Milei is defying expectations and pulling the Argentinian economy out of a leftist-engineered death spiral
Since taking office in December, Javier Milei, Argentina’s
self-proclaimed “anarcho-capitalist” president, has taken a “chainsaw” to his predecessors’ failed leftist policies and increasingly to critics’ doubts.
Recent economic signals out of the South American nation indicate Milei’s free market reforms could ultimately usher Argentina from ruin to renaissance.
Background
Argentina was
one of the world’s richest nations in the early 20th century. However, it was reduced to a shambles after six major military coups and several decades of unchecked spending. A 2016 paper in the Journal of Development Studies indicated that Argentina, which has defaulted on its sovereign debt nine times, was the only country in the world considered to be “developed” in the year 1900 but “developing” in 2000.
When the country’s former leftist President Alberto Fernandez left office late last year, Argentina
owed $44 billion to the International Monetary Fund; had a trade deficit of $43 billion; had international creditors knocking at the door; had nearly half of its population stuck in abject poverty; and was poised to see inflation exceed 211%.
Milei had no plans of seeing his socialist predecessors’ destructionist campaign through to its inevitable conclusion. After all, he had campaigned instead on executing his so-called
Chainsaw Plan.
“The thievery of politics is over. Long live freedom, damn it!” said Milei.
Blaze News
previously reported that this plan entailed selling off state-owned companies, slashing public spending, reducing and simplifying taxes, and eliminating various government agencies. He also suggested the country would adopt the U.S. dollar and shutter Argentina’s central bank.
In a
video that went viral before the election, he excitedly ripped the names of various government ministries off a white board, stating, “The thievery of politics is over. Long live freedom, damn it!”
Voters ultimately decided to give Milei more than a white board to work with.
Milei goes to work
As promised, the 53-year-old former right-wing economist who regards climate change to be a “socialist plot”
kicked things off in December with an executive order cutting the number of government ministries from 18 to nine and relieving over 5,000 bureaucrats of their duties.
Milei’s government subsequently allowed for its peso currency to
devalue by 54%, and then his economic minister, Luis Caputo, indicated the country would be cutting spending by at least 3% of GDP.
While making strides toward dollarizing the currency, Milei’s government also purchased over $5 billion in dollars to build up its reserves and issued
“Bopreal” bonds to tackle import debts.
Late last month, Argentina’s lower house signed off on key chapters of Javier’s omnibus bill, including the privatization of some public companies as well as the granting of expanded executive powers on administrative, financial and economic matters the president,
reported Bloomberg.
If the country’s Senate approves of the plans this month, Milei will be able to fire more state workers, cut costly subsidies, and eliminate various government bodies.
Despite facing caltrops in the nation’s Congress where his allies do not enjoy a majority as well as challenges from both
provincial governments and unions, Milei has continued to implement his chainsaw strategy whilst signaling increasing alignment with the United States — to the great disappointment of the China-led BRICS intergovernmental organization.
Beginning to see results
Milei announced last week that the country had recorded its first quarterly budget surplus since 2008,
reported the Telegraph.
Although 0.2% of GDP is a relatively small surplus, it was a herculean feat for Argentina, granted it has reportedly run up a deficit in 113 of the last 123 years.
This week, the country’s central bank — which has yet to be shuttered — cut interest rates for the third time in three weeks, down to 50%.
“The Argentine leader is providing a blueprint for how to break free,” wrote financial columnist Matthew Lynn.
Although inflation rates reached a
cumulative figure of 287% in March, USA Today reported Milei’s shock measures have resulted in lower inflation rates every month for the past three months.
Ian Bremmer, the founder of the Eurasia Group, reportedly indicated Wednesday that contrary to the collapse expected by so-called experts, “Monthly inflation has come down every month for the past three months, from 25% in December to nearly 10% in March, with forecasters expecting the April figure to come in at single digits.”
Bremmer explained that the “[Milei] government did this by turning the 5.5% budget deficit it inherited into the country’s first surplus in over a decade, while boosting the central bank’s reserves, lowering its benchmark interest rates, and reducing the money supply — all without destabilizing currency and financial markets.”
The Telegraph indicated that if Milei is able to execute on his plan to get the country’s shale oil and gas out of the ground using tried and proven technologies, the economy may make further leaps and bounds.
Matthew Lynn, a financial columnist who writes for Money Week and the Telegraph,
noted, “the Argentine leader is providing a blueprint for how to break free. The global economic elite keeps lecturing us on why we need more government and a more powerful state despite the painful lack of results. Argentina is challenging it in dramatic fashion.”
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