This followed congressional approval of the government’s ‘base law’ and tax package, designed to strengthen public finances, modernise the labour market and attract foreign investment. Economy Minister Luis Caputo has announced that the first phase of the economic plan (‘zero fiscal deficit’) has ended; the second phase (‘zero money printing’) is a pre-condition to lifting capital controls.
The positive effects of economic reforms will take time; public tolerance could wane if the economy does not rebound soon.
The government’s delay in lifting capital controls will undermine investor enthusiasm and will postpone economic recovery.
The regime to promote large investments will attract foreign capital to some resource-based industries, whose spillover effects are limited.
The government’s goal of reducing inflation at all costs risks leaving the country vulnerable to a sudden halt in foreign capital inflows.
