“The opposition must be careful with its promises.” For Domingo Cavallo, this premise must take precedence over the change of government that will take place this year. In a new blog post by him, the former Economy Minister also warns of the danger of a rapid disarmament of securities; and he says that “In the best of cases, a good stabilization plan can only be launched at the beginning of 2025″.
According to the former economy minister, if the next government decides to quickly eliminate the exchange rate without first applying a fiscal adjustment with a cut in monetary emission, the result will be “a hyperinflationary explosion, extremely costly from a social point of view and devastating from a political point of view”.
On the other hand, and in a sort of vicious circle, Cavallo indicates that “with the high degree of de facto dollarisation that the Argentine economy has, it is not possible to expect to obtain a significant reduction in the monthly rate of inflation without eliminating stocks altogether”.
According to Carlos Menem’s former Economy Minister, for the reduction in the inflation rate to be sustainable over time, the key will be that the new government applies “a series of structural reforms” achieve greater openness to international trade and attract foreign investment.
What does Cristina Kirchner think?
“The political strategy that Cristina Kirchner has in mind, certainly based on Kicillof’s economic reasoning, is to avoid at all costs the unleashing of hyperinflation before the handover, but that it is inevitable during the next legislature”, says the former head of the Treasury.
In this sense, he adds: “Only in this way can we understand why he supports Massa’s management as economy minister while reiterating its adherence to the Chavista-inspired socialism of the 21st century. He surely knows from the governor that if the economy minister doesn’t get enough outside support, an extreme loss of inflationary control could occur in the coming months. But, at the same time, it does not want fiscal adjustments and related prices to be implemented that could facilitate the economic management of the new government”.
In this economic and political context, opposition candidates must be very careful with their initial proposals and actions to circumvent the trap that will be activated above all by the existence of stock exchange shares”, concludes the head of the Palacio de Hacienda during the governments of Carlos Menem and Fernando de la Rúa.
NS
Source: Clarin
