He is a self-styled “anarcho-capitalist” with no government experience but is running one of the world’s boldest economic experiments, advised by his sister, his English mastiffs, and a social media guru.The fate of 46mn people in a country that is one of the world’s biggest food exporters lies in his hands. Hedge funders hail him as a beacon of pure capitalism in a “woke” business world, while leftists dismiss him as a loathsome manifestation of the global far right.So how is Argentina’s unconventional President Javier Milei performing after nearly 11 months in office? And can he transform a country that is synonymous with economic crisis into a success story?Inflation, Milei’s top priority and Argentina’s eternal bugbear, is down from 25.5 per cent a month when he took office last December to 3.5 per cent in September — although prices have still more than doubled since the start of the year.Milei has fulfilled his campaign pledge to “take a chainsaw to the state”, eradicating years of hefty government deficits and money-printing by halting capital spending, shrinking the government payroll and increasing pensions and state sector salaries by less than inflation.Government finances moved into the black by 0.3 per cent of GDP in the first eight months of this year, compared with a 4.6 per cent deficit at the end of 2023. One international financial official describes it as “the most drastic fiscal adjustment ever seen in a peacetime economy”.But austerity has deepened a recession which began last year, with the IMF predicting the economy will shrink 3.5 per cent in 2024. While there are some signs that economic activity has bottomed out — it grew 1.7 per cent month-on-month in July according to the latest government data — consumer spending, industry and construction remain deeply depressed compared with 2023. The number of Argentines in poverty has swelled to 53 per cent, the most in 20 years. Unemployment in the second quarter of this year stood 1.4 percentage points above the same quarter last year.“The worst is now past,” Milei insists in an interview with the Financial Times. “More than 80 per cent of [economic] indicators have turned positive . . . real wages have been growing for the past four months.” He concludes: “We are laying the foundations for strong growth.”Economists, diplomats and pollsters are less certain, praising Milei’s achievements in extraordinarily difficult circumstances but pointing to big risks that remain.“The starting point was terrible,” says Alfonso Prat-Gay, who served as finance minister between 2015 and 2016 in the centre-right government of Mauricio Macri and is now a consultant. “But the government is too triumphalist . . . It’s admirable what Milei achieved on the fiscal side this year, but there’s a big question about how sustainable it is.”Some confidence is returning. The gap between the black market dollar and the official rate — a closely watched barometer of sentiment — has shrunk to just under 20 per cent this month from levels as high as 60 per cent in January.But most foreign investors want to see how durable the Milei experiment proves before opening their cheque books. Domestic industry is being squeezed by the increasing strength of the peso, which also makes it harder for the government to save up the dollars it needs for debt payments.When it comes to stimulating growth, Prat-Gay says of the government: “They want it to happen, but they aren’t doing anything to make it happen.”Argentina also faces external financial pressure, with more than $14bn of debt repayments due next year and no chance of borrowing fresh cash on international markets until the economy is stronger.The government rests on a fragile legislative base. With only a small minority of seats in congress and no state governors, Milei is betting that he can govern by decree and borrow enough votes from Macri’s bloc of lawmakers to veto laws that increase spending. He hopes to elect many more legislators in midterm elections next October. Whether or not he succeeds, some argue he has already permanently reshaped Argentine politics.“Maybe we underestimated him,” says one senior diplomat in Buenos Aires. “He has kicked over the entire political playing board and, for now, he has neutralised the opposition . . . Even if he doesn’t succeed, I doubt the country will go back to where it was before.”Perhaps the biggest question amid all the uncertainty is how long the patience of the Argentine people with Milei’s drastic economic shock therapy will endure.Milei’s popularity has dipped since taking office but, at about 44 per cent, his approval rating is holding up well for a leader presiding over tough austerity measures. In a country with a long tradition of big, noisy street protests, the relative lack of mass demonstrations so far has been striking.“The government is having successes in some areas,” admits Héctor Daer, leader of the powerful health workers’ union, on the quieter than expected streets. “People want their problems solved and they don’t want to be protagonists [in protests] for fear of losing their jobs.”This may change: Milei’s veto of a bill restoring inflationary increases for university budgets brought an estimated 250,000 people on to the streets earlier this month, uniting the left and centre-right and prompting some to suggest the president had miscalculated.But, for now, one of Milei’s biggest advantages is the lack of alternatives. “People who voted for him are saying: ‘Let the madman get on with it,’” political analyst and consultant Sergio Berenzstein says. “Ultimately, his success will be defined by the speed and the perception of economic recovery.”Argentina’s Peronist movement, which has dominated government over the past 40 years, is on the back foot after leaving the economy to Milei in a dire state and suffering a series of corruption scandals.Axel Kicillof, governor of Buenos Aires province and the Peronists’ most powerful elected official, accuses Milei of deceiving voters. “They thought the spending cuts were for others [like the elite], not for them,” he says. But when asked about the Peronists’ message now, he is more vague, talking of the movement’s nationalist values and the need to build consensus around the worth of the state.Former president Cristina Fernández de Kirchner, still Argentina’s dominant leftist, has announced her intention to return to the presidency of the Peronist party in what is seen as an attempt to stamp her brand of populist socialism on the movement before next year’s midterm elections.But “Cristina”, as she is universally known, is fighting a series of court cases over corruption allegations and is almost as polarising a figure as Milei, so it is unclear to what extent her return will help the left.Martín Lousteau, a leader in the centrist Radical party, compares Argentines faced with a choice between Milei and the Peronists to long-suffering passengers on a 12-hour flight from Buenos Aires to Madrid offered a meal choice between chicken and pasta.“The last five times the chicken has given me food poisoning, so I’m going to ask for pasta,” he says. “When the pasta comes, it’s going to be horrible, nobody likes it . . . but there’s nothing else to eat and 10 hours to go before landing. And then Cristina comes out and says: ‘I’ve got some chicken for you.’” More
