Javier Milei came to power last December in an Argentina worn down by successive crises.
With the promise of ending the slow decline of the South American country and turning it into a world power again, the president announced that he was going to deregulate all sectors of the economy, privatize public companies, lower taxes, replace the peso with the dollar and close the Central Bank.
The proposal involves dynamiting the foundations of the bruised Argentine welfare state and building on it an economic system with few regulations and much more market freedom.
Three months after assuming the presidency, Milei carries out a draconian fiscal adjustment and has begun to liberalize the economy through a decree of necessity and urgency with more than 300 measures.
Housing rental is now governed by the market and not by law;
Private health companies can set the price they want for their clients, industrial and commercial promotion regulations have been repealed and a first step has been taken towards the privatization of public companies.
His first economic recipes have pushed the Argentine population one step lower than they were.
Inflation exceeds that of Venezuela and is the highest in the world (276% year-on-year), the poverty projection is close to 60% and unemployment is on the rise.
Milei blames the deterioration on his predecessors and maintains a fixed course towards an irreversible transformation.
Along the way he has encountered two obstacles: Congress, which stopped its law to scrap the State, and Justice, which has left the labor reforms included in the decree on hold.
“If anyone thought that so many decades of cheap and impoverishing populism could be resolved in 90 days, they were wrong,” presidential spokesman Manuel Adorni said on Thursday.
“Our success is that the expectation has been changed and that it has begun to be understood that we avoided the worst, that we avoided hyperinflation and that we are indeed in complex months, by virtue of correcting a lot of inequalities and distortions,” he added without predicting. When will recovery begin?
Discontent shakes the streets, with calls for strikes and protests every week.
But the president refuses to look for another path and is betting that others will step aside and leave him a clear path.
His dogmatic character has so far prevailed over the pragmatism expected of a head of state and even more so if, as in his case, he has a weak parliamentary minority.
The Libertad Avanza coalition, led by Milei, has 38 of the 257 deputies and 7 of the 72 senators.
The Argentine president, a 53-year-old economist, defines himself as a libertarian.
He is a follower of the Austrian School, a school of thought founded by Carl Menger at the end of the 19th century that places individual freedom as the basis of progress and maintains that the State should remain outside the economic decisions of individuals.
“The State is a criminal organization,” Milei said on March 1 in his opening speech to the ordinary sessions of Congress.
It is the same message that made him popular as a television talk show host and on which he based his successful electoral campaign when he made the leap into politics.
The difference is that since December 10, Milei is the highest representative of the institution he attacks.
Radical doctrine
The president admires the Austrian Murray Rothbard - to the point of naming one of his four dogs after him - to whom the term anarcho-capitalism is attributed, which defends the total abolition of the State in favor of individual sovereignty.
Milei considers himself an anarcho-capitalist at heart, but a minarchist in practice, that is, he believes that state functions should be limited to justice and security.
This explains why some time ago he was in favor of the sale of organs—and even of children—and the free carrying of weapons, ideas that he banished to come to power.
Milei's doctrine is radical for any country — “I am the first liberal libertarian president in the world,” he likes to boast — but much more so in Argentina, where the State is one of the largest employers and its economy is heavily intervened.
The resounding victory of a candidate who brandished a chainsaw as a symbol of cutting public spending was possible due to widespread fatigue with the traditional political class after 12 years of economic stagnation and loss of purchasing power.
The purchasing power of salaries was reduced by 25% between December 2017 and November 2023. “There is no money,” Milei said in his first speech as president, and no one came out to contradict him.
He then announced a fiscal adjustment plan of five points of GDP for the year 2024.
Bus stop with graffiti rejecting Javier Milei, in Buenos Aires on March 7.
Natacha Pisarenko (AP Photo/LAPR
The first cut was symbolic: the ministries went from 19 to 9. He then ordered the paralysis of almost all public works and devalued the peso by 54% to bring the value of the official price—regulated by the State—closer to that of the market.
The gap between the two, which was greater than 100%, is now around 20%.
The measure was applauded by the markets and by the export sector, Argentina's economic engine, but it contributed to the prices of goods and services soaring without income being able to keep pace: in the first two months of Government, salaries lost 23% purchasing power, almost the same as in the previous six years.
The forecasts are not encouraging: GDP fell 1.6% in 2023 and a decline of 2.8% is expected this year.
The adjustment has included a 64% reduction in the million-dollar subsidies with which Kirchnerism kept public transportation and services such as electricity, gas and water at ridiculous prices.
The value of bus tickets in Buenos Aires has multiplied by five since Milei assumed the presidency, up to the current 270 pesos (about 25 euro cents).
It is a very low price compared to other countries in the region, but it represents a new blow to the meager pockets of Argentines, especially for workers who make more than one trip a day.
Electricity, gas and water bills have also become more expensive and will continue to rise.
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Argentina: the eternal crisis
Runaway inflation helps meet government goals: it has been enough to freeze many social benefits to obtain large budget savings.
This is the case of retirements.
The minimum pension is 134,000 pesos (about 120 euros), a figure that is below the poverty line, which is 193,000 pesos for an adult (175 euros).
More and more elderly Argentines cannot afford medications, which have increased more than 300% in a year.
“Milei is governing towards the market and with its back to society,” warns economist Juan Manuel Telechea.
Argentine bonds are rising, the country risk has dropped to its lowest level in nine months and the Central Bank already accumulates more than 9,000 million in reserves.
Argentina registered a financial surplus in January for the first time since 2012, and this positive data created “a false sense of success,” according to Telechea.
This expert believes that it is unsustainable — “how much more are we going to be able to cut social programs and pensions?” — and hides the fact that a great social crisis is brewing underneath.
The middle class combats the fall in income by reducing all possible expenses, as shown by the collapse in consumption: in February sales in small and medium-sized businesses fell 25%, according to the sector chamber, and new car license plates They were reduced by almost 20%, according to the Argentine Dealers Association.
Families that still cannot make ends meet have begun to exchange the dollars they had saved.
“Almost everyone comes to sell dollars.
Nobody buys,” said the owner of a currency trading business in the center of Buenos Aires ten days ago.
The exchange rate at which these transactions are made is not the official one - less than 900 pesos per dollar - but rather the market rate: the US currency was sold in the middle of the week at around 1,085 pesos and was bought at 1,035;
the euro, at 1,113 and 1,080, respectively.
The situation is critical for the poorest.
Although Argentina is one of the largest food exporters, among its 46 million inhabitants there are almost five million who suffer from hunger.
The income of one in ten households is insufficient to fill the shopping basket, which has become 300% more expensive in the last year and has a cost similar to that of Spain.
The price of some basic products, such as milk, is even higher: the same international supermarket chain offers a liter of whole milk for 1.2 euros in Argentina and 0.90 euros in Spain.
Salaries, on the other hand, are much lower: the minimum wage in the South American country is equivalent to 180 euros;
in Spain it is 1,134.
Attendance at free community kitchens has overflowed to levels similar to those of the covid pandemic in 2020. They cannot cope: Milei has suspended the delivery of merchandise to review this assistance model and they depend on the help of municipal governments, provincial and donations.
A group of unemployed people queue in front of Congress to receive food from social movements, on February 29 in Buenos Aires.
Ricardo Ceppi (GETTY IMAGES)
The president attributes the social emergency to past policies.
“The last 20 years have been an economic disaster, an orgy of public spending, uncontrolled emissions that resulted in the worst inheritance that any government in Argentine history has ever received,” he told legislators.
For the economic historian Pablo Gerchunoff, Milei wants to return to the conservative bonanza of 1910, a utopian desire that compares him to the nostalgic Kirchnerists of the first Peronism, of 1945. “Two anachronisms in competition,” he says.
Since Argentina's return to democracy in 1983, the president has only saved the administration of the liberal Peronist Carlos Menem (1989-1999).
Menem suffered hyperinflation at the beginning of his mandate, but later stabilized prices with the convertibility law, which equated the value of the peso to that of the dollar.
He opened imports and privatized almost all public companies, including the oil company YPF.
The convertibility model began to break down in 1994, but was maintained until 2001, when it was blown up in the midst of the worst economic and social crisis in the country's recent history.
To get out of that crisis, Argentina benefited from high international grain prices.
That tailwind has ceased, but Milei has in its favor this year the recovery of the field after a historic drought, which will bring in at least 15 billion dollars more than in 2023. It also has the production of unconventional oil and gas from the Vaca Muerta field, which is estimated to produce an energy trade surplus of $3 billion this year.
Dollarization as a way out
Milei wants to go further than Menem and promised to adopt the dollar as the national currency, although he later spoke of free currency competition.
Economists of different currents consider it a terrible idea, but the Argentine president keeps it on the horizon and part of the citizens support it.
“The reasons that experts give for opposing are technical, but the discussion on the street is to lower inflation,” says sociologist Mariana Luzzi, co-author of the book The Dollar: History of an Argentine Currency.
Luzzi affirms that dollarization has a halo of magical solution for those tired of the peso losing value day by day.
He believes that Milei's goal is not so much to solve inflation, for which she could use other tools, but to clip the wings of a state that she considers an enemy.
“Dollarization takes away from the State the power to issue money and define monetary policy.
Since it is easy to enter but difficult to exit, it ensures that no other Government will issue currency again.
It means taking power away and shrinking it forever,” he says.
Outside of Argentina, the closest reference to the model that Milei wants to implement is that of those known as Chicago boys during the Chilean dictatorship of Augusto Pinochet.
This group of Chilean economists trained at the Chicago School carried out a profound tax and labor reform, deregulated the economy, opened the doors wide to imports and privatized strategic public companies.
The economist Milton Friedman, a great reference for ultraliberals, coined the term “Chilean miracle” to refer to the work of his disciples, but there are figures that question it: during the Pinochet regime, poverty almost doubled, reaching 39 % of population in 1990;
Unemployment grew and a large part of the Chilean industry was destroyed by external competition.
In between, the country was hit by the severe economic crisis of 1982.
“It was a miracle for the richest 10% of the country,” says Chilean historian Francisco Vidal, former Minister of Defense under the presidency of Michelle Bachelet.
Vidal sees many parallels between Milei and the Chicago boys, but also a big difference: “Milei wants to do the same, but she is in democracy.
Pinochet closed Parliament in one night, bombarded the popular media and crushed the political and social movement that opposed him,” says Vidal.
In Argentina, Congress put a stop to Milei in February with its state reform megaproject, the Bases Law.
The official negotiators agreed to prune almost half of the original 664 articles that included the delegation of legislative powers to the president for two extendable years, the reform of the political and tax system, privatizations, restrictions on the right to strike and greater control of protests, among others. others.
The dialogue ran aground because the parliamentarians asked for more resources for the provinces and Milei refused.
When he saw that the opposition was voting against some key articles, the president chose to withdraw the law and vented his fury on social networks shouting “traitors” and “extortionists.”
A month later, Milei once again built bridges of dialogue with the opposition.
She needs Congress to make her economic reforms into law, as requested by the International Monetary Fund.
Instead of negotiating with the parliamentary blocs, he now addresses the provincial governors: he offers them more resources in exchange for their legislators approving the Base Law in its entirety.
As a cherry on top, he has called them to a national pact in May to sign his ten free market commandments.
The new offer includes a threat: “We have no ambition for power, we thirst for change.
If what they seek is conflict, they will have conflict.”
Opposite will be Kirchnerism, which considers Milei an “extravagant experiment.”
The negotiation takes place in the offices and on the streets.
The unions called a general strike 45 days after the new Government took power and in recent weeks teachers, medical personnel and railway workers have gone on strike.
Milei asks for “patience and trust.”
Opponents are betting that this patience will run out.
The first internal bomb to explode
Javier Milei has suffered his first internal crisis this week.
When one bases one's electoral campaign on disqualifications of the so-called "caste" that refuses to lose its privileges, and champions austerity to straighten the coffers of the State, a controversy related to the salaries of the Executive is as if a torpedo hit the waterline of a submarine.
Last Monday, the Argentine president fired his Secretary of Labor, Omar Yasin.
He claimed his head as a firewall after a Peronist opposition deputy, Victoria Tolosa Paz, published on X (formerly Twitter) that the president had signed a decree to increase his salary and that of his entire cabinet by 48% between January and February.
In the midst of an economic adjustment like the one the Government is applying, which is leading many Argentine families to suffocation, Milei's reaction to stop the controversy was quite erratic.
At first, the libertarian leader blamed the Executive's salary increase on an old decree by former President Cristina Kirchner that contemplated updating the Cabinet's salaries.
Later, as the controversy grew and grew, he used the manual of almost all politicians: draw a red line and choose a sacrifice.
In this case, that of the head of Labor, whom he accused of signing the decree that increased the salaries of the Executive "by mistake."
Like almost everything that surrounds Milei, the communication of the termination had bizarre overtones.
During a live television interview he announced Yasin's dismissal.
“When did he fire him?” the journalist asked him in surprise.
“At this moment they are notifying it.
It is a mistake that he should not have made,” Milei stated emphatically.
A society divided between the “caste” and the “good citizens”
One of the causes of Argentina's decline has been its social and political polarization.
For decades, the South American country has swung like a pendulum between two antagonistic country models and corruption runs rampant between these cracks.
Protectionist governments are succeeded by other defenders of the free market;
Some approve measures to sustain a welfare state that maintains free public education and healthcare, and others make decisions to reduce it because they consider it inefficient.
Milei's election has taken that oscillation to an extreme never before seen in the last 40 years of democracy.
The libertarian president has broken the classic division between Peronists and anti-Peronists to replace it with an even deeper one: that of the “good Argentines” against “the caste”, which includes politicians, prebendary businessmen, journalists and union members who resist to lose their privileges.
“Last night the caste celebrated.
Today, good Argentines suffer the negative effects of their excesses and passion for living off other people's things,” Milei wrote on
This Manichaean vision of the world links him to other populist leaders, according to Italian professor Loris Zanatta, who specializes in Latin American populism.
“If we understand populism as a policy of economic demagoguery, then the Kirchners were populists, not Milei who wants to make a five-point adjustment to the GDP.
But populism is essentially a religious vision of the world that divides it between a pure people and a corrupt elite and, in that sense, Milei is a hyperpopulist,” says Zanatta, author of Jesuit Populism: Perón, Fidel, Chávez, Bergoglio ( 2020).
This professor from the University of Bologna, a frequent visitor to Argentina, warns that Milei's messianic language carries an implicit risk of authoritarianism: “All populisms think that their people, even if they are a partial people, are the total people and that this gives the right to impose itself.”
Milei relies on the 56% of Argentines who voted for him to ask Congress to approve his Bases Law.
But that support is volatile: he started his administration with 58% approval and 42% rejection, according to an Opinaia survey based on 1,200
online
interviews .
At the end of February, approval had fallen six points and the photograph was an Argentina almost divided in two.
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