leftists Brazil’s Luiz Inacio Lula da Silva and Mexico’s Andrés Manuel López Obrador were some of the notable absentees.
In a sign of trouble ahead, state-run energy company YPF raised gas pump prices by an average of 25% this week, with analysts and markets predicting a sharp devaluation of the overvalued peso currency soon after Milay takes office. There is.
“We know that in the short term the situation will worsen, but then we will see the fruits of our labor,” Millais said. “We don’t want to make the tough decisions we will have to make in the coming weeks, but unfortunately we have no other choice.”
Reporting by Nicolas Misculin and Miguel Lo Bianco. Additional reporting by Jorge Ohtaola, Walter Bianchi, and Candeleria Grimberg.Editing: Adam Jordan, Sri Navaratnam, Margherita Choi
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