Argentina’s Mr Market Javier Milei wants to make austerity great again
2024.12.09 05:22
By Lucila Sigal
BUENOS AIRES (Reuters) – Argentina’s libertarian President Javier Milei laid out a bleak vision in his maiden speech a year ago amid an economic crisis. He warned there was “no money”, pledged shock therapy for the economy and said things would get worse before they got better.
The crowd in front of Congress cheered his every word.
A year later Milei has managed to pull off a gravity-defying feat: keeping that fervor burning and avoiding tipping the country into fiery protest even as he rolls out severe spending cuts that have crimped the economy and pushed up poverty.
The bombastic and shaggy-haired economist, who marks one year in office this week, has seen his star rise globally. He has become a poster child for free markets and the political right, with public backing from Tesla (NASDAQ:) billionaire Elon Musk and U.S. President-elect Donald Trump.
At home he is leading a bold – if risky – experiment, turning Latin America’s third largest economy and a key producer of grains, gas and lithium, into a rare live test case of libertarian free-market economics and deregulation.
So far, he is defying the odds.
Milei’s polling numbers are high and rising, monthly inflation has come down from 25% to 3%, markets are soaring and distortions in the currency markets have eased.
That is despite the real economy being in reverse, hit by his spending cuts. Central bank dollar reserves have improved but remain in the red and half of Argentina’s 45 million people live in poverty.
“Milei has made huge cuts, which has generated a major recession,” said political analyst Facundo Nejamkis from consultancy Opina Argentina. “And yet, the people who voted for him continue to back him. This is what marks Milei out.”
Part of the explanation is what came before.
Argentines voted Milei into power last year in a shock election driven by anger at the traditional political parties that have overseen years of recessions, fiscal deficits, debt defaults, currency controls and soaring inflation.
That has given Milei more leeway – and time.
“We are on the right path … We came from a difficult situation, the country was in decline,” said José Bosch (NS:), a 40-year-old lawyer in Buenos Aires, adding that prices were beginning to stabilize and salaries regain lost ground.
While life was tough, Bosch was willing to wait for growth to pick up.
“In my personal situation I can endure this, though I don’t know for how long,” he said. “What we Argentines are always urgently thinking about is the economy.”
CHAINSAW AUSTERITY
Milei’s rise from acid-tongued economic pundit to president has shaken Argentina and rippled overseas. His austerity, plans to slash back the state and anti-woke rhetoric have made him a darling of the conservative right and free markets.
Trump-backing U.S. Republican Kari Lake recently called Milei a “heavily caffeinated version of Donald Trump” at a conservative summit in Buenos Aires. Milei’s backers sometimes wear adapted “MAGA” hats: Make Argentina Great Again.
If Milei succeeds longer-term it could redraw Argentina’s political fault lines after years of big government. He could gain more seats in Congress in mid-term elections next year that would boost his ability to push through reforms.
His government, however, faces a tough new phase: reviving the stalled economy, ending currency controls that have proved hard to undo, and keeping a lid on popular anger at the high cost of living and cuts hitting pensioners and state workers.
“They’ve taken away medicines from retired people, they’ve fired over 45,000 government workers and they keep making budget cuts to the lower classes,” said Claudio Arevalo, a State Workers Association union official at a protest last week.
“We will stay on the street until this government decides to change its political and economic path.”
Brenda Corbalán, 38, said she and her partner, who work in an orthopedics shop and earn some 800,000 pesos ($790) a month, were having to support her retired in-laws, tightening their belts by taking cheaper bus routes and canceling holidays.
“Things have got worse, at least how we see it,” she said.
PRAGMATIC STREAK
Argentina, the top global processed soy exporter, a key shale producer and No. 4 for battery metal lithium, has seen a series of would-be saviors fall flat after initial promise. And Milei remains a self-confessed political outsider.
However, analysts pointed to a pragmatic streak helping Milei survive. He has won allies from the mainstream conservatives that have let him navigate Congress despite having few seats, put moderates into his Cabinet and softened attacks on trade partners like China despite ideological differences.
“He’s ended up being much more pragmatic in how he’s running things,” said Marina Dal Poggetto, Buenos Aires-based executive director of economic consultancy Eco Go.
A straight-talking style and brash showmanship have also kept him in the spotlight. With big sideburns and shaggy locks, he has performed rock music and dated local celebrities. He still appears with a “chainsaw” to represent his cutbacks, now gold-hued with “Forces of Heaven” written on it.
That has helped mask, for now, the hardship many Argentines face, and Milei’s big win has been convincing them that austerity is the tough medicine the resource-rich country needs to turn its fortunes around – and see it in a positive light.
“We are coming out of a very bad time, tragic for the country,” Juan Agustin told Reuters on the streets of Buenos Aires, adding that despite the economic drop he felt optimistic. “Now we are facing a moment that gives us real hope.”
