This December 10 marks the first anniversary of Javier Milei taking office as president of Argentina. His supporters highlight a drop in inflation, which fell from 25% per month to less than 3% under his mandate, while his opponents denounce a significant increase in poverty in the country. So what is it really? First, regarding inflation: it’s important to remember that Argentina has suffered double-digit inflation every year since 1945, with the exception of the 1990s, when the peso was pegged on the dollar. Thanks to its reform program, Milei achieved a budget surplus for the first time in fifteen years, which is a real feat.
According to an analysis from the Juan de Mariana Institute, in Spain: “On the monetary level, Milei has combined two types of improvements: on the one hand, the qualitative improvement of the balance sheet of the Central Bank, altered by many years of coverage of the public deficit through monetary printing on the other hand, the quantitative improvement of the conditions of the peso, with a view to stabilizing the monetary base, which will contribute to generating a relative scarcity of the national currency, thus appreciating its value in relation to the dollar When Milei arrived at the. power, the gap between the official exchange rate and the real exchange rates of the peso against the dollar was around 150%, but by the end of 2024, this gap is only 3%, paving the way for a future abandonment of the exchange rate peg”.
So what about the poverty rate? Milei inherited a poverty rate of 45.2%, which briefly exceeded 50%. However, it has recently declined and is now slightly below its initial level. This trend, which is accompanied by a decline in gross national product, was predictable and I anticipated it before Milei took office. Similarly, during the market economy reforms initiated by Leszek Balcerowicz in Poland from 1990 to 1992 and by Margaret Thatcher in the United Kingdom in the early 1980s, the gross national product initially fell, even more sharply than under Milei. Hidden unemployment turned into visible unemployment, and businesses that had been heavily subsidized by the state were often unable to survive. These are normal adjustment processes in the context of radical market economy reforms, but in both Poland and the United Kingdom they have been followed by a remarkable economic recovery and a massive improvement in standard of living.
Will the Argentinians be patient?
It is likely that Argentina will follow a similar trajectory and may even exceed my initial expectations in the next couple of years. Another extract from the Juan de Mariana Institute analysis states: “Productive activity was already in decline in 2023 and, as expected, the adjustment measures taken by the new liberal government contributed to an initial scenario of contraction, noticeable in the first two quarters of 2024. However, since the third quarter of the year, the economy has started to show signs of recovery, reaching production levels close to those recorded before Milei’s arrival in power, but now with a rebalanced monetary and fiscal framework. The improvement observed in the Argentine economy after the monetary and fiscal adjustments suggests that the government has successfully met this challenge.”
Deregulation is already starting to bear fruit, which is crucial to maintaining the loyalty of Milei’s supporters. The efforts of the new Ministry of Deregulation and State Transformation, led by Federico Sturzenegger, have been particularly notable, notably in abolishing rent control laws in the country. This led to a rapid and significant increase in housing supply. Previously, many landlords had stopped renting their properties, deeming it financially unviable due to the combination of rent controls and inflation. Between November 2023 and July 2024, the average monthly rent for an apartment in Buenos Aires decreased by 30% in real terms, directly due to the removal of rent control laws.
Milei’s success, as I have always emphasized, depends on her ability to overcome this initial “lean” phase. It essentially comes down to whether Argentines will be patient and understand that problems accumulated over decades cannot be resolved in a single year. For now, it seems that Argentines are aware of this, as Milei’s approval rating remains close to 50%. It enjoys strong support, particularly among the poorest populations. However, internationally, left-wing media and politicians are quick to hold Milei responsible for the turbulence inherited from his Peronist predecessors. And it’s not just left-wing politicians: in Germany, when the leader of the liberal party (FDP), Christian Lindner, recently called for “a little more Milei”, the leader of the CDU – and probably the future chancellor from Germany – Friedrich Merz responded that he was “appalled” by such comments. He accused Milei of “ruining” his country and “trampling” his people.
Ironically, the poor in Argentina – who make up the majority of Milei’s supporters – seem to understand his message better than some supposedly conservative foreign politicians.
* German historian, Rainer Zitelmann is notably the author ofHitler’s National Socialism, The Power of Capitalism and the recent How Nations Escape Poverty.
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