Javier Milei's first months: The chainsaw still roars

Argentina's President Javier Milei surprised millions with his election victory and now has to defend his first reforms. Despite protests, he can point to initial economic successes. By Wolfgang Bendel.

It's "the last piece of a heroic effort" - that's how Argentina's President Javier Milei tried to reassure the population. The resident of the Casa Rosada, the presidential palace in Buenos Aires, who has been in office for four months, defended the most far-reaching economic cuts in decades in a televised speech. Contrary to many expectations, Argentina achieved a budget surplus in the first quarter of 2024 for the first time in decades. "The chainsaw was followed by the economic miracle," Milei said.

Many people are feeling the effects of the chainsaw with which the self-proclaimed anarcho-capitalist promoted his state restructuring during the election campaign. Less than a day after the speech, more than 150,000 people took to the streets of the Argentine capital to protest austerity measures in higher education. "We can only maintain operations for another two to three months," complained Ricardo Gelpi, rector of the prestigious University of Buenos Aires.

Despite an annual inflation rate of 287 percent, the budget for state universities was to remain unchanged for the current year. Milei has shown little inclination to compromise - a few days earlier he had described the state universities as "repositories of dubious business and indoctrination.

Milei fights hard against hard currency debt

The 53-year-old has never hidden his radicalism. With him, Argentinians elected the world's first libertarian head of state. One of his first acts was to eliminate half of the country's 18 federal ministries. Only those deemed necessary remained, including Foreign Affairs, Defense, Economy, Infrastructure and Justice. The functions of the abolished ministries, such as Women, Gender and Diversity and Environment and Development, were integrated into the remaining ministries. In addition, a few days after taking office in December, he issued a "mega-decree" containing 366 deregulation and austerity measures.

The situation in the Argentine economy remains tense. According to World Bank estimates, gross domestic product (GDP) will decline by 2.8 percent by the end of 2024. At the same time, the institution forecasts growth of five percent for the following year - and monthly inflation fell from 20.6 percent in January to 11 percent in March. "There is no alternative to austerity," said William Maloney, the World Bank's chief economist for Latin America. The South American country has long been heavily indebted. Its public debt ratio recently stood at 154 percent of GDP. More than two-thirds of Buenos Aires' debt is denominated in foreign currency.

Leftist state institutions should be closed

The conditions in the Institute against Discrimination, Xenophobia and Racism (Inadi) show how Milei's predecessors did business. A report by the Ministry of Justice states: "The Institute had a superstructure that did not ensure the efficiency of its work. There were 7,000 unprocessed files." This is in stark contrast to the large number of people formally employed there. Recently, Inadi expanded to a total of 44 branches and had to deal with 2,500 discrimination complaints per year.

This is to come to an end, as presidential spokesman Manuel Adorni announced in February. The government will close several institutions that have either acted as "huge political slush funds" or created jobs for political activists. "We must finally get rid of everything that does not benefit Argentines," he added.

Dollarization and abuse of the left are part of the agenda.

This should also apply to the peso. Before the election, Milei had promised to replace the Argentine currency with the US dollar and to introduce free competition. But the politician had to back off a bit. "Dollarization is the last step of a whole process that begins with the reorganization of the Argentine Central Bank, then the reform of the financial system, and finally its liquidation," he said in an interview with journalist Ivan Shargorodsky. First, Milei wants to create an anti-corruption bank. "Once this is done, we can move to a free banking system," he explained. The conditions for this will not be created until next year.

In foreign policy, however, the president has been able to make his mark. His consistent support for Israel in its conflict with Hamas caused a stir. Milei has also been outspoken in his criticism of leftist Latin American counterparts, including Brazil's Lula da Silva and Colombia's Gustavo Petro. In the latter case, diplomatic tensions erupted after Milei called the former guerrilla leader a "terrorist murderer. Petro responded by expelling some Argentine diplomats.

Milei's Actions Force His Opponents to Reconsider

Milei's actions also angered many of his countrymen. "Not even the military dictatorship went this far," complained one protester in December. But the president can still count on the trust of much of the population. According to a study by the Atlas Intel Institute, an equal number of respondents (48 percent) rated Milei's past work positively and negatively. He received clearly positive marks for his previous actions against corruption and crime. According to the respondents, these phenomena have decreased since December.

This is forcing many of Milei's opponents to rethink their approach. Among them is social democrat Cristina Kirchner, who was president of Argentina from 2007 to 2015. "This experience should make us analyze what we have done and rethink strategies for the present and the future," she told her supporters in an interview.

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