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See the 5 challenges that Javier Milei must face in Argentina

Javier Milei won the 2023 presidential elections in Argentina, marked by surprising results from the primaries to the second round.

This Sunday (19), Argentines chose the candidate of the La Libertad Avanza party to govern the country for the next four years. But, what are the challenges that the new president-elect will face?

Inflation, central issue

Analysts consulted by CNN agree that the central axis is inflation. The latest official data points to annual inflation exceeding 140%.

The issue is something chronic in Argentina and previous governments – which had different ideologies – did not find a solution to contain it in the last decade.

In addition to negative indicators, such as 40% of the population living in poverty, high levels of informality in the field of work and instability in the exchange rate.

“Argentina faces short-term challenges, which are very urgent, and medium-term challenges, which are also urgent,” says Estefanía Pozzo, journalist specializing in economics and finance and editor-in-chief of the Buenos Aires Herald.

“It was a year with little agricultural production, very few dollars in the Central Bank and this takes away the government’s muscle to make decisions on economic policies”, he explains.

Pozzo also adds that “in the medium term, the complexity of the decisions that the Government had to take due to this lack of dollars also makes it urgent to resolve issues in relation to the Central Bank, with regard to the exchange rate, monetary and financial situation ”.

Credibility, the heart of the matter

In the same vein, economist Claudio Zuchovicki says that the most important challenge is the credibility of Javier Milei, who takes office on December 10th.

“Argentina distorted relative prices. There are many assets below the attainable value, the official exchange rate, energy, gasoline, among many others,” he states.

According to Zuchovicki, the consequence of this change is scarcity and, to reverse it, a lot of political power is needed. Milei will have to “do things” that were not in his campaign proposals, explains the economist.

“There is no alternative other than a credible and lasting stability plan”, adds Juan Germano, director of the consultancy Isonomía.

“There are no more shortcuts on the debt side or on the bond issuance side, this is over. There is no tolerance for those who govern to continue navigating the economic situation. Society expects change,” he says.

Facundo Nejamkis, analyst and director of Opina Argentina, states that the core of the issue is not economic, but political. “It’s true that inflation is a problem and, if you emit, you generate inflation,” says Nejamkis.

“The question is how do you finance public spending without issuing emissions, who do you cut? Then the decision is political,” she says.

Congress and governance

In Milei’s case, another challenge is Congress and its ability to govern.

Malamud says that the economist will be faced with the dilemma of “setting up a government with Macri’s crutches”. The expert refers to the need for support from former president Mauricio Macri and his political allies, both at the legislative and territorial levels.

In this sense, Nejamkis proposes two possible scenarios. “It is necessary to see whether Milei intends to develop a plan of disruptive measures or ones closer to a classic anti-inflationary model”, he explains. And he warns that, if the first case occurs, “it will be a period of great political and social conflict”.

What Milei can expect in 2024

For now, the economic context for next year may have some positive expectations. Economist Claudio Loser suggests that, with no drought on the horizon, “the scenario is much better in terms of agricultural production and exports” and that “there will be an increase in the production and availability of oil and gas”.

With the maturity of private debts and the International Monetary Fund, Argentina gains another breath of air. “We have largely advanced in private debt and in debt with the International Monetary Fund, despite interest rates”, concludes the economist.

Once again, the surprising electoral race in Argentina leaves questions on the table.

Source: CNN Brasil

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