Lasecki: Javier Milei shock therapy

The fresh president of Argentina Javier Milei is beginning to defy the implementation of his Libertarian economical shock programme. On 21 December, demonstrations “with pots and pans” took place in various locations of Buenos Aires and another cities of Argentina.

Minister of safety in the Government of J. Milei (and previously his counter-candidate in the presidential election) Patricia Bullrich tries to counter the protests through increased police presence on the streets and the adoption of a protocol to severely punish roadblocks.

Earlier, as part of government policy, the Minister of Economy Luis Caputo announced on December 12 the devaluation of Argentine peso by 54% and a fiscal austerity programme. These steps aim to reduce hyperinflation (143% year-on-year) and the fiscal deficit (5.5% of GDP), which the minister indicated in his beginning message as the main causes of Argentina's economical problems. L. Caputo besides pointed to the capricious deficiency of abroad currency, repeating the phrase "No money" which is frequently repeated in the communicative of the fresh administration.

The decision of the Minister of Economy was welcomed by the global Monetary Fund (IMF) to which Argentina owes US$44 billion (as agreed by IMF spokesperson Julie Kozack) and the Inter-American improvement Bank (IDB) whose support was expressed by its president Ilan Goldfajn. Minister L. Caputo stated to their satisfaction that Argentina must treat not the "symptoms" (budget deficit), but the "causes" ("addictment" of Argentina from the deficit).

The fresh head of the Ministry of Economy intends to reduce public spending to 2.9% by reducing transport and energy subsidies, minimising national transfers to provinces, reducing social benefits and pensions, reducing the number of ministries from 18 to 9 and ministerial departments from 106 to 54, deleting public works offers that L. Caputo has identified as 1 of the main centres of corruption.

According to the announcement of the fresh tenant Palacio de Hacienda, the devaluation of peso is expected to increase the profitability of exports (and thus production) and the amount of US dollars in the economy. Argentina is besides expected to temporarily increase import taxes and to keep the current level of taxes on exports of non-agricultural goods, to offset the taxation burden for all sectors of the economy and to end discrimination against the agricultural sector.

Government import permits are to be reviewed and export taxes are to be abolished, according to L. Caputo, which harm Argentine agriculture. To minimise the immediate social costs of shock therapy, the value of government food cards (Tarjeta Alimentar) is expected to increase by 50% and children's benefits (Asignación Universal por Hijo) double – 40% of Argentina's population surviving in poorness benefit.

On Wednesday 13 December, president of Banco Central de República Argentina (BCRA) Santiago Bausili announced monetary policy measures, interest rates and debt. president J. Milei previously identified as a precedence for the liquidation of Leliq, a peso-denominated short-term BCRA debt instrument.

Emergency Needs Decree

On Wednesday, December 20, president Milei signed "Decreto de necesidad y rgencia" (DNU) introducing a broad deregulation of the Argentine economy in 366 detailed reforms. The president announced the signing of the decree in a tv speech, surrounded by members of his cabinet. He stressed that his predecessors had left him an overgrown, inflationary state. The decree aims to reduce inflationary factors, limiting the function of the Argentine State in the economy.

State firms are to be privatised, the economical sectors are to be deregulation, price control abolished. This is intended to be a stabilisation plan, including fiscal adjustment, adjustment of exchange rate policies to actual exchange rates, as well as a monetary policy to heal the central bank. J. Milei thus withdrew his announcements from the BCRA's run to liquidate.

Initial measures include the preparation of state-owned companies for privatisation, deregulation of tourism and satellite access to the Internet, repeal of the rules governing the rental of real estate, mining sector, commodity prices, land trading, and improvement of the customs code for the intensification of abroad trade, improvement of the wellness care system, civilian and commercial code.

DNU lists the State airline Aerolíneas Argentinas as an undertaking whose ownership is to be transferred in full or in part to private entities. Concerns rise the anticipation of privatization by J. Milea's squad of strategical company Yacimientos Petrolíferos Fiscales (YPF S.A.) controlling the operation of national lithium deposits.

Political and legal obstacles

The Decrees of 12 December and 20 December will be in force until the 2 chambers of National Congress, if any, are dismissed: the 257-member Chamber of Deputies (where president La Libertad Avanza has 38 deputies – 15% of the mandates) and the 72-member legislature (where LLA has 7 deputies – 10% of the mandates). specified an appeal is very likely due to the fact that the J. Milei administration did not consult the DNU with the deputies of the chambers before it was announced, thus alienating from the task its possible allies.

The centre and left opposition parties reacted negatively to the DNU. president of the legislature representation of the Peronist coalition of Unión por la Patria The President with Partido Justiceist described DNU as a "land sale" for the benefit of a tiny minority. erstwhile Head of State Alberto Férnandez (2019-2023) accused the current president of "abuse of power" by issuing a decree. Central Right Mayor of Buenos Aires from 2015 to 2019 Horacio Rodríguez Larreta questioned the constitutional and legal legality of the DNU.

As has already been pointed out, there are besides doubts as to how the DNU actually meets the criteria of its name "necesidad" and "urgency" and whether it is not the President's usurpation of legislative competence. The effectiveness of DNU will besides reduce the request to adopt implementing rules.

Obstacles in the Street

As mentioned at the beginning, the opposition against DNU is besides poured into the streets of Argentine cities. However, so far the demonstrations have not reached the size expected by the initiators. The leftist Polo Obrero called for street speeches. However, the Manifestation of December 20 did not attract the most likely 50,000 participants she had announced; according to government demonstrators figures, it was expected to be in Buenos Aires around 3000.

So far, the largest trade union in the country, allied with the current Confederación General del Trabajo, the moods in which they are to intensify. Thus, even a general strike is possible in Argentina in January.

However, the deregulation was welcomed by the capital: the industrialist Unión Industrial Argentina, who peculiarly likes the abolition of the payroll taxation and increased labour marketplace flexibility, and the leaders of the largest companies Asociación Empresaria Argentina. The Argentine Stock Exchange, after announcing the plan of L. Caputo and then DNU, grew both stock prices and government bonds.

International obstacles

The global position of the fresh Argentine ruling squad may be complicated. At J. Milei's swearing-in ceremony, among others, the leftist-liberal president of Chile appeared Gabriel Boric, Declaring erstwhile as the libertarian president of Ukraine Volodymyr Zelenski (with which J. Milei mentioned warm words), Conservative Prime Minister of Hungary Viktor Orbán (with which W. Zelenski mentioned unfriendly words), as well as erstwhile (in 2019-2023) Brazilian president Jair Bolsonaro. However, the President-in-Office of Brazil did not appear Luiz Inácio Lula da Silva, sending his abroad Minister alternatively Mauro Vieira – this is the first case in forty years where the president of Brazil is not present at the oath of president of Argentina.

The fresh squad has besides failed to avoid a failure in relations with China. J. Milei recalled the erstwhile Ambassador of Buenos Aires to Beijing, for respective days without citing a fresh one. In response, the People's Republic of China called on its typical in the capital of Argentina Wanga Wei. Casa Rosada tried to save the situation by sending a professional diplomat Marcel to Beijing Suáreza Salvia, previously head of Trinidad and Tobago, however, the negative consequences of ignoring Chinese partners have not been stopped.

Buenos Aires is the beneficiary of a evidence IMF loan. As of 2018, having closed access to the western financial markets, it paid interest on the funds made available by China. After taking office of President, J. Milei sent a private letter to Xi Jinpinga. However, the degradation of political relations with China on the Argentine side caused Beijing to suspend a US$6.5 billion swap agreement between BCRA and the Chinese Central Bank, which would let Buenos Aires to make certain reserves of hard currency at the end of 2024.

But already during the election campaign, J. Milei announced that he would like to break all relations with China, which, in his opinion, are a communist country and "deprived of freedom". Following the oath of J. Milei, a visit to Casa Rosada was made by a Chinese diplomatic delegation with Ambassador Wang Wei at the head. The Chinese then announced that the fresh president "will attach importance to bilateral relations and will apply the rule of 1 China", but these words were not confirmed by the Argentine side. In the administration of the fresh president, a supporter of ideological policy, alienating Buenos Aires towards Beijing, is the abroad Minister Diana Mondino. The little ideological and more realistic policy is advocated by the Minister of Economy L. Caputo.

Difficult Time for Argentina

The forecasts of J. Milei himself from his speech of 10 December to both chambers of legislature inaugurating his presidency spoke of inflation to scope 15000%, financial and fiscal deficits to scope 17% of GDP, a poorness rate to exceed 45%. According to the fresh president, shock therapy is intended to lead to stagflation (economic stagnation and advanced inflation), hitting economical activity, jobs, real wages and poverty. According to the fresh president, Argentina, to get up, is to scope the economical bottom in advance.

"Feeling pain" after the implementation of the fresh administration programme was besides announced by the presidential press spokesperson Manuel Adorni. The priorities of the fresh government are to halt the issue of money without covering what the fresh president of BCRA S. Bausila has taken care of. According to M. Adorni, the budget deficit is to be liquidated by the end of 2024. The president himself, asked in a radio interview about his first reforms, replied: “I inform you, others are on their way!”.

Ronald Lasecki

photo of wikipedia