Saturday, May 18, 2024

ARGENTINA | 29-01-2024 15:53

How is Javier Milei’s libertarian experiment progressing in Argentina?

Preident Javier Milei's reform plans have been stalled by opponents, congress and the courts.

The radical reforms spearheaded by Argentina’s libertarian head of state Javier Milei since he became president less than 50 days ago are facing political, economic and judicial obstacles.

Last week, the La Libertad Avanza leader’s government faced the first general strike of its brief time in office, when the CGT umbrella union group staged a large demonstration in Buenos Aires.


How is the crisis going?

The 50-percent devaluation of the peso and the release of price controls has further encouraged inflation which was already running at more than 200 percent per year. Analysts believe consumer prices will rise in January even more. 

The minimum wage is around 150,000 pesos (US$172) and the basic food basket for a household of four people is 240,000 pesos (US$277).

Inflation not only erodes the purchasing power of wages, it also hits businesses’ income.

International currency reserves have increased by US$4 billion, to US$25 billion, thanks to the increased collection due to greater amount of exports and purchases made by the Central Bank to restore foreign currency stocks.

The other side of the coin is in the import sector: the auto industry, for instance, is facing difficulties in obtaining the necessary foreign currency to buy the parts it needs from abroad.

The IMF has welcomed the adjustment of expenditure by the government and has agreed to refloat its US$44.5-billion credit programme with Argentina.

“We’re taking measures which are unpleasant and go against our own convictions, such as increasing a few taxes,” Economy minister Luis Caputo said last week.


How has society reacted?

The biggest unions in the country organised a general strike on Wednesday which mobilised tens of thousands under the slogan “The homeland is not for sale.” It was the first major demonstration against Milei’s fiscal austerity and mass reform plan.

Milei’s government played down the protest, calling the unionists “mobsters” and saying it would focus on its north star: a zero fiscal deficit in 2024, delivered through drastic cutbacks in expenditure supposedly aimed the “political caste” – according to the opposition, austerity affect the basic functioning of the state, while hitting pensioners and those on welfare in the pocket.

Different polls indicate that Milei’s positive approval rating remains in the same range as it was when he won the November 19 presidential run-off, winning 55.6 of the vote.

“The best scenario is that after 2023, which started with six percent [monthly] inflation and ended at 25.5 percent [for the month] and 211 percent year-on-year, 2024 starts in the region of 22.5 percent and ends around six percent, and that year-to-year inflation is 200” percent, summarised economist Marina Dal Poggetto, the executive director of Eco Go Consultores.

Yet Dal Poggetto warned that governability is key. Milei needs to dominate, and this aspect is still “a big question mark.”


What is Congress debating?

Milei has sent – to Argentina’s very fragmented Congress  – a sweeping “Omnibus Law” comprising 660 articles with reforms to laws and statutes of any kind, whose central purpose is to reduce the role of the State and liberalise the economic system to the fullest.

Due to the opposition’s objections, the government has now withdrawn nearly 150 reforms from the original text, but it still only narrowly cleared the bill past committee stage.

Critics reject agricultural export duties, changes to the pension formula, control by the Executive Branch of a social security savings fund of over US$20 billion, state privatisations and the delegation to the government of emergency legislative powers.

The Abeceb consultancy firm stated in a report last week that “Argentina is a country with a long history of reforms – with different versions – which fell due to lack of political support or technical consistency.” It warned about the “legal insecurity” carried by this “frequent changing of the rules.”

Why did the Courts intervene?

Milei’s other great political initiative is a mega emergency DNU decree of 366 articles issued last December, whose validity has been questioned by most constitutionalists. 

“The emergency decree pushes the limits accepted by the Constitution, or violates it outright. Out of the 366 articles, half of them do not justify the exceptional circumstance which prevents the processing of a law,” said constitutional lawyer Félix Lonigro.

Courts have already admitted 60 constitutionality “amparo” remedies against the Emergency Decree presented by unions, provinces and private organisations. Some decisions suspended part of the mega decree (its labour chapter) and the Supreme Court may declare it unconstitutional on a permanent basis. 

Congress must first assess the “emergency” of the emergency decree, which can only be invalidated by the rejection by both houses.


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