Javier Milei's Austerity Measures and Argentina's Economic Gamble

Javier Milei's radical austerity measures spark hope and hardship as Argentina faces economic turmoil.

### Argentina's Radical Economic Gamble: Javier Milei's Austerity Measures
* 🇦🇷  Javier Milei, a political newcomer, became Argentina's president in December 2023, promising **aggressive austerity measures** to address the country's economic crisis.
* 💰  Milei's reforms include **cutting government subsidies, reducing public spending, and devaluing the currency**, leading to **significant price increases for public services and goods**.
* 📉  While inflation initially spiked to **25% monthly**, it has since slowed, reaching a **two-year low in July**, and the government now operates with a **fiscal surplus**.
* 👥  Despite these measures, Milei maintains high popularity, with approval ratings **above 50%**, largely due to ongoing dissatisfaction with previous governments.
* 🏗️  The austerity measures have led to economic challenges, including a **new recession**, **job losses**, and **salary stagnation**, particularly affecting **informal workers**.
* 🏛️  In June, Congress granted Milei emergency executive powers and approved legislation to **privatize public companies and attract foreign investment**, a key test for his agenda.
* 📊  The upcoming 2025 midterm elections will be crucial in determining the **long-term success of Milei's economic gamble** and its impact on **Argentina's future**.

This is Javier Milei. He was elected president of Argentina in a radical political gamble. And the aftershock is now in full swing. Milei took office in December 2023 and believes his aggressive and controversial austerity measures are key to lifting Argentina out of a decades-long cycle of economic boom and bust. And he knows it's going to hurt. Close to half of Argentina's 46 million citizens live in poverty. Inflation is among the world's highest, at an annual rate of 260%. And a sixth recession in a decade took hold at the start of the year. Despite the hardships associated with his fiscal reforms, Milei's not your typical politician and enjoys rock star status. So what's propping up his popularity? And when will the electorate know if their gamble will pay off? Milei kind of came out of the blue. He had only been in politics for two years as a national congressman. Argentines took a bet on someone completely new that even in his discourse

filled with yelling and expletives, captured the ire that they themselves were feeling at everyday life. And perhaps understandably. Argentina's the largest economy in Latin America after Brazil and Mexico, but it spent a third of the last 70 years in recession. It defaulted on its international sovereign debt three times since 2001. Runaway inflation and a devalued currency prompted the central bank to introduce bigger and bigger banknotes to help shoppers needing to carry increasingly large stacks of cash around. We are in a huge crisis, but also we have a very important opportunity because we have things that the world needs. We have oil, gas, lithium, commodities. So maybe it is an opportunity to find our model of economic development. Milei planned on finding that model. He started by stripping away government subsidies of public utilities from electricity and gas to water and public transportation. This has had a big impact on people's wallets.

In December 2023, an average household in the Buenos Aires metro area would pay about 30,000 pesos for public services. That bill has soared in the months since then. Low and middle-class households who previously had to pay next to nothing, about 5% for the actual cost of electricity, are now having to pay between 20 and 30% of the real cost of that electricity. This had real financial consequences for people like Monica Perez. She owns a carniceria in a working-class neighborhood outside of Buenos Aires. But she says she stands by her vote for Milei. Milei also cut real spending on pensions, social security, public wages, and education - and halved the number of ministries in government. It was all part of Milei's rock and roll campaign promise to take a chainsaw to public spending. Milei reduced spending on public works in real terms 90% compared with the first three months of 2023.

That includes everything from hospitals and schools to train stations, bridges, and even hydroelectric dams. No matter how far along they were. Juan Pablo Rudoni owns Ecosan, a modular construction company that works on both private and public infrastructure projects. Since Milei came to power, he says government contracts have been completely frozen. He's not alone in his optimism. Milei came to power with nearly 56% of the vote, and he's mostly retained that popularity. Different polls show different numbers, but for the most part, he remains above 50%. This is a really high approval rating for someone who's taken such unpopular measures. One of the main reasons that Milei remains so popular is that there's still a lot of anger toward everyone that came before him. There's plenty of anger when it comes to Milei's politics as well. He's right-wing and a self-described libertarian who's quite literally embraced Donald Trump and his political rhetoric.

He condemned abortion, advocated for the free trade of human organs, and cozied up with far-right leaders and billionaires across the world. But as for whether Milei's austerity measures are working, it really depends on where you look. When he took office, monthly inflation spiked to 25% after his government scrapped price controls and devalued the currency. But it's slowed since then, reaching this two-year low in July. And that is very important because inflation affects people not only in material terms but also in psychological terms. For someone going to the supermarket and seeing that a product has the same price as the last week, well, that has a psychological impact that is very, very important. The government also now spends less than it receives in tax revenue. That's notable for a nation that in 2001, during a brutal recession, went through five presidents in two weeks and defaulted on a record $95 billion of foreign debt.

We haven't seen this level of sustained fiscal surplus since 2008. It's a country that has always spent way more than it has, which is one of the key culprits behind runaway inflation. Some critics say that the onset of a fiscal surplus is simply the result of one-time cost-cutting measures. In the first three months of 2024, the economy fell into another recession, consumer spending and manufacturing tanked in the wake of Milei's austerity measures, and tens of thousands of people lost their jobs. Salaries for those in the formal sector have failed to keep pace with prices. And it's worse for informal workers who are paid under the table and make up almost half of the total workforce in the country. In June, Argentina's Congress approved a sweeping bill that grants emergency executive powers, privatizes a number of public companies, makes it easier for employers to fire workers, and provides tax breaks for foreign investments in key sectors like mining.

It's really important for investors because it's a test of whether or not Milei can get congressional approval to back his ideas. It's one of the biggest challenges that he faces because Milei is sort of a one-man party. There's no one else. In 2025, midterm elections will reveal whether Milei's measures, and the hardship they've meant for those who gamble on his presidency, pay off.

Is Milei’s Radical Plan to Save Argentina Working?

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Javier Milei's Radical Presidency in Argentina

Javier Milei was elected president of Argentina in December 2023, implementing aggressive austerity measures to combat the country's economic crisis.

With nearly half of the population living in poverty and inflation at 260%, Milei's controversial reforms have sparked both hardship and rock star-like popularity.

His unconventional approach and promise of economic development through the country's natural resources have drawn support, but the impact of his policies on citizens' wallets has been significant.

The Impact of Milei's Policies in Buenos Aires

Public service bills in the Buenos Aires metro area have surged, with low and middle-class households now paying 20-30% of the real cost of electricity.

Milei's government has cut spending on pensions, social security, public wages, and education, while also freezing government contracts for infrastructure projects.

Despite implementing unpopular measures, Milei has maintained a high approval rating, with over 50% of the vote, due to widespread anger towards previous administrations.

Milei's government has faced criticism for its austerity measures, which initially caused a spike in monthly inflation to 25%.

However, inflation has since slowed and the government is now spending less than it receives in tax revenue, marking a notable fiscal surplus.

Despite these changes, the economy fell into recession in early 2024, leading to job losses and stagnant salaries, particularly for informal workers.

Milei's ability to gain congressional approval for his ideas is crucial for investors.

He faces the challenge of being a one-man party with no support.

The 2025 midterm elections will determine if his measures and the hardships faced by his supporters will pay off.