2023-12-22 18:38:55
The mega decree presented by the present Javier Milei last Wednesday includes a package of ultra-liberal measures that aims to ‘end the crisis’ that the country is going through and reverse the ‘decadence’ in which it has been immersed for decades. The radical nature of the means to achieve these ends has provoked doubts and multiple reactions.
Carlos Quenanprofessor at the Sorbonne Nouvelle University, vice president of the Institute of the Americas in France, agreed to answer two questions from RFI.
RFI Argentina has more than 30 important public companies. What effects could the decision to privatize them all have?
Carlos Quenan “The liberalization of economic activity and the reduction of the weight of the State – considering that per se every public company, every State company is something like harmful, it is bad – and therefore it is necessary to privatize. So what has been proposed in one of the items of this Emergency Necessity Decree (DNU) is to transform public companies into public limited companies to facilitate their privatization. This can be discussed on many levels and in particular on one, considering, per se, bad, a participation or intervention of the State through a company in economic activity leaves open the discussion about whether that company is linked to a strategic sector of the economy, if it has to do with this or that aspect of the integration of the national productive apparatus, etc. That is, that point is evacuated because it is considered bad.”
” Considering, per se, bad, a participation or intervention of the State through a company in economic activity leaves open the discussion about whether that company is linked to a strategic sector of the economy, if it has to do with this or that aspect of the economy. integration of the national productive apparatus”
“The second issue is precisely that it can be privatized and decided like this, without there being a decision by Congress and this is linked to a broader issue, which many constitutionalists who are specialists in these issues say, namely, that this Emergency Decree advanced on powers that do not correspond to the president, but must go through Parliament; In fact, in many cases they discuss whether there is a need or urgency. For example, it is proposed that football clubs that want to adopt this decision may transform into public limited companies. Well, we don’t see the urgency of a decision of this nature, so it could be considered more pertinent, for example, to repeal the rental law because there is a problem with the supply of apartments for rentals.”
“The problem is whether this repeal of the law opens the way to a total liberalization in which the parties can set rental conditions, the currency in which they will rent, which may raise the idea of paying in dollars and then restrict precisely the number of people who can access a rental. Then we have the problem of what strategic perspective of the country’s economic development this arises from. On the one hand, if this liberalization shock is truly like this, so widespread, a good thing from a productive point of view, and, on the other hand, we have the problem of its constitutional nature or not, what role Parliament can play. In principle, it tends to show continuity with his first public appearance, which was precisely on the day of the inauguration of the Presidency on December 10, when in his inaugural speech he did not address Parliament, rather he did so behind Parliament’s back and “He headed to the square where his supporters were in some way, raising the idea of addressing the people directly.”
RFI President Milei has also proposed that from now on debts will be settled in the currency in which they were contracted, that is, you contract in pesos, pay in pesos, contract in dollars, pay in dollars, there is a lot of talk about moving towards a future partial or general dollarization of the economy, the problem is that Argentina has already experienced a situation of almost total replacement of the peso with the dollar. What effects can this have in the medium term?
Carlos Quenan “First of all, none of this is certain, that is, it has been reiterated again that there is this objective of dollarization of jure, that is, full total, because there are levels of de facto dollarization for the purchase and sale of apartments for the real estate sector, etc. But there is no this idea, it has not been materialized and it is what Milei has proposed, especially during the electoral campaign, of completely replacing the peso of the national currency with the dollar. He had also raised the proposal to close the Central Bank. These two issues, for the moment, are there as a perspective, but they are undoubtedly postponed because there are no conditions to be able to dollarize immediately, and, secondly, because the objective and priority for the fiscal adjustment that It was announced a few days ago and a devaluation of the currency. The official exchange rate went from 335 pesos to 800, approaching the level of the parallel market. In principle, this is proposed from an anti-inflationary, stabilization perspective, but in the immediate future it is generating an increase in inflation, and if the process is not controlled it could even lead to hyperinflation that could create the conditions for a much higher dollarization. faster than expected. That is, we have an open front there. A perspective is fixed, in principle it cannot be materialized, but Milei maintains that orientation even though in the immediate future we are in the presence of a traditional fiscal adjustment, with devaluation measures also traditional in this type of situations. Without it clearly appearing what the anchoring variable is, as is often said among economists, because the exchange rate, for example, has not been fixed.”
“With respect to the experience of the 90s, in fact, convertibility, which was a fixed peso-dollar parity, with in turn a bimonetary regime in which both the peso and the dollar could be used in contracts, achieved, at mid-90s, stabilize, sharply lower inflation, however, it was not sustainable due to multiple problems, which are those that could arise in the case of dollarization. For example, one of them was that at the end of the 1990s and beginning of the 2000s, numerous emerging countries suffered a serious exchange crisis in external payments and others, and the vast majority devalued, including some such as Brazil, a very important trading partner. for Argentina; So, having devalued a large number of Argentina’s commercial partners and competitors, in Argentina, with a fixed parity, it was in a certain sense bad, very bad, with a great loss of competitiveness, and that is the problem that can arise, among others, if dollarization is reached, which, as I say for the moment, is postponed.”
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