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OP-ED | 16-12-2023 06:03

The lion enters his jungle

Milei cannot be accused of not warning us that things would get much worse before they got better – what he did not say was how he would be moving in the opposite direction of the firebrand rhetoric he deployed during his pre-presidential existence.

Among the lesser-known of the many phrases of Juan Domingo Perón are “When I define, I exclude,” and “When I contradict myself, I multiply my options” – on that basis President Javier Milei is fast becoming a true disciple of the Peronism he has just routed within days of taking office. Milei cannot be accused of not warning us that things would get much worse before they got better (almost the exclusive theme of last Sunday’s inaugural speech) nor of not moving very quickly to live up to his word since then – what he did not say was how he would be moving in the opposite direction of the firebrand transformational rhetoric deployed by the dogmatic economist of his pre-presidential existence.

The contradictions already begin with that warning. How can he speak of 20-40 percent monthly inflation early next year (not to mention hyperinflation of 15,000 percent) if he really means what he says about freezing the money supply and public spending? In that event retailers could double their prices all they liked and nobody would buy.

Before specifying how far Milei is straying from his most basic principles, fairness dictates an acknowledgement of the difficulties posed by a dire economic inheritance (although whether the direst in Argentine history remains debatable) – last month’s inflation of 12.8 percent and the last year’s 160.9 percent reading was not his doing. Quite apart from the ritual 100 days traditionally granted new governments, the hyperinflation increasingly around the corner since midyear is not easy for anybody – thus it took Carlos Menem (a pet reference of Milei) fully 20 months to find his feet in the face of the wheelbarrow currency of 1989 with an infinitely stronger political power base so bashing the libertarian government before its first week is up might seem a bit harsh.

Nothing succeeds like success and everything will be forgiven if the plan pans out but is there a plan in the first place? “Blood, sweat and tears” is wartime pep talk, not a programme of government, of which there were few traces in Tuesday’s incomplete package (least of all in its sloppy presentation and deliberate exclusion of journalists and their uncomfortable questions).

Almost the only thing in keeping with Milei’s pledge of drastic transformation was the maxi-devaluation with its inevitable sequel of accelerated price increases (not least for fuels in an economy which moves on wheels) but even this may not mark any real difference. When the various parallel dollars are almost trebling the official exchange rate, it is quite clear that even a victorious Sergio Massa could not have stood idle (even such an ultra-Kirchnerite as current Buenos Aires Province Governor Axel Kicillof has the major devaluation of early 2014 to his name). As for the immediate future, the announced crawling peg of a monthly two percent out of all proportion to the runaway inflation promised by Milei for the near future looks much closer to the recent practices of the derided Central Bank which has just been overhauled. Whether the figure should have been 800 pesos or the 600-650 of Interior Minister Guillermo Francos or some other number is hotly disputed but this debate is premature – the following weeks and months will decide.

A full list of the contradictions would exhaust this space – perhaps the biggest is seeking to narrow the fiscal deficit via increasing the tax burden, including such levies demonised by Milei as export duties and PAIS (what could sound more Kirchnerite than Para una Argentina Inclusiva y Solidaria?). While always known that political spending cuts could never cover even 10 percent of the retrenchment required to balance the budget, contrary to Milei’s campaign pitch, it remains an unpleasant surprise to see how little of the sacrifice is falling on the “caste” holding the new government hostage and how much on the private sector in particular and the people in general. If the previous administration held off fiscal collapse by using inflation to erode pensions, welfare benefits and state pay in real terms, Milei now proposes an extreme continuation of this policy. Many other contradictions, among which the currency swap overtures to the “Communist” Chinese stand out. 

Since any first editorial on a new government should end on a positive note, Milei’s mantra of “No hay plata” (the cupboard is bare) has its virtues if people change Argentina’s self-image to a poor country needing to work its way up rather than redistribute an imaginary wealth – even if somebody might come along to say: “No hay plata pero sí oro” and start a new glut. But early days and a work in progress (we hope).

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