Argentina’s libertarian president Javier Milei is ready to bypass hostile legislators who blocked his landmark economic reforms and rely on decrees and other executive powers to implement his radical austerity plan.
His strategy for reviving the stricken economy is widely perceived as high-risk, but Milei waved aside doubts during a confident interview at the pink-coloured presidential palace, the Casa Rosada. He said he was making faster progress than expected with a fiscal adjustment so drastic it had no parallel “not just in Argentina but the world”.
The chance of ordinary Argentines rioting against austerity was “zero” and his message to Argentina’s growing number of poor, he said, was: “You don’t get out of poverty by magic. You get out of poverty with capitalism, savings and hard work.”
A political outsider inaugurated in December on a promise to take a chainsaw to the state, Milei surprised Argentina by eking out the country’s first budget surplus in 12 years in January. That was achieved by slashing payments to provinces, freezing budgets and not uprating pensions and benefits fully for inflation, which was running at 254 per cent a year last month.
Economists have warned that such drastic spending cuts may not be sustainable. But Milei, a former economist and TV pundit, believes that having brought down inflation from a peak of 25.5 per cent a month in December to 20.6 per cent in January and an expected 15 per cent in February, he can turn around the crisis-stricken economy this year without congress.
“We have avoided hyperinflation,” the self-styled anarcho-capitalist leader told the Financial Times. “Our objective is to continue lowering inflation . . . [and] finish cleaning up the [central bank’s balance sheet]. Once the central bank is cleaned up, we are planning to lift exchange controls . . . the IMF estimates we could do it by the middle of the year.”
Milei’s reform agenda ran into trouble almost immediately when the opposition-dominated congress began unpicking hundreds of deregulation measures proposed in his wide-ranging draft bill.
Rather than see the bill “shredded”, the president withdrew it and plans to wait until after midterm legislative elections late next year before trying again with a comprehensive package. He said, however, that he would not wait that long to push ahead with large parts of his reform agenda — and was ready to do it without congress.
“There are other reforms which we can do by decree . . . by changing the application of laws, and all that we will do,” Milei said. He pointed out that about a third of his proposed 1,000 reform measures were included in an emergency decree that will remain in force unless both houses of congress vote to reject it.
“But while congress has its current make-up, we think it’s difficult to pass reforms because what became clear with the [economic reform bill] is that the politicians . . . have no problem damaging the interests of Argentines in order to keep their privileges.”
Milei conceded that “in the long term you need congress” but insisted that Argentina’s historically low levels of investment meant that business could achieve big returns in the short term with only small outlays of capital.
The president believes that lifting exchange controls would open a virtuous circle of economic recovery. “We could have a lot of investment despite not having institutional changes . . . and this could be the take-off point so that next year Argentina is growing in a strong, solid, sustainable way with low inflation.”
This, he believes, would allow his insurgent La Libertad Avanza party, founded only two and a half years ago, to win more seats in next year’s midterm elections. Then he would try again to legislate. “We are ready to send back all the reforms after the 11th of December 2025. We have sent 1,000 but we still have 3,000 more to present.”
In the meantime, Milei will continue to send reforms piecemeal to congress to expose what he called political games by the country’s political “caste” of professional politicians. “Those who vote against will be identified as the enemies of change,” he said.
Despite rising levels of poverty and opposition from the country’s powerful Peronist-dominated labour movement, Milei remains confident that his popularity and his frankness with Argentines before the election about the need for painful economic change will carry him through.
“The word which best represents this government is hope,” he said, claiming that surveys show a growing proportion of Argentines believe the economy will look better in six months.
Argentina faces $5.5bn in payments to private external bondholders in 2025, and with reserves still negligible, the country risks another default unless it can refinance the debt by returning to international capital markets.
Milei said Argentina would be in a position to do that next year. “If we maintain a zero deficit, of course we will be able to achieve that,” he said.
According to a report by consultancy Invecq, nearly half of the fiscal adjustment the government made to reach a surplus in January came from not fully uprating pension and social spending for inflation, though some social security payments, such as food stamps and child benefit, have been increased.
Analysts warn that the key to Milei’s success will be how long poorer Argentines, who have already endured runaway price increases, tolerate such measures. Argentina’s confederation of unions has already held a nationwide general strike against his government and several smaller protests have taken place.
But the president said he did not fear widespread unrest of the kind that struck neighbouring Chile in 2019, when protests over inequality and poor public services exploded into street riots, paralysing the country for months.
“There is a zero chance of a social uprising, unless there is a politically motivated event or [one involving] foreign infiltrators,” he said.
Milei claimed that activists from Venezuela and Cuba had attended recent protests disguised as photographers. “Leftist governments work together to try to sabotage those who are not like them.”
Milei has prioritised alliances with “countries that defend freedom”, including the US, Israel — which he visited earlier this month — and Ukraine, to which he has donated two Russian-built military helicopters.
Milei said he planned to host a “summit of Latin America support” for Ukraine later this year, marking a sharp difference with other regional leaders such as Brazil’s Luiz Inácio Lula da Silva and Mexico’s Andrés Manuel López Obrador, who have taken a more neutral position.
A crucial alliance for Argentina is with the US, the largest stakeholder in the IMF, as the fund weighs how much flexibility to give Milei’s government in the next few years on the $44bn loan that the country is struggling to repay, and whether to lend more.
Last Friday the president hosted Antony Blinken, US secretary of state, in Buenos Aires, but the following day Milei flew to Maryland to address a conservative political conference and embraced President Joe Biden’s 2024 election rival Donald Trump backstage. “I hope next time [we meet], you will be president,” Milei told Trump in a video of the encounter shared by advisers to both leaders.
“It was not a bilateral meeting [or] a premeditated situation, it was like two friends meeting,” Milei said of the conversation. “My alignment is with the United States . . . whether Democrats or Republicans are in power, regardless of my preferences.”
A professional economist before entering politics, Milei said free-market thinkers from the Austrian school of economics were among his most important influences and dismissed what he called “Keynesian rubbish” that favours more government intervention.
Confident of his ideological moorings, the outsider president dismissed the idea that his economic shock therapy was risky. He concluded: “Why would it be risky, when I’m doing exactly what the textbooks say I need to?”
Source: Economy - ft.com
