OF ETERNAL HOPE: Argentina
(Directly from Buenos Aires)
Arriving in the marvelous city of Buenos Aires after a meeting with Argentina’s Minister of Economy at FIESP and still savoring the Botafogo victory, during the week marking one year of flamboyant Milei’s government, is an unprecedented experience. Everything is clean, beautiful, with crowded restaurants, excellent security, and a terrible exchange rate—1 dollar equals 1,000 pesos. Everything is expensive (a breakfast at the famous La Biela costs 150 reais per person). This is an Argentina that saw 20.6% inflation in January, which dropped to 3.2% in November. The exchange rate is stable, commercial import debts have been paid, and a president who brought the conservative world to Buenos Aires for a global meeting is now the star of the moment. The entire world is watching the “second half” of the chainsaw-wielding president’s term, whose rhetoric bears striking similarities to the speeches of Hitler and Mussolini.
Countries caught in inflationary spirals and profound economic and social crises often see democratically elected saviors turn into democracy’s destroyers and eventual dictators.
The first year of budget cuts, targeting the excesses of public administration and the mismanaged public finance system accumulated over decades, was relatively easy. It’s easy to hit retirees, the unemployed, the cultural sector, universities (it’s worth watching an excellent Argentine film on the subject, Puan), researchers, and public servants. The real challenge will be to restore economic growth. The prospects for economic development in a country plagued by massive poverty, unemployment, hunger, and social disparities—favoring agriculture and mining, sectors that do not generate many jobs—are not promising.
Despite having a solid industrial base, it lacks competitiveness, and nothing suggests that the current government’s policies will create new jobs. There’s also a labor shortage, as many young, qualified professionals have emigrated. The country needs more than radical rhetoric and chainsaw-like cuts to public finances; it requires a sustainable growth plan.
Some say Milei’s violent rhetoric should be ignored, asserting that he is pragmatic, particularly in his approach to China and Brazil. Undoubtedly, he enjoys full support from Trump, which translates to the IMF, to which Argentina owes $45 billion. However, this external pragmatism is coupled with radical ideological actions internally, dividing the country, which will face its first major test in the midterm elections next year. If Milei succeeds, his example could influence Brazilian elections as well.
The Argentine people’s patience with Milei’s government—despite basic staples like beef (a dietary essential) rising 9% in November and 14% in early December—is born out of despair. While Milei’s approval ratings are high, so is the cost of living, with wages remaining frozen.
Anyone familiar with the economic patterns of South America might feel they’ve seen this movie before: Martínez de Hoz, Domingo Cavallo, Dilson Funaro, Zélia, and, last but not least, the Plano Real. After the deluge, there’s hope for sunlight. Even with Trump and the IMF’s backing, it will be harder next year to keep inflation low and sustain growth. Rhetoric must translate into concrete actions, requiring political skill, public support, and consistent technical foundations.
The results Milei’s government may achieve represent the hope of conservatives worldwide—especially in Brazil. Foreign investments might choose Argentina over Brazil, and positive economic effects could reinforce the belief that these policies are also suitable for other countries. Until 2026 arrives, watching this thousandth Argentine experiment unfold—while it chairs Mercosur and insists on deals with the U.S., failing to realize that a thriving Argentina also benefits Brazil—will remain the favorite sport of economists and those footing the bill.
Stefan Šalej
December 12, 2024
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