Argentina’s Presidential Candidate Vows To Shut Down Central Bank
Argentina’s top presidential contender, Javier Milei, known as an anarcho-capitalist, created turmoil in local financial markets and caused currency devaluation after his surprising victory in the Sunday primary.
Adding to the astonishment, he declared his intention on Wednesday to shut down the country’s central bank. Despite this, he emphasized his commitment to preventing a default on the national debt if he becomes the winner in the October election.
Milei, a staunch libertarian, informed Bloomberg News that his audacious fiscal plan would improve Argentina’s reputation and credit standing, removing the need for a default.
His strategy involves reducing spending by a minimum of 13% of the GDP before mid-2025. This involves significant cutbacks in public projects, streamlining ministries, eliminating subsidies, and lifting currency restrictions for businesses to conduct transactions in US dollars. Additionally, he aims to close the central bank, which he views as unnecessary, and adopt the US dollar for the $640 billion economy.
“I will make every effort to avoid a default, obviously,” Milei said in a two-hour interview in Buenos Aires on Wednesday. “If you do the fiscal adjustment that’s needed, the financing will be there.”
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Milei caused a market shock by unexpectedly leading the primary as a presidential candidate, a role he was not previously considered a serious contender for. The primary is seen as a gauge for the upcoming presidential elections in a country where polls are often unreliable. This drop in popularity led the government to devalue its tightly controlled official exchange rate by 18% as markets opened on Monday.
In his first interview with foreign media after this surprising victory, Milei spoke to Bloomberg. He outlined his strategy to replace the Argentine peso with the US dollar to tackle the soaring 113% inflation rate. He also intensified his criticism of the central bank, labeling it “the worst garbage that exists on this Earth”.
“Central banks are divided in four categories: the bad ones, like the Federal Reserve, the very bad ones, like the ones in Latin America, the horribly bad ones, and the Central Bank of Argentina,” he said.
Should Milei secure the presidency, he intends to entrust economist Emilio Ocampo with the responsibility of shutting down the central bank. Ocampo has informally advised Milei on the dollarization initiative.
Ocampo will also assist in negotiations with the International Monetary Fund (IMF), which has a $44 billion program with Argentina. The candidate has clarified that he has no intentions of seeking additional funds from the IMF.
But don’t mention that to the US, which has only seen four annual surpluses in the last 50 years.
Milei has already crafted a blueprint for dollarizing the economy, a step he promises to take early if he wins the October 22 election. Argentina would adopt a model similar to El Salvador’s, allowing people to choose between currencies voluntarily.
Once two-thirds of the monetary base undergoes conversion, the economy will complete its full dollarization, he explained.
Manuel Garcia Gojon, writing for The Mises Institute, notes that Milei’s comprehensive plan, presented in some detail on August 2nd, is distinctly pragmatic from an anarchist standpoint:
The former congressman got more votes than Patricia Bullrich’s pro-business group and Economy Minister Sergio Massa’s ruling Peronist team, which was a surprise to experts who predicted he’d be third.
Investors are concerned that the country might be heading for its fourth debt crisis in 20 years.
A big worry for markets is whether Milei, who is new to politics, will get support for his plans.
At 52 years old, Milei doesn’t hold back in criticizing politicians he thinks have been taking from Argentines for many years. He said he’d use referendums if lawmakers didn’t agree on his ideas.
In a detailed Bloomberg interview, Milei also criticized China and leftist leaders in Latin America, whom he sees as “socialists.” He wants to exit the Mercosur trade group and make commodity markets less regulated.
According to the Buenos Aires-based consulting firm 1816 Economia & Estrategia, Argentina is on the brink of financial collapse as it has depleted all of its liquid international reserves and has reportedly spent an additional estimated $1 billion.
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