Economist Emanuel Álvarez Agis argued that the pragmatic measures adopted by the President contradicted his campaign promises. While these actions may have prevented a deeper crisis, they created inconsistencies in the economic program. He pointed out that the lack of clear communication about this program leads to uncertainty in the market. In a recent interview, he stated that “tying a program to a foundational law and a deregulation decree while inflation remains the most pressing issue in the Argentine economy is a misstep.”
Álvarez Agis, a founding partner of the PxQ consulting firm, served as Deputy Minister of Economy from 2013 to 2015 and previously held the role of Undersecretary of Economic Programming from 2011 to 2013. He also represented the state on the boards of various companies and has worked as a consultant for the World Bank and the United Nations among other institutions. He is known for his critical perspective on the management strategies of Luis Caputo and Javier Milei.
He discussed whether the economic plan being pursued by Caputo and Milei is consistent and robust enough to be effective. He believes the shift in perspective we see now is due to the realization that the initial economic strategy no longer suits the current societal conditions.
He divided his critical view into two halves: Initially, he would have suggested a very different approach to inflation at the start of the Liberty Advances government. However, since they won the election, they held the legitimacy to implement their plan. Yet, as the administration progressed, it appeared that their strategy changed, causing the market to react negatively. According to him, the originally proposed program involved a prolonged recession as a strategy to lower inflation, which he found inadequate, primarily because it suggested that inflation would decrease slowly—something that has proven to be a mistake.
Álvarez Agis noted that halfway through the administration, the President seemed to realize that society wouldn’t accept a two-year recession. He pointed out that the measures taken to reduce inflation were reminiscent of failed strategies from the past, particularly delaying tariff and currency alignments. He asserted that the current situation, where very few foreign currency reserves exist, makes the approach of keeping tariffs and the dollar lagging unsustainable.
The government acknowledges that there will be delays but aims to show results in the last quarter of the year. Álvarez Agis questioned whether the administration’s shifts in policy were a response to public support amidst austerity measures being implemented, which he asserted might not be as steadfast as it appears.
He highlighted a moment early in the administration where they proposed allowing pre-paid medicine costs to be set freely, only to revert and regulate them again after observing unanticipated increases. He expressed skepticism over the government’s ability to completely revise public policies under current conditions without adverse effects.
The economist further commented on the government’s communication of planned tariff increases, indicating that their gradual implementation led to a significantly higher inflation rate than initially expected. He emphasized that the belief the economic program would bypass usual forms of societal resistance was flawed.
Moreover, he referred to the contrasting measures that now seem more aligned with the last six months of a previous administration, making the current economic management seem inconsistent. The government’s success largely hinges on the ability to communicate clear goals and plans to the public and the market. While it is not bad for the government to take time to address the previous administration’s mess, confusion arising from the opaque nature of current policies could diminish public confidence.
He expressed concern over the President’s combative approach towards critics, suggesting it might reflect either an inability to manage frustration or a calculated strategy showing strength through intimidation. He acknowledged the importance of sticking to economic adjustments but was critical of the narrative that suggests all burdens fall on those who didn’t fit the government’s narrative.
In a broader context, he drew parallels between past administrations and the current one, stating that while there are similarities, the approach to handle structural reforms vastly differs. The successful reduction of inflation historically has come after solid political capital allowed significant reforms. He argued that dealing with current economic challenges should take precedence before implementing further structural changes.
In conclusion, Álvarez Agis emphasized that the government must clearly communicate its economic strategy to enable it to be understood and accepted by the market and citizens alike. Only through transparent dialogue can any advancements be made in stabilizing the economy and reducing inflation moving forward.
Source: https://www.perfil.com/noticias/modo-fontevecchia/emanuel-alvarez-agis-milei-se-dio-cuenta-que-no-iba-a-aguantar-una-recesion-de-dos-anos-modof.phtml
