Domingo Cavallo's advice to the government: build up reserves and remove more regulations.

Former Economy Minister Domingo Cavallo addressed the economic plan being developed by Javier Milei 's government and recommended "stockpiling reserves" because this will benefit the country's "stability and growth" in the future. In this same context, the economist focused on the Libertarian administration's plan to get " dollars out of the mattress ."

In his blog post, the specialist acknowledges that accumulating reserves is important to "pay for imports without problems and meet debt service payments without delay." He also argued that "many more reserves are needed as the economy seeks to re-monetize, not only in the local currency but also in dollars."

Following this, Domingo Cavallo stated that the accumulation of national reserves will simultaneously consolidate "the elimination of inflation and rapid economic growth" in a country that is "heavily indebted in foreign currencies and has virtually no external credit," according to the former minister.

On the other hand, Cavallo maintains that for the "proper functioning of a system that channels savings into investment," the important thing is that "the unspent remainder of those savings can be removed from the infraction and deposited in the financial system." This is in reference to the government's plan to circulate the dollars that Argentines have as savings cushions.

This, along with re-monetization in dollars, requires "allowing for the multiplication of bank credit in that currency through financial intermediation with fractional reserves, just as is permitted for deposits in pesos."

However, financial intermediation with fractional reserves in dollars " needs liquidity provision mechanisms to avoid destabilizing runs on deposits. The Central Bank must have sufficient liquid reserves of its own to provide all the necessary dollar liquidity," Domigo Cavallo stated in this regard.

The former minister argues that tax and regulatory incentives may have a "very limited effect" on re-monetization as long as there is no " progress toward the complete removal of all remaining exchange restrictions " and no "authorization of banks to conduct the same type of financial intermediation with dollar deposits as with pesos."