Argentina at a crossroad
Argentina’s right-wing president has announced sweeping measures to deregulate the economy, in what critics fear could threaten jobs and affordable housing for millions of Argentinians. Javier Milei, who took office in December, said he will wipe out or amending some 300 regulations, changes he deemed necessary to help repair the country’s economy. The changes include laws that regulate Argentina’s rental market and supermarket supplies and removing restrictions on the privatization of state enterprises.
The reforms build on austerity measures Milei unveiled, including devaluing Argentina’s currency by 54 percent and slashing state subsidies for fuel and transport.
The strategy is part of the economic shock therapy the president says is necessary to rebuild the economy. However, with 40 percent of Argentinians in poverty, he has warned conditions will worsen before they get better. Disillusioned with decades of recurrent economic crises, marked by debt, rampant money printing, inflation and fiscal deficit, voters were receptive to his radical vision. However, the burst of anger over his austerity plan shows he is bound to face challenges in his quest to slash the state budget.
Milei’s so-called omnibus law, which has yet to be analyzed by Congress, comprises 664 articles proposing sweeping changes to Argentina’s political system, educational institutions, pension schemes, labor relations and protest rights. The president’s La Libertad Avanza party intends to take it to the Chamber of Deputies for a vote on January 25. The initial point of the long text declares a public emergency in economic, financial, fiscal, social security, security, defense, tariff, energy, health, administrative and social matters until December 31, 2025, which may be extended unilaterally by the Executive Branch for up to two years.
It would also enable the Executive Branch to privatize state-run companies such as Aerolíneas Argentinas, YPF, Correo Argentino and AySA as some of the 41 state-run companies the Executive Branch plans to sell-off into private hands,
It will get tough before it gets better in Argentina. The monthly inflation rate soared to 28% in December, which would be the highest since early 1990, driven by a sharp devaluation of the peso currency last month. The median forecast from 20 local and foreign analysts polled by Reuters underscores the challenge facing the country, with annual inflation set to top 200% for the year, one of the highest rates in the world.
Net foreign currency reserves are deep in negative territory, huge debt payments are looming, and the government is racing to revamp a $44 billion loan program with the International Monetary Fund.
Argentina recently announced that they no longer plan to join the BRICS counties and there is an attempt by the new leader to align the country closer to the U.S. The Biden administration remains cold though. Maybe the new president is too much of a far-right radical, too similar to Trump? Either way, this would be a good time for the U.S. to help Argentina to get on a positive economic path. It would certainly be money well spent instead of wasting money on waging wars in the Middle East and in Europe.