Studied Economics at Mar del Plata University and holds a Master’s degree in Public Policy (UTDT) and Impact Assessment (University of East Anglia, UK); He was a member of the Buenos Aires Ministry of Economy and Nation Chief of Staff Hernan Lacunsa, with whom he currently works at Together for Change.

Economist Milagras Gismond was the candidate to join the legislature of the autonomous city of Buenos Aires in the recent “Together for Change” election. He is currently the Head of Emanuel Ferrario Tech Teams, Deputy Head of City Government, MP Maria Eugenia Vidal’s Economic Advisor and Professor at the University of Australia. In addition, he is part of the team of former Economy Minister Hernan Lacunza, who is working on a 2023 economic plan.

– Vice President Christina Kirchner said that monetary emissions have decreased, but inflation still does not decrease. Why?

– He mixed terms and analysis. On the one hand, 70% of last year’s emissions, which accounted for almost 4% of GDP, in the last six months were concentrated on what was in the “silver plan”. The impact of the issue on inflation is not instantaneous. No country in the world lives with these levels of emissions and fiscal deficits. Perhaps for this reason, the Minister pointed out that there is no economic model that supports financing three to four points of the deficit or economic subsidies equivalent to 3% of GDP, as it is unsustainable. The amazing thing is that a minister looks more like an economic consultant than a manager for 30 months.

-Because he says?

– In 2019, tariffs covered 60% of energy costs; Today they cover 30%. There were decisions along the way that the same minister, who says the situation is unstable, backed because the energy secretary depends on him.

What has changed in the middle? Was it an agreement with the IMF?

– We should try to respect the requirements of the IMF and deviate as little as possible from the goals. There is a lot of consensus that these goals will change, not least because of the war as an excuse, but also because of how the variables are happening. The Minister is trying to minimize the diversions. This points to context, but the same Guzman has given similar explanations before, for example, when he said that subsidies are “pro-rich.” The problem is that we have a Minister of Economy who does not represent the integrity of the government’s economic vision and this has consequences, because subsequent decisions are made through this internal openness, but also because of uncertainty. Who invests or creates jobs when you do not know what the next month will be like?

– How much is high inflation explained by war and how much for domestic reasons?

– Our inflation ended at 51% in 2021 and last month it reached 58% compared to the annual, but it is operating at a speed of about 80%. Looking at last year quarters, it was closer to 3 to 3.5%, and now the first quarter will be around 5.2%. This is a new inflation step where the reasons are internal: last year’s 3.8% GDP emissions, very concentrated during the elections in the second semester and in addition to that was the abuse of the presenters, the rates have risen. 10% and exchange rate 25%, inflation 50%. These anchors are now starting to run. In fact, another drive that is moving and forceful is parity; Sneaks in from the inside as well. It is not an insignificant fact that the vice-president mentions a 60% parity, as it clearly puts the rest. While 60% is lower than the 65% inflation that economists see as a consensus for this year, it outperforms current year inflation. It’s not less than that it starts to weaken as an exchange rate that starts moving faster and that rates. In addition, there is a decline in demand for money.

– Guzman says that the acceleration of inflation is also caused by the whole political noise.

– There is no doubt, because there are two components to inflation: oversupply and political uncertainty. Many have been issued and besides there is no demand for the peso. With supplies that are controlled as he is almost forced to be in the peso, but political uncertainty begins to make more and more noise and, if it is impossible to switch to other financial assets, replace the bed or refrigerator. It is no coincidence that domestic tourism has shifted so much, it is also a product that can be made with pesos. And that is hampering inflation, which has been rising by 15 percentage points each year: from 36% in 2020 to 51% last year, and today we are talking about 65% in 2022. Inflation to be below 70%. This year, the average monthly should be 4% for the next eight months, which means a sharp slowdown.

– Is it consistent to stop the acceleration of inflation at a time when we are trying to “wage defeat inflation”?

Parity is another component of costs; If costs are higher, the parity increase shifts to higher prices. Inflation is fundamentally a loss of the value of silver, while value is lost due to strong emissions or distrust. There are other anchors that can lower it such as exchange rate, exchange rate and parity. Last year, real wages, even for official employees, fell by about two points. If they rise this year, they will add another spice to inflation, but the cause of the culprits should not be confused.

– Can it end in hyperinflation if the presenters are moving and there is political uncertainty?

– In order for there to be hyper, not only must these components be there, but there must be a very sharp demand for money. This is quite limited in stocks, but that does not mean that the scenario is completely out of the question, as political noise can almost generate hyper. We are probably moving towards what we have now: a high inflation regime that operates at 80%. Inflation is very paralyzed, it has recessive effects, because at this level it is difficult to invest in the country, to open a new store. This starts to put a huge constraint on the economy, even with the number of activities that continue to mark recovery. Because there are still some positive numbers to celebrate, they say we are not so bad, but the economic recovery that is being celebrated does not end with dependence on high trade conditions – which continue to finance imports. Shares – which lead to demand but higher inflation costs – and other components of the agreement with the IMF, such as the accumulation of reserves. Here we see fatigue because even though agriculture makes a big contribution, it cannot buy the central dollar. Exhaustion is noticeable, perhaps not so much in activity, but some sectors are already feeling it.

– Why can not the Central Bank collect dollars?

– This is the result of a depraved system. It’s not even that there is a lack of dollars, but that there is a peso left, which forces them to accumulate, which is a little bit, but last year it was $ 150 million, now it is $ 300 million. The same goes for card purchases and services like Netflix. There was an extra field in dollars for this consumption, indicating that the peso remained. There is also the problem of energy imports, which totaled $ 2 billion in the first quarter. At this point, last year, with less exports, the central bank amassed $ 4.3 billion, and this year only $ 600 million with record exports.

– According to him, most likely, the goals of the IMF will be calibrated. Hours?

– There are all challenges, but they can be fulfilled with political commitment and determination. Given the fiscal purpose, can be refused [exención] The Impact of War on Economic Subsidies. The backup goal of delaying this exchange is very difficult. We see central bank financing at almost double the target, at around 1.8% of GDP, which is high but half of 2021. This is not something that will greatly increase inflation as long as the fiscal target remains within reasonable values; Instead of 2.5% of GDP, be 3%.

– The deficit would not have been reduced at all if it had been 3.1% of the GDP last year …

-No and the cause of the war is not insignificant. From a commercial point of view, the effect is neutral, as what is obtained at higher prices for agricultural products ($ 4.3 billion in addition) is lost through high energy imports ($ 4.5 billion). But in fiscal terms, there will be additional spending on subsidies of 0.6% of GDP.

-How will you develop an economic program, if it is difficult to predict how the economy will reach December 2023?

– It is very difficult without clarifying the initial conditions. We are working on how key variables can come into play. Also think about what country we want. Some things are clear: we want it to grow for at least five years in a row. In the last 80 years it has only tripled in more than five years. It is the same to reduce the nominality of the economy, which must be done through stabilization. We can not depend on the little machine of happiness; We already know that there is no such thing as a healthy macroeconomy. This is a common consensus, not only of the team that Hernan coordinates, but also of the other actors in Together for Change.

– Costs for this should be reduced, which is largely indexed.

– There are very indexed costs, but there are also priorities that need to be revised and improved, such as avoiding overlapping costs between the nation, provinces and municipalities. Then there is the issue of energy subsidies, which this year will be almost equal to the fiscal deficit (3% of GDP). And there is evidence that subsidies are affluent and regressive for a dual reason: because of how it is directed, because much of the country is without gas, and because they are financed by inflation.

How are you going to explain this to the public?

We have three big challenges. More technical: Learn how a stabilization plan can be developed to dismantle the saw and start growing in a sustainable way. The second is that there is a real demand for change: to put issues on the table and explain that it cannot continue like this. I do not know how much money it’s worth, but you have to be very pedagogical to tell this truth, because demanding change is what legitimizes you when you want to carry out certain reforms. The third challenge is related to economic policy communication.

– Do you think this was lacking in the government of Mauricio Macri?

I do not know if he missed it. Undoubtedly, certain problems were not assessed and in this we must have a balance between courage and prudence. We need to be bold in the sense that we can talk about reforms and be able to generate them when we see that there is something that is not enough for more; But, at the same time, be very careful knowing that there are no magic solutions.