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Editorial: Chainsaw Challenges
Most economists (including those of us at Econviews) believe that fiscal adjustment is a necessary condition to stabilize the economy. That is to say, Javier Milei has the correct diagnosis. The chainsaw analogy he used in the campaign was somewhat explicit, but no less correct. Not that the other macroeconomic challenges are easy, but this one is especially complex given the governance issues and natural learning curve of any new team that arrives. In this chapter we put everything that will necessarily have to be negotiated with governors, unions and their social works and other interest groups that have the power to block decisions.
Caputo’s Possible Ways
-There are three issues where Luis Caputo will have several action plans: devaluation, FX restrictions, and BCRA liabilities.
-Rumors speak of a devaluation that would not be as high as expected and that FX restrictions would continue. We think that a shock plan would be better.
-We think that too much importance was given to the liabilities of the Central Bank. If the fiscal deficit is reduced, it is a problem that should be solved.
What to Expect in the FX Market in 2024
-Gradually loosening FX controls, instead of a shock approach, could lower the Central Bank’s reserve purchases by USD 8 billion next year.
-The Central Bank lost USD 4.6 billion in reserves in October, with a current account deficit of 313 million and a loss of 4.3 billion in the capital and financial accounts.
-Only half of the imports accrued in October have been paid. Another debt for the next government…
