Pres. Javier Milei Says Shutting Down Central Bank ‘Non-Negotiable’
Argentina’s President-elect, Pres. Javier Milei, has reaffirmed his commitment to one of his signature campaign promises: the closure of the country’s central bank. In a statement from his office, Milei described this as a “non-negotiable matter.”
This announcement comes as Argentine President Javier Milei is working diligently to assemble his team in preparation for assuming office on December 10, 2023. While there have been some indications that he may choose a more moderate Cabinet than initially anticipated, the emphasis on the central bank’s closure remains a main theme.
One critical development is the appointment of economist Osvaldo Giordano to lead Argentina’s social security administration, ANSES. President Milee’s decision is noteworthy given his promise to reduce state spending and subsidies, making ANSES a crucial institution in his agenda.
The selection of Osvaldo Giordano, hailing from the central Cordoba region of Argentina, signifies a shift from earlier expectations, where it was believed that a close ally of Milei would take the helm of ANSES.
Additionally, Horacio Marin, a seasoned executive in the private energy sector, has been confirmed as the incoming chief of the state oil company YPF. These appointments provide insight into Milei’s team’s composition, which will play a pivotal role in shaping the country’s economic policies.
Despite Pres. Javier Milei’s ambitious reform agenda, which includes proposals to dollarize the economy, shutter the central bank, and privatize state-owned companies like YPF, the newly-elected President, faces significant challenges.
His libertarian coalition holds a limited number of seats in Congress and lacks provincial governors, making it necessary to navigate the demands of the more mainstream conservative bloc. This bloc’s support was instrumental in Milei’s victory in the recent run-off election.
While Pres. Javier Milei’s campaign imagery, demolishing the central banks, captured attention and resonated with some voters, but the practical implementation of his agenda remains complex. Transitioning away from a central bank, particularly in a nation as economically diverse as Argentina, involves numerous considerations. These include negotiations with international bodies like the International Monetary Fund (IMF), managing the country’s monetary base, and addressing currency exchange rate policies.
Furthermore, Pres. Javier Milei’s plans may include adopting a strategy similar to that of El Salvador, beginning with adopting the U.S. dollar as the official currency, followed by a potential acceptance of Bitcoin. Achieving the necessary “legal tender” status for these currencies and allowing market forces to determine their success could be part of Milei’s approach.
One critical aspect of this transition is the monetary base, which currently stands at $7.7 billion in Argentina, significantly lower than that of the United States, which exceeds $5 trillion.
Replacing the monetary base will be challenging but not impossible. The crypto world’s familiarity with stablecoins and Bitcoin could assist in this process, mitigating some of the difficulties related to exchanging currency.
In addition to the monetary aspects, Milei’s government will need to address the unification of exchange rates and the free convertibility of currency. These reforms could encourage the return of significant sums of savings Argentines hold in foreign currencies, which may boost the nation’s economic stability.
It’s important to note that the central bank and the treasury are distinct entities. While a country can function without a central bank, a treasury is essential for managing inflows and outflows of funds. Treasuries are also responsible for issuing government bonds, and their efficiency plays a crucial role in a country’s fiscal policies.
Significant economic and financial reforms will mark Javier Milei’s presidency, and how he navigates these complexities will shape Argentina’s economic landscape for years to come.
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