In some countries there is a tradition of reviewing a new leader after the first 100 days in power. In Argentina too this has also been the case, surely in April there will be many pre-written puff pieces ignoring election promises and thus avoiding comparisons with post-election reality. With President Javier Milei things move rapidly using his little busts of maniacal energy. This messianic little man keeps pushing his highly doctrinal and severely damaging economic policy measures down the throats of the other 45 million Argentinians. This is not a puff piece, Milei has been quite true to his rather crazy economic campaign promises, instead this is about the economic results of the first 50 days of Milei in Argentina.
It Could be Worse
By mid February 2024, seven weeks into President Milei’s term, 57% of the Argentine population (about 27 millions) were living below the poverty line and ten Argentine pesos was worth about one US cent. It now costs somewhere between 880 and 1400 pesos to buy a dollar if you can find one. The currency is not in free-fall, it has been collapsed. Even after the 120% devaluation it is still being continuously pushed down (slowly for the moment) via a creeping devaluation of about 2% per month against the almighty commodity dollar. Another mega-devaluation seems inevitable, mainly because the last one didn’t work and because the Argentine soy and grain exporters (who export at dollar rates and pay wages in pesos) love a good mega-devaluation. So why not two?
Milei’s obvious dislike of the peso, and everything else “national” including the Argentine Central Bank that emits it, means there is no saving it. His fans, now a dwindling percentage in the polls, pray that dollarization of the economy might stall inflation. Devaluation and the removal of price controls have raised that inflation by 800% sinceMileitook power, spiking over the last few months (to 25% and 20% per MONTH). At this rate Milei can compress the economy toward a minimum wage of less than a dollar an hour. Many people with decent jobs, even in the capital city, earn less than that now. The legal minimum wage is less than 150 dollars, about a third of the legal minimum in China and so much less in buying power.
Milei’s team has offered the Argentinian people one assurance, if you could call it such, he said “no more mega-devaluations without a removal of currency controls”. Gee thanks! What this means is another mega-devaluation will mean Argentinians shall be able to go shopping in Chile or Bolivia with essentially worthless pesos trading at maybe 2000 to the buck? A cheap week in Santiago might cost two million pesos without dinner or the bus from Mendoza and that will be three months wages for anyone still with a job? Milei hasn’t guaranteed that Argentina’s devalued pesos will be available at a single “official” rate but he’s starting to hint at it with that nasty little smile of his. Even if currency controls go the population has little hope for currency stabilization or recovery. That would be against Milei’s anti-intervention doctrine and bad for exports. All Milei cares about is a balanced budget and he’s willing to destroy the lower classes to do so.
Those land and corporation owners still making money in the export sector will probably find it cheaper to move into their investment properties in Florida as prices for basic goods in Argentina spike. Milei has a little pied-a-terre there too, he’ll be able to stop by and chat with Bolsonaro if they’re not both in jail by then.
It’s doesn’t all smell of roses
Milei, however didn’t want to paint too rosy picture of his new economy, instead he noted that the Argentina still needed one or two months (from mid February) before it would “touch bottom” only to “take off like a rocket”. That rocket economy is going to have a lot of zeroes on it’s tail, just like the currency. By Autumn, the way the currency is being crushed by the LLA and Macri’s henchmen, a sandwich in Buenos Aires could cost 50,000 pesos or about fives hours of wages for the people making them.
Milei’s economics team, recycled by Mauricio Macri (some from his own failed team while in office and others inherited by the disastrous clown president Carlos Saúl Menem) have executed brutal economic adjustments without mercy. Even food kitchens keeping children and the very poor from starving in the city slums were not spared. Rather than audit the banks Milei’s new government decided to audit the food kitchens of the last government. Predictably the audit was critical finding that the “la patita” (the little duck cooking oil, a cheap brand) had been ordered which meant that some of their mates in the food distribution industry couldn’t compete for government contracts with the brands they had on offer. One has to question an auditor that complains that the food kitchens ask specifically for cheap ingredients but, one suspects that the children’s health was not top of the accountant’s concerns.
‘Toto’ Caputo (I know it sounds like a mafia boss from the wizard of Oz, but no, Toto’s Argentina’s Economics Minister) has devalued the currency to less that 1/2 of what it was valued at, then he removed price controls and then reduced energy subsidies (energy spikes of 400% in February 2024 alone). Naturally this too will spike inflation even higher but Mileiis betting that this deep depression will finally conquer rising price over the dead bodies of the poor. In his campaign he slammed the previous government for inflation which had averaged about 100% per year. Then Mileitook power and it’s already spiked to 850% annualized in February having dropped from 1000% in January (Milei’s first month in power).
Milei professed his libertarian freedom by not raising the minimum wage even in increasingly devalued pesos. “Isn’t that an issue that has to be addressed by workers with their employers? I don’t think a politician can determine a price by force [the constitution says he can if there is no accord in congress]. I wouldn’t dream of it.”, he said revealing his dogmatic hands off approach. The dogma of liberalism is that the state needs to remove unions (collectivists in paleo-libertarian terminology) from any discussion of wages. This has to do with liberal dogma that a private contract is sacrosanct. Libertarians also believe in a ficticios natural balance in power even between a multinational corporation (or the state itself) with each and every employee. In practice this implies any collective bargaining is unfair to corporations because it means the poor ganging up on the rich, a preposterous idea which puts the bargaining power of McDonald’s corporate offices at the same level as a 17 year old employee flipping a burger. Ideas like this only emanate from radical economic cults ignoring reality.
These policies had already begun to destroy whole sections of the poor and the middle classes with massive profits for others. Even the prices of basic foodstuffs like sugar or flour (and services like healthcare or bus fares) are now free to rise in an uncontrolled or exponential manner. All the while imports are still restricted so local prices now far outstrip prices in neighbouring countries leading to extreme poverty. Take sugar for example, a product made in Argentina by local corporations like Ledesma (who all pay wages in devalued pesos) now can cost two to three times the cost in neighbouring Brazil (where wages are considerably higher).
The Economy is not in Free-Fall, it is being suffocated by Liberalism. Nice try Milei but I’m not sure De Soto’s Nobel prize nomination for economics is coming your way quite yet.
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