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It is winter in the southern hemisphere, but Argentinians flock to the beaches of Rio de Janeiro anyway and underline a problem for President Javier Milei and his crusade to make Argentina great again.
The Caipirinha-Seifen tourists are part of a larger exodus. In the first four months of this year, more than 8.4 million Argentinians traveled abroad, 68 percent more than in the same period in the previous year. You benefit from a peso that is so strong that it once turned costly trips abroad into bargains – and blown a large hole into the current country.
The strong peso is a policy. Milei sets it, it will help him achieve the goal of achieving his political reputation: the killing of inflation. Argentina organizes temporary elections in October and although inflation was the lowest in five years last month, prices still rose by 43 percent compared to the previous year.
In view of a dilemma between the reduction of inflation, increasing growth or building up reserves and the stabilization of the exchange rate, “At the expense of others, the government has the prioritized inflation that is the most politically profitable,” said the other, “said the others,” Eduardo Levy YeyatiEconomists and professor at Torcuato di Tella University in Buenos Aires. “Now the other areas are shouting for attention.”
Since the peso against the dollar against the dollar in real terms is around 40 percent stronger, imports have increased, small companies have problems and unemployment has increased to a four -year high. Despite the mile, often the desire to transform the extent Argentina Managing directors do not open their wallets in a fluorescent fire from the free markets. “Business Class has never been so satisfied with a president, but they still don’t invest energy and mining on the outside,” said an Argentine executive. “Until the exchange controls are completely canceled and the congress passes a work reform, it is very difficult to see that this happens.”
Further cushioning of Animal Spirits is a judgment by the New York court, which commands the government to submit its controlling participation in the state oil company YPF in order to pay a lawsuit of $ 16 billion on the nationalization of the company in 2012. Milei has appealed against the decision.
His libertarian government has only a small minority of seats in the congress, and the intermediate times are crucial to strengthen its position. The president is confident of the victory, but Ramiro Blazquez, Latin America strategist at Stonex, says Milei is missing two important elements on the way to coordination: dollar and political consensus. Blazquez assumes that, according to a conservative estimate, the current account deficit will increase in the third quarter to $ 8 billion, since nervous Argentine gives in a popular pastime: purchase of the US currency as protection before the elections.
The government’s wish to keep the peso strong 20 billion USD rescue in April. Argentina needs dollars to achieve large repayments for foreign debts to private creditors next year, which is an essential step towards returning to international capital markets.
Mileis another problem is political. “The lack of consensus means that very dangerous laws are discussed in the congress, which could possibly erase the budget surplus,” says Blazquez.
In a foretaste of what could be in front of us, the legislators in the Senate dominated by Peronists on July 10th vote in increasing expenses for pensions and social security.
Milei has undertaken to make the law a veto a veto, and the government hopes that even if the congress overrides its veto, legal challenges prevent the additional expenses from draining the budget.
The completed political outsider Milei has never been a consensus, but this was less important in the past year because he secured the right to make certain reforms through decree, a faculty that has now expired. He was also able to bend the provincial governors on his will by holding back funds, a strategy that now reaches its limits.
Before the intermediate times it is his sister Karina, A former Instagram cake seller became chief of staff who took over the political strategy.
There is still a world in which Milei triumphs in the elections, quickly handled the overvalued exchange rate and creates reserves and gains more investments. But Argentina is Argentina, risks remain high.
The government quickly shoots a flood of insults for everyone who questions its business management, so that only a few well -networked Argentine’s public criticism will risk. But like a former senior official put it: “The economy looks fragile. In a country that is as dollar as Argentina, you cannot afford the luxury of low reserves. I think the uncertainty will increase.”
