Javier Milei has been in office for a little more than a year, and more and more people are describing him as a saviour of Argentina. His popularity in Argentina and abroad skyrocketed, and nowadays, Javier Milei is the second most popular politician in the world. However, at the beginning of his presidency, everything wasn’t so wonderful, and he has been struggling to implement at least half of the reforms that he proposed.
The main concern for the Argentinian population was hyperinflation, and during the election campaign, Milei had promised to make the fight against inflation his top priority, which he later succeeded.
Right after taking office, Milei presented his economic program with an omnibus law “Ley Bases” with over 600 measures and an emergency decree “Decretos de Necesidad y Urgencia” with around 300 measures. Although the parliament did not permit to implementation of all of these measures, some of the most important were put into practice. Later, he started to reduce state spending by abolishing several ministries and subordinate authorities. Ten government departments had been disbanded, public infrastructure projects had been put on hold, and local government funding had been drastically reduced when Milei took office. Wages and salaries in the public sector, as well as pensions and subsidies in transport were decreased. He reversed Argentina’s budget and trade deficits, enabling the country to see a surplus for the first time this year.
This year, inflation has decreased from a rather high 25% to 5%, enabling the central bank to finally lower interest rates and pave the ground for the projected economic rebound under Milei.
He has devalued the Argentine peso by 50%, causing it to decline by 2% every month. The decision was made to bring closer Argentina’s official and unofficial currency rates. This will make it easier to make more investments and reduce the amount of imports that Argentinean consumers and businesses must make.
There were two immediate effects of these actions. The first is the sharp decline in GDP as a result of government spending cuts, which left households with less money to spend. The second was a significant rise in poverty, which went from 40% to 52% in a single year and rising inflation as a result of the peso’s depreciation. In November 2023, inflation was 12%; by December, it had risen to 25%.
However, inflation began to decline from 25% to 3% in the final months as the austerity policy began to reach its zenith. By worldwide standards, it is undoubtedly high, but not by Argentinean ones. In the year 2023, Argentina had highway inflation in the world -211%. Above that, salaries in Argentina are beginning to rise at the quickest rate ever—roughly 6%. The export rate began to rise, and this year, it has reached almost $45 billion, up 14.8% from the previous year. Argentina is attempting to become more independent from its suppliers and to rely more on domestic manufacturing, as seen by the 25.9% fall in the import rate.
Argentina has favourable conditions for investments in the energy and raw materials sectors in addition to its abundance of agricultural products. In addition to having significant reserves of gas and hydrogen and a climate that is conducive to renewable energy, the nation also possesses valuable raw materials, including copper and lithium, which is crucial for battery manufacturing and is one of the three countries with the largest reserves of these raw material after Chile and Australia. Prior Chinese investments in northern Argentina have generated controversy due to their effects on the local population and environment. However, Western nations are currently working towards greater energy and raw material independence from authoritarian nations like China and Russia due to geopolitical and economic dangers. As a country that supports democratic values and has some resources that are beneficial for the European and American markets, Argentina offers considerable potential for the Western world, and it depends on Milei’s government- if it wants to use this possibility to enrich Argentina’s economy even more. Knowing Milei, he will not miss this opportunity. It is just a question of time.
Summarising, the success of Milei’s reforms will depend heavily on their implementation, the ability to secure legislative backing, and how they address the immediate challenges of economic inequality and political polarization. Ultimately, his leadership marks a pivotal moment for Argentina, promising bold transformation but carrying significant risks that could reshape the nation’s economy and social life.
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