Ricardo López Murphy: “Gradualism is much more expensive than an initial correction”

INFOBAE – The former Minister of Economy for the Alliance, Ricardo Lopez Murphy, analyzed the sharp drop in share prices in Argentina and the world in recent weeks, along with a pronounced devaluation of the Argentine peso.

“It always seemed to me that gradualism, I think by definition, is much more expensive than an initial correction therapy, because to equal correction, in gradualism it has two costs: the accumulation of debt and the debt services of this process” , the former minister told the journalist of AM Ecomedios.

Lopez Murphy added that “if a second negative piece of news crosses the road, the cost, being one in debt and becoming more fragile, is even more significant. That’s why the difference between an immediate and a gradual treatment is to avoid that vulnerability, that surprise and that extra cost. ”

“The climate of opinion in Argentina has become less optimistic, and that is the product of a scenario that is not as favorable and generous as it seemed that of interest rates in the world close to zero,” he said.

Lopez Murphy considered that the fall in the prices of assets in international financial markets was linked to “an estimate of a rise in the world growth rate”.

“It is natural that the real interest rate at a global level will take more growth, which will make our financing more expensive and we are demanding financing, due to the strong fiscal imbalance,” said the economist.

The climate in Argentina has become less optimistic: a less generous scenario is seen than the one of zero rate
“For our situation, it’s not good news. Nor is it dramatic in the environment that has occurred. If the rate (of 10-year US Treasury bonds) goes from 2.3 or 2.4 percent to 2.9 percent, that means that global financing increased by 0.5 percent. It will cost us, to make the environment less favorable, but it is not so dramatic, “he explained

“You have to take in mind that in 2017 the GDP per capita is the same as in 2008. The country did not change its government just because: the populist system had collapsed. Nine years without increasing the per capita income, we must register that, with a pulverized investment system. It is a miracle that we grow to 2.5% because we invest very little and very badly. For 10 years we have wasted investment, “continued López Murphy.

“In that context, it is natural that we have to be very effective in investing. It is a point where I have a great discrepancy with the investments that the Government has taken, the investment strategy and the critical opinion that exists. It is crucial not to make mistakes in the investment programs that lie ahead, “he stressed.

For the economist, “there is a private sector that is saving much more than it invests and a public sector that acts as the great enemy of growth. The public deficit absorbs the savings that should go to investment and that is the essential reason for the low performance of Argentine growth, in addition to the poor quality of the investment. ”


Interview to Ricardo López Murphy, member of the Academic Council of Freedom and Progress.