Wednesday, July 24, 2024

ECONOMY | 12-12-2023 10:39

Argentina's government prepares economic package ‘to avoid hyperinflation’

President Javier Milei heads Cabinet meeting for second consecutive day; Among those in attendance, ex-Central Bank chief Federico Sturzenegger.

President Javier Milei’s newly inaugurated government is finalising its first batch of emergency economic measures in order to “avoid hyperinflation,” chief spokesman Manuel Adorni said Tuesday.

Confirming that the measures would not be announced this morning and would be communicated late Tuesday afternoon in an emergency broadcast by Economy Minister Luis Caputo, Adorni said President Milei had taken the decision to “avoid” a deeper crisis.

"We are immersed in one of the deepest crises in history and we are also heading towards hyperinflation. The decision is to avoid it," the official, Milei’s main spokesperson, said at a morning press conference at the Casa Rosada.

Argentina is mired in a severe economic crisis, with annualised inflation running at 143 percent and poverty affecting more than 40 percent of the population.

Milei, an ultra-liberal economist, argues that the country needs “shock” austerity measures and has vowed to slash five percent of GDP off government spending.

The first concrete measures will be announced on Tuesday at 5pm local time via a recorded message from Economy Minister Caputo, Adorni said.

"The inflation we are going to avoid will surely be much more devastating than the hyperinflation of 1989 and 1990. That is why we are concerned and why we are taking urgent measures," he argued.

"We understand that the situation is serious and we are well aware that it could be much worse,” he continued.

"Everything that is effectively announced will be in line with what was promised during the campaign and with what we are all convinced that we have to do, which is to avoid Argentina from ending up in a catastrophe,” he concluded.

Adorni’s remarks came as Milei had chaired a second Cabinet meeting on Tuesday morning. As well as the majority of his ministers and Vice-President Victoria Villarruel, there was one other surprise attendee: former Central Bank governor Federico Sturzenegger, another top financial official who served in Mauricio Macri’s 2015-2019 government.

Adorni refused to outline any of the economic measures and avoided giving definitions about the future of the ‘cepo’ currency controls that govern the foreign exchange market.

He did, however, reiterate that there would be a significant reduction in the size of the state and confirm that contracts signed with the government over the last 12 months were under review.

"A review of the contracts and of each one of the appointments made by the national government in the last year has been initiated. Each and every one of the appointments and contracts that were formalised in the last year are under review,” he declared.

Argentina’s public sector accounts for 18 percent of total employment, one of the highest percentages in Latin America, totalling around 3.4 million people.

Adorni also announced the "suspension of media advertising for a period of one year,” without providing further details. The move to slash state advertising, known locally as ‘pauta,’ had previously been trailed during the presidential campaign.

"The line is always the one that the President Milei has transmitted and communicated in his electoral campaign and in the following days until today. The situation is critical," said Adorni, who previously worked as a journalist.

The spokesperson also highlighted the reduction in government ministries and secretariats confirmed the previous day.

“Argentina went from having 18 ministries to having 9. There was a 50 percent reduction," he said.

Blaming “one of the deepest crises in Argentina’s economic history.” Adorni said that the number of state secretariats had been reduced by 49 percent, with sub-secretariats reduced by 23 percent.



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