National Deputy Luciano Laspina — economic adviser to Juntos por el Cambio (JxC)’s presidential candidate Patricia Bullrich — said eliminating capital controls, fiscal deficit, and realigning public utility prices will be the three main challenges the next government will have to face. In order to restore the country’s credibility and achieve those targets, Laspina contended that a new deal with the International Monetary Fund (IMF) should be negotiated.

On Tuesday noon, Laspina shared Bullrich’s economic perspective and proposals in a virtual dialogue with Wilson Center’s Latin America Program, as a part of their Argentina Elige series, where the main candidates’ economic advisors will be participating in upcoming digital events.

The Wilson Center is a think tank that showcases non-partisan and federal perspectives about Argentina. Benjamin Gedan is the director of the Latin American Program.

Laspina said that, in order to “leave the populist strategies behind” of the current Peronist government, a potential Bullrich administration would aspire to move forward with “rational economic reforms,” for which she would need to have the majority of lawmakers in the Chamber of Deputies and the Senate in Congress and a positive external context.

If Bullrich — who represents the more confrontational and hardline faction of JxC — were to win the elections, she would do all the reforms she is planning from the very beginning of her term in order to put the economy back on track and attract investors, the economist said.

Currency controls

Laspina said eliminating currency controls — known as cepo in Argentina — is key to “avoid higher inflation acceleration and exchange rate,” as well as a new deal with the IMF to rebuild credibility. 

“If we can do that, the cost of eliminating capital controls will be lower for Argentina,” he said.

The cepo in Argentina was first established during Vice President Cristina Fernández de Kirchner’s last term as president, eliminated by her successor Mauricio Macri, and re-established at the end of his term in 2019 as a way of protecting dollar reserves in the Central Bank from runs against the peso.

Currency controls are a central talking point in this year’s presidential campaigns: while Bullrich and libertarian Javier Milei want to lift the cepo and eliminate export duties immediately, her intra-coalition rival Buenos Aires City Mayor Horacio Rodríguez Larreta said he would do it progressively. Meanwhile, sitting economy minister and presidential hopeful Sergio Massa said he would lower taxes for agricultural exports without eliminating them.

“We need to remove capital controls very fast. The sooner, the better,” Laspina insisted.

Laspina admitted that lifting the cepo “without any credibility” could lead to hyperinflation. “We want to rule that out.” To move forward with these drastic measures from the get-go of their potential government, Laspina said a credible fiscal path, with a reform of the state, a reduction of public spending, and a new agreement with the IMF would be necessary.

“With that and the IMF’s support, we can build the conditions to restore some credibility in Argentina, and we will probably be able to lift the cepo as soon as our administration begins, and experience a realignment of prices and wages. Inflation will probably start to calm down if we can get this problem under control,” Laspina said.

Laspina also said that in order to remove export duties, public spending needs to be reduced. “We want to eliminate export taxes and we will do that by law.”

Another key point in Bullrich’s economic program is a reform of the Central Bank. Contrary to Milei, she doesn’t want to eliminate it, but to make it “independent from politicians” and ban future authorities from imposing new currency controls in the future, Laspina said.

Labor reform and investment

Laspina also said that Bullrich’s administration would pursue a law to attract and protect capital investment in Argentina, with tax benefits such as fast reimbursement, tax depreciation for investment.

They would also aim to pass a labor reform, which would include the reduction of work-related litigation costs because they are a “contingent liability for corporations” when hiring people.

“The world is demanding Argentina’s natural resources: sand, wind, lithium, copper, energy,” Laspina said. “That is quite different from the panorama that we received in 2016. It was common to receive investors that wanted to buy bonds. Now there are real investors that have huge investing projects for Argentina.”