Politics

Milei says stagflation and harsh adjustment will be Argentina’s ‘last bitter pill’

Buenos Aires, Dec. 10 (EFE) – The new president of Argentina, libertarian Javier Milei, gave his first address as head of state on Sunday, anticipating a tough adjustment and “stagflation” for several months, but promising that it would be the “last bitter pill to swallow” before the “reconstruction” of the South American country.

“Unfortunately, I have to say it again: there is no money. The bottom line is that there is no alternative to adjustment and there is no alternative to shock,” Milei said, addressing a crowd of supporters gathered at the gates of the Argentine Congress Palace.

The new president admitted that the “shock” plan he intends to implement will have a negative impact on the levels of economic activity, employment, real wages and the rates of poverty and extreme poverty.

“There will be stagflation, it is true, but it is not very different from what has happened in the last two years,” he said.Milei assured that Kirchnerism left his government the worst “inheritance” that any Argentine government has ever received, with a financial and fiscal deficit equal to 17% of the GDP, inflation growing at an annual rate of 300%, paralyzed economic activity, a poverty rate of 45% and an extreme poverty rate of almost 10%.

He ratified his commitment to a fiscal adjustment of 5% of GDP, which he promised would fall “almost entirely” on the state and not on the private sector.

He also reiterated that he would “clean up” the Central Bank’s debt and stop printing money, which he said was the cause of Argentina’s high inflation.

But he warned that there is an 18-24 month lag between monetary policy and inflation, citing private forecasts of monthly rates ranging from 20% to 40% by February.

Milei painted a delicate fiscal and monetary scenario that he said puts Argentina on the verge of hyperinflation, which could reach 15,000% per year.

“It is our top priority to make every effort to avoid such a catastrophe, which would bring poverty to over 90% and extreme poverty to over 50%,” he stressed.

Milei also warned of the “inheritance” of debt: $30 billion in debt to importers; $10 billion of retained earnings to foreign companies; $25 billion in central bank debt; and $35 billion in Treasury debt.

“The debt bomb is $100 billion, which must be added to the nearly $420 billion in existing debt,” he warned.In addition, there is the issue of peso-denominated sovereign debt that will mature in 2024, for the equivalent of about $90 billion, as well as maturities with multilateral organizations for $25 billion.

“With the financial markets closed and the agreement with the International Monetary Fund cancelled due to the brutal default of the outgoing government, the debt rollover is very difficult,” he warned.

Despite the apocalyptic scenario described, Milei said that Argentina’s situation will begin to “improve” after the “macroeconomic restructuring.”

“There will be light at the end of the tunnel,” he predicted.

Among those present were the King of Spain, Felipe VI; the presidents of Ukraine, Volodimir Zelenski; Chile, Gabriel Boric; Uruguay, Luis Lacalle Pou; and Paraguay, Santiago Peña, as well as the Prime Minister of Hungary, Víktor Orbán.

Javier Milei spoke with the Ukrainian leader for a few minutes before embracing him and thanking him for coming to Argentina at a time when his country was at war.

Also among the guests were the former presidents of Argentina, Mauricio Macri (2015-2019) and Brazil, Jair Bolsonaro (2019-2023).

Javier Milei will be the president of Argentina for the period 2023-2027, after winning the second round of the elections held on November 19 against the candidate of the ruling party, Minister of Economy Sergio Massa. EFE

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