- Argentina's President Javier Millay is embracing “shock” adjustments to save the country's economy amid soaring inflation, hundreds of billions of dollars in national debt and poverty.
- Milais' actions include reducing the bureaucracy, devaluing the country's currency, imposing temporary tax increases, and balancing the budget deficit. Markets and investors are starting to trust these developments.
- “The market has become very optimistic about Javier Millay's conviction,” Javier Casabal, a fixed income strategist at Buenos Aires-based AdCap Grupo Financiero, told Reuters in late February. Told.
Argentina's newly elected liberal and self-described “anarcho-capitalist” president, Javier Millay, is determined to take drastic measures to save his country's struggling economy, even in the face of overwhelming obstacles. We are working on major reforms.
Mr Milley's 'shock' adjustment action comes despite opposition from MPs and challenges arising from the high inflation rates that have plagued the country for years. Improved The confidence of the Argentine people and foreign markets and investors. Millais inherited his 140% inflation rate. poor population and hundreds of billions debt When I took office in December. (Related: 'MAGA!': Trump and Miley greet each other like old friends backstage at CPAC)
Millay Admitted On his inauguration day, he said Argentina's economy would temporarily deteriorate while accepting a “shock” adjustment to start a correction.
“They have ruined our lives… we have no money!” Millais said in her inaugural address. “So the bottom line is that there is no other way but to adjust, to give a shock…This is the last straw to start the rebuilding of Argentina.”
BUENOS AIRES, ARGENTINA – SEPTEMBER 25: La Libertad Avanza presidential candidate Javier Millay, La Libertad Avanza's Buenos Aires gubernatorial candidate, during a rally on September 25, 2023 in San Martín, Buenos Aires province, Argentina Pick up the chainsaw next to Carolina Piparro. (Photo by Thomas Cuesta/Getty Images)
One of Millay's first actions as president was to cut Argentina's bureaucracy from 18 to nine people in order to cut government spending, fulfilling a promise he had made during his campaign. according to to Reuters. Millais and his supporters say several ministries, including the Department of Transport and Public Works, the Department of Tourism and Sport, and the Department of Environment and Sustainable Development, have been absorbed into other existing ministries and are incapacitated and cash-strapped. I was looking at it. according to To the CATO Institute.
Millay also allowed the value of the peso currency to plummet by 50% in December to increase import costs while reducing export costs. according to To the Associated Press. The goal is to narrow the trade gap and make Argentina a bigger global trade competitor, stem the flow of capital from the country and increase its stockpile of depleted foreign exchange reserves.
Millay's ultimate plan is to completely replace the peso currency with the US dollar, another promise he made during his campaign. according to Go to NPR. The US dollar is valued highly in Argentina because it is generally stable and maintains its value longer than the peso.
According to the Associated Press, the temporary tax increases were imposed by Milley's administration to reduce the national debt and balance the budget. Argentina's budget deficit currently stands at 3%, and Prime Minister Millei has promised to balance it this year. according to to Reuters.
In December, Milais submitted an omnibus reform bill to parliament that includes the privatization of state-owned enterprises, increased export taxes, limits on foreign bonds, and the repeal of debt restructuring rules. according to to Reuters. He also issued another executive order in December aimed at deregulating Argentina's economy.
These efforts are already having a positive impact. Argentina's monthly inflation rate slowed to 15.3% in February, much lower than the spike in December, according to Reuters. forecast.The government also looked at the monthly budget. surplus in January for the first time in over 10 years.
CORDOBA, ARGENTINA – NOVEMBER 16: Presidential candidate Javier Millay of La Libertad Avança poses with 100 faces painted during the closing rally ahead of the run-off elections on Sunday, November 16, 2023 in Cordoba, Argentina. Hold a dollar bill in your hand. (Photo by Thomas Cuesta/Getty Images)
Treasury Secretary Janet Yellen said at a press conference: “The Milley administration has inherited an urgent task of stabilization, but has already taken significant steps to restore fiscal sustainability, adjust the exchange rate, and combat inflation.” Stated. meeting In late February. (Related: 'Long live freedom, damn it!': Argentina's 'Trump' storms Davos with speech exploding socialism)
Since President Millei took office, Argentines have deposited more than $2.3 billion in dollar-denominated banks, fully recouping the banks' losses last year, and increasing withdrawals are common in times of instability. It shows that you feel stable. according to To Bloomberg. Argentina's national debt is at its highest level in four years, and the country's risk index has fallen to its lowest level in two years, Reuters reported.
“The market has become very optimistic about Javier Millay's conviction,” Javier Casabal, a fixed income strategist at Buenos Aires-based AdCap Grupo Financiero, told Reuters. “Given that just a few weeks ago most investors lacked confidence in his ability to reduce the deficit, this is a real change worth celebrating. If anything, he has gone too far in some ways. Maybe.”
Millay still faces some obstacles.Inflation remains at record levels treble And poverty continues to consume a large portion of Argentina's population. Key provisions of Millais' reform bill were blocked in early February by the country's parliament, which Millais called a “rat's nest”. according to to Reuters
In a March 1 speech, Millais pledged to parliament to “accelerate” the reform program and encouraged them to get involved, but warned that the reform program was not needed to achieve her goals. according to to Reuters.
“We're not going backwards. We're going to keep moving forward,” Millay said. “Whether it's through legislation, whether it's through executive order, whether it's through regulatory amendments.”
Millais's government is currently considering breaking up the reform bill and passing the provisions separately through parliament. according to to Reuters. He is calling on MPs to agree a 10-point social pact by May 25, including negotiations on economic reform.
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