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ECONOMY | 29-12-2023 21:20

Federico Sturzenegger, architect of Argentina’s reforms, says he isn’t even halfway done

Federico Sturzenegger says President Javier Milei’s ambitious, pro-business reform blitz is only getting started.

The architect behind President Javier Milei’s ambitious, pro-business reform blitz says he’s only getting started and that new policy changes will be unveiled soon regardless of the social unrest and worker protests triggered by the government’s overhaul zeal.

Federico Sturzenegger, one of Argentina’s most cited economists and Milei’s key adviser to deregulate the ailing economy, said the government will send another bill to Congress next week to eliminate 160 “absurd” regulations that hinder activity. Together with a sprawling decree and another wide-ranging bill that Milei’s administration presented in his first three weeks in power, they seek to radically transform the South American nation, he said. 

“The reforms have a dimension that goes deeper than the reforms themselves — it’s like an overhaul of the economic power structure in Argentina,” Sturzenegger said in an interview at the presidential palace in Buenos Aires, adding that the measures account for only 40 percent of the changes Milei wants to achieve. “I don’t remember anyone with so much forcefulness.”

The libertarian economist Milei has wasted no time since taking office on December 10 with a popular mandate to tame inflation running above 160 percent and restart a stagnant economy. The 300-measure decree issued last week, which seeks to greatly reduce the hand of the state in Argentina’s economy, was followed on Wednesday by an omnibus bill heading to Congress with other 664 articles.

The new legislation comply with Milei’s shock therapy strategy, which also included a 54 percent currency devaluation and major spending cuts to achieve a balanced budget in 2024, with the goal of reversing the country’s economic crisis.

The decree, which takes effect on Friday, was met with resistance by the opposition, with some legislators arguing that it goes beyond the president’s powers. Sturzenegger, 57, says such criticism is a smokescreen not to discuss the content of reforms while adding the decree is an “all or nothing” bet because Congress can vote it down but can’t modify it.

Milei counts on the fact that none of his immediate predecessors had a decree turned down by Congress but that political fight will take place early next year.

 

Protests, strike

While the government’s ambitious changes have already triggered some scattered protests in Buenos Aires and other cities, Milei’s big test will come on January 24 when Argentina’s largest union group, CGT, holds a nationwide strike to protest against the measures. The general strike will be the earliest in an Argentine president’s term in the past 40 years of democracy, a sign of the hostility Milei can expect from CGT, a group traditionally linked to the Peronist opposition. 

In addition, several requests were filed in courts to legally stop the decree once it’s active.  

Sturzenegger remains unfazed, saying he expects lawmakers to pass the bill “in some form” before March and the legislation is crucial to reach a fiscal balance next year. He’s confident in the end the “pro-jobs” reforms will make it easier to do business and spur activity in diverse sectors from rental contracts to satellites.  

“Is anyone going to present a case in the justice system that there can’t be satellite Internet, that there can’t be competition? It’s somewhat ridiculous,” Sturzenegger says, referring to recently lifted restrictions for Elon Musk’s Starlink to operate in Argentina.

 

Deregulation czar

For Sturzenegger, who holds a doctorate in economics from the Massachusetts Institute of Technology, this is the second high-profile attempt to fix Argentina’s perennial crisis, after he led the Central Bank from 2015 to 2018 under the government of President Mauricio Macri.

Before joining Milei’s ranks, the economist spent the past 18 months designing deregulation reforms for Patricia Bullrich, who lost to the president in an October first round but subsequently joined his government as security minister. Sturzenegger then fused his reform plans with those of Energy Secretary Eduardo Chirillo, who worked on Milei’s campaign.

At a deeper level, Sturzenegger says the fast paced, sweeping reforms go beyond just changing the fine print, but aim to challenge the political establishment, echoing Milei’s campaign pledges. 

“The only way to achieve change is to disarm that structure and to disarm it, in some sense, you have to drain it of its resources, because that’s what they use to sustain the status quo,” Sturzenegger said.

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by Ignacio Olivera Doll, Bloomberg

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