Argentina’s Leading Presidential Candidate Vows to Shut Down “Thieving” Central Bank
After sending local capital markets into a tailspin and triggering a currency devaluation with his shock win in Sunday’s country’s presidential primary, Argentina’s leading presidential candidate Javier Milei – a self-described anarcho-capitalist – added to the shock factor on Wednesday when he pledged to close the nation’s central bank while saying he would make every effort to avoid a default on the country’s sovereign debt if he wins the October vote.
His plan includes slashing spending by at least 13% of GDP before mid-2025 by dramatically downsizing public works, reducing the number of ministries, and removing subsidies and capital restrictions that would allow businesses to transact in US dollars. More drastically, he also plans to shutter the central bank which he said has “no reason to exist”, and dollarize the $640 billion economy.
“I will make every effort to avoid a default, obviously,” Milei said in a two-hour-long interview in Buenos Aires Wednesday. “If you do the fiscal adjustment that’s needed, the financing will be there.”
Milei triggered a market shock when the presidential candidate – largely viewed as an outsider without serious chances for the position until now – came out ahead in the primary, seen as a barometer for presidential elections in a country where polls are notoriously unreliable. The slump forced the government to devalue its tightly controlled official exchange rate by 18% when markets opened Monday.
In the first interview with foreign media after his unexpected win, Milei spoke to Bloomberg and detailed his plan to scrap the Argentine peso for the US dollar as a way to bring down inflation that’s running at 113%, and upped his criticism of the central bank, which he called “the worst garbage that exists on this Earth.”
Argentina’s leading presidential candidate Javier Milei pledged to close the nation’s central bank, calling it "one of the greatest thieves in the history of mankind" https://t.co/IWKrXf3cwM pic.twitter.com/yRau0nlC3e
— Bloomberg (@business) August 16, 2023
“Central banks are divided into four categories: the bad ones, like the Federal Reserve, the very bad ones, like the ones in Latin America, the horribly bad ones, and the Central Bank of Argentina,” he said.
If Milei wins the presidency, he plans to hand over the keys to the central bank to economist Emilio Ocampo, his informal adviser on the dollarization program, so that he can shut it down. Ocampo will also help in negotiations with the International Monetary Fund, which has a $44 billion program with the South American nation. The candidate says he has no plans to ask the IMF for more money.
“A fiscal deficit is immoral,” Milei said.
“If you live continually with a fiscal deficit, you’re going to be insolvent.”
Just don’t tell that to the US which has had like four annual surpluses in the past 50 years.
Milei said he’s already developed a plan to dollarize the economy, a move he vows would be among his first in case he wins the Oct. 22 election. Argentina would follow El Salvador’s model, allowing people voluntarily choose between currencies.
Once two-thirds of the monetary base is converted, the economy would become fully dollarized, he said.
“If nobody wants to have pesos in Argentina, the question is how much are pesos worth in real terms? Nobody wants them, we’re not talking about water in the middle of the desert. We’re talking about something nobody wants,” Milei said.
Manuel Garcia Gojon writes, at The Mises Institute, that Milei’s full plan – which he laid out in some detail on August 2nd, is nothing if not pragmatic from an anarchist point of view.
