Martin Guzman reappeared and said that dollarization “has already begun” and that the Milei government “has no other plan”. The former Minister of Economy, Martin Guzman, stated on Friday that the dollarization proposed by Javier Milei during the campaign “has already started,” and that the La Libertad Avanza government “has no other plan.” He also described it as a “great disaster” for the country to have turned to the IMF in 2018 during the administration of Mauricio Macri, on the day of the first official meeting between an IMF delegation and Minister Luis Caputo in Argentina.
According to the statements of the former government official in an interview with Ernesto Tenembaum and Reynaldo Sietecase on Radio con Vos, “nothing would be as serious as dollarizing because it would mean that Argentina has already given up.” Furthermore, the economist believes that this process of moving towards another currency has “already begun through a measure that, for the moment, goes unnoticed but will have a strong impact: the issuance of Bopreal,” the dollar-denominated bonds that oblige the Central Bank to pay in the future with that currency.
For Guzman, the issuance of Bopreal implies that “the remunerated liability of the Central Bank, such as Leliqs and repos, are in dollars, and dollarizing means converting all the liabilities of the Central Bank into dollars. So, the alternative of dollarizing becomes increasingly likely and tempting for the government,” he argued. He also recalled that the path to dollarization, announced during the campaign and reaffirmed by Minister Luis Caputo a few days ago, “was set in motion with the 118% devaluation of the exchange rate” at the beginning of the Milei era.
Furthermore, the former official questioned the omnibus law that the government sent to Congress for consideration and the DNU (Decree of Necessity and Urgency) for state reform presented by Milei days ago, which has already been rejected by the labor court in its articles related to labor reforms. “All of this aims to make the middle class, the population segment with few children or only a few, and the retired population bear the burden of the adjustment,” he said, estimating that there will be “an intensification of this distributive conflict because, while this is happening, taxes for the rich are reduced through the reduction of personal assets.”
According to Guzman’s analysis, “there will be a broad social and economic reaction because wage negotiations will once again exert pressure on prices and, in turn, on the official exchange rate. The exchange rate gap will rise, and the government will have to devalue more, resulting in suffering for many and gains for others. We are in a situation of regression instead of progress,” he concluded.
Regarding the debt contracted by the Macri government, Guzman stated that in the future, “the IMF will be in Argentina because that debt cannot be repaid quickly, and we must be clear that we need a solution to that issue.”
In this regard, the economist stated, “it was a great disaster for Argentina to turn to the IMF” and admitted that “it was also very damaging for the country that we did not have the ability to prevent it when hundreds of thousands of people in April 2018, when Macri made the national broadcast announcing Argentina’s return to the IMF.”
“Today we will have to deal with that problem, and the plans we make must take into account that Argentina has that debt with the IMF,” he emphasized.
Furthermore, Guzman recalled that negotiations with the international organization during his days as Minister of Economy “were very complex.” “No one in our space likes having to reach an agreement with the IMF, so it is a matter of absolute patriotism,” he said.
In this sense, he evaluated, “They left Argentina with a debt of $45 billion, and the alternatives are either to pay it, which we don’t have the dollars for, or to refinance it or default, with all that implies.”
“The ideal scenario was to find an agreement in which we could implement the economic policies we wanted and be able to refinance the debt, but in January 2022, four days before the agreement, the dialogue did not continue, and that had significant consequences for the management,” concluded the former official, referring to the rupture that occurred within the Frente de Todos government and led to his resignation from the Ministry of Economy in July of that year.
The meeting between the Milei government and the IMF scheduled for this Friday will focus on the possibility of “reestablishing the agreement that fell apart due to the non-compliance with all the targets that the previous government had set with the organization,” said presidential spokesperson Manuel Adorni.
The government clarified that beyond the meeting with Caputo, Posse, and central bank authorities, the agenda of the multilateral organization’s executives also includes “different meetings with technical teams.”
In January, Argentina must pay around $1.9 billion in debt maturities, and although it has not been formally announced, sources within the government have indicated that they will use the possibility of extending the deadline until the end of the month.
Regarding this, IMF sources confirmed this last possibility, which is to regroup the January maturities and pay them at the end of this month.