Thank you very much, President Milei, thank you very much for talking to Bloomberg again. Last year I think we discussed free market economics, dogs, and the Rolling Stones. But this time we are going to begin with Venezuela. You welcomed the removal of President Maduro. But the Trump administration seems quite happy at the moment with sticking with Venezuela's interim president Delcy Rodriguez, who is loyal to Maduro. And you very much describe the Maduro regime as a narcoterrorist dictatorship. So what has changed? Are you worried that nothing has changed in Venezuela?
No, it's not as you state it. First of all, I want to highlight the enormous work of President Trump and Marco Rubio. First, in extracting the narco-dictator, murderer Maduro, who also dedicated himself to spreading terrorism throughout the entire region, financing campaigns, financing terrorist acts on the streets, making life difficult for all governments that were not of 21st-century socialism. Therefore, I broadly celebrate that situation. On the other hand, I think the plan designed by the United States government in three stages is very appropriate. The first stage has to do with stabilization, which is what we are going through right now. Then will come the reconstruction part, and then the transition to democracy will begin. What happens is that it would not be possible to do it any other way. The stabilization that they are doing now, those of us in America who have suffered and still suffer from the interference of the hordes of 21st-century socialism in the state structure, who basically work as thought police during 21st-century socialist administrations and act as spies when they are out of power and dedicate themselves to sabotaging governments of different signs. It is very difficult. If you think about that in Venezuela, that would be 100%. Therefore, believing that there is another possibility of managing the stabilization process is truly not understanding the limits of reality. So from my point of view, the work the United States is doing is excellent. Also, I think it is yielding results because what we are seeing is that the different political prisoners are being released, which we applaud, and we hope they finish releasing all political prisoners. We are particularly concerned about the situation of Nahuel Gallo, but as we see how the situation is evolving positively, we have hope that Nahuel can return to us in Argentina.
Look, the situation is that you have to understand that in the stabilization process, any alternative, the regime's own internal strength will make it fail. So from my point of view, what the United States has chosen to resolve the situation is correct, it is what can be done at this moment. That is, there will be time after reconstruction for the democratic transition, and at that point, we will see what decisions are made and how to advance in the democratization of Venezuela. That is aside from the enormous appreciation and esteem I have for Maria Corina, who is a friend and a great defender of freedom, but what you need is for this procedure to be successful, lest by rushing, we end up regressing.
Yes, I am in contact with them. We are friends. Let's look at the economy. When we came here last year, you had already brought inflation down from 300% to 80%. Now it's at 30%. You've had a good year in terms of the trade deficit. The economy is growing. Two questions though come back, and the first is the currency. As you know, you are a free marketeer. You believe in free currencies. And the question is, when will you let the peso go free?
The first thing to understand is that when you come to run a country, it's not that you start from zero. You have to face a history, and Argentina has a very bad history behind it. That is, Argentina has removed 13 zeros from its currency, had two hyperinflations without war. So there is a first problem regarding the currency in Argentina, and it is the mechanism by which agents form expectations. If one worked with a traditional rational expectations model that we all studied and celebrated Robert Lucas Jr. for, to the point that I named two of my four-legged little ones after him, so you can imagine that it's not something... No, I haven't heard them bark yet. I also have much more liberal versions of myself, but aside from that, what I want to point out is that in normal contexts of pressure and temperature, the price level in the economy would be governed by the quantity of money, and the exchange rate is just another price in the economy. Strictly speaking, we fixed the quantity of money in the middle of last year, sorry, in the middle of '24. And what we are suffering now are the effects of the lags of the monetary policy, the monetary disaster of the previous government, which issued 28 points of GDP, 13 in the last year to try to win the election. So what happens is that in Argentina, history, I say this in economic theory, is the Cantillon effect, the sequence that prices take. Suppose the following: you have a fall in money demand, that makes the exchange rate jump, that makes transable prices rise, then wholesale prices rise, then retail prices, and finally wages. If you have had that dynamic for nearly 90 years, it is very likely that people believe that if the exchange rate jumps, prices will jump. So I am not going to get angry with the way people form expectations because the truth is they have 90 years of reason. So in that sense, what we try to do is understand that people can form expectations that way, and we understand that volatility in the exchange rate can end up translating into volatility in the price level. Because suppose you have a change in relative prices, where transables become much more expensive, or a deterioration in the terms of trade, the exchange rate jumps. What will happen? Then prices will jump, the price level will become misaligned with the quantity of money, and you will put the economy into a recession. So we understand that problem of volatility. So the exchange rate within the band is free. It is free within the band, and the bands only function to show people that the exchange rate is not going to be worth anything, and in that way they learn to float, that is, they lose their fear of floating. So that is the role of the bands: to limit volatility, to say that anything cannot happen.
From my point of view, that moment will come when we have determined to clean up the monetary surplus. That is, we carry the monetary surplus, either from the lags of monetary policy, from the capital controls that existed, and from the price controls. Since we have fixed the quantity of money and now only issue against new demand, at some point local inflation will converge to international inflation. In that sense, that means that at that moment you have cleaned up the monetary overhang. At that moment you will be able to float freely without any problems, because in the meantime agents will have learned, and if there is volatility in the exchange rate and they want to pass it through to domestic prices, they will have to face the worst face of Menger, which is that they will have no demand and will have to adjust.
Can I ask you the other big test? And you know it's a fairly simple question: the international loan markets. You have raised money at home domestically, but as you know very well, when your predecessor defaulted on the foreign bonds, the question is, when you go and raise money in New York outside...
Look, strictly speaking, the issue of obtaining funds. The truth is that the only thing we should need in principle would be just to roll over, as a general framework. Why? Because Argentina has a zero deficit. In fact, the amount related to interest, Argentina pays with a surplus. That is the first point. On the other hand, with the fiscal sincerity law, we expect to boost and grow the domestic capital market. Consequently, the need to resort to funds in external markets will be less and less. In the worst case, the only thing we would be looking for in international markets is basically the rollover. And we think so because given Argentina's fundamentals, paying a spread or a country risk of 550 basis points seems clearly not aligned with our fundamentals. Therefore, since we have a very low debt-to-product ratio, because most of the debt is in the public sector, and we have fiscal balance, the truth is that we will need much less access to capital markets beyond the rollover, and with the development of the domestic market, we will be able to pay and reduce that exposure. It is not something that, given our fiscal performance, worries us too much. I would be more worried about having too little Argentina, I would say.
The swap line from the US, big success. When you got it, Scott Bessent, the Treasury Secretary, said that you had committed to, he put it, getting China out of Argentina. And you have always been very critical of China. As you know, China still has a space station in Argentina. You still have a swap line with China. What does getting China out of Argentina mean to you?
