With the August 13 primaries getting closer, Diana Mondino, senior economic advisor to La Libertad Avanza’s presidential candidate Javier Milei said all currency restrictions should be eliminated immediately if he wins the general elections.
On Wednesday noon, Mondino shared Milei’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 will be participating in upcoming digital events. The Wilson Center is a space that showcases non-partisan and federal perspectives about Argentina. Benjamin Gedan is the director of the Latin American Program.
The economist showed her support for several of Milei’s main proposals, like shutting down the Central Bank, which she criticized for “choosing who can buy dollars” in the official market.
“I make my salary through hard work, I pay my taxes, but if I go to buy dollars I may get in trouble,” Mondino said. “Those restrictions should be eliminated. Many people say it should be done in an orderly fashion, but I think it should be done immediately.”
In Argentina, currency restrictions are collectively known as the cepo. It 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 after a run against the peso.
The cepo has been a talking point among other presidential candidates: at the 2023 ExpoRural, opposition coalition Juntos por el Cambio’s Patricia Bullrich echoed Milei’s stance of eliminating currency restrictions and 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.
“The cepo decides who can buy dollars. That should be eliminated and the exchange rate should be singular,” Mondino said. However, one of Milei’s main campaign proposals is “dollarizing” the economy — that is, eliminating the peso altogether and using the US dollar as the country’s official currency.
Mondino contended that Argentina hasn’t paid “one cent” to the International Monetary Fund (IMF). The country signed an economic program with the Fund that Argentina must comply with in order to receive disbursements every three months to pay back the record US$44-billion debt former President Mauricio Macri acquired in 2018.
However, Argentina has paid US$10.9 billion to the lender this year, plus US$1.4 billion in charges and interests. The country was set to receive three IMF disbursements in June, September and December. Argentina and the financial institution have now agreed on the disbursement schedule for the second half of 2023, which will be in August and November.
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According to Mondino, the Central Bank is unable to make the IMF payments because “it has negative reserves,” which “means that they are using money that is in their custody.”
“If for whatever reason Argentina has no debt tomorrow, the next morning you need to ask for more, because Argentina has a fiscal deficit,” Mondino said. The country is currently undergoing an reserve scarcity crisis, which was deepened by a historical drought.
“We already have protests and riots. We already have a lot of strikes,” Mondino said when asked whether La Libertad Avanza’s drastic economic proposals would cause social unrest. “Why do you think it would be worse than 150% inflation?”
Argentine interannual inflation is currently 115.6% and the IMF has projected 120% for 2023.
Regarding La Libertad Avanza’s differences with JxC, she said she agrees with most of their proposals.
“The thing is how much do we think we can do fast,” Mondino said. “The two biggest political parties have no ideology right now. People might not like us right now, but we’re telling you our ideas. We’re the only ones who talk about our platform.”
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The Wilson Center is a space that showcases non-partisan and federal perspectives about Argentina. Benjamin Gedan is the director of the Latin American Program.