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“From the President’s Desk” is a series of public briefs with insights directly from Global Americans’ Interim President and CEO, Tulio Vera.
This coming Tuesday will mark the one-year anniversary of Javier Milei’s inauguration as President of Argentina. A lot has happened in Argentina and in the world since then. Milei has moved rapidly to restructure the country’s dysfunctional economic framework, and his economic program has become a global case study of sorts which economists the world over are monitoring closely. But if there is one major surprise to the past twelve months, it is that this is happening with increasingly less push back from Argentina’s entrenched vested interests.
Milei campaigned on promises to reduce the size of the state, bring an end to fiscal and monetary profligacy, stabilize runaway inflation, and deregulate Argentina’s rent-seeking welfare economy. Implementation has gone about as well as economists could have expected. A massive fiscal consolidation has led to budget surpluses since the beginning of the year; the central bank is no longer printing money; the rate of monthly inflation has collapsed to low single digits; the country-risk spread has contracted; and the economy has started to show signs of a recovery. Challenges certainly remain and Milei’s program is by far not out of the woods. The lack of foreign exchange reserves has meant the exchange rate cannot yet be freed to float and therefore capital controls must remain in place. This of course does not entice foreign investors looking to invest in the real economy. Despite a trend towards overvaluation over the first half of this year, there is good news in that the pace or real appreciation of the Argentine peso has slowed. And then, of course, as the largest member borrower, Argentina must keep the IMF happy.
We have argued that for the specific case of Argentina, Milei’s economic diagnosis makes sense, yet in the highly polarized and politically charged world that we live in, separating Milei’s economics from his politics has never been straightforward. More than ever, making that distinction remains essential to understanding what is happening in Argentina. Milei, with all his eccentricities, does not make this easy. Indeed, many observers conflate President-Elect Donald Trump’s economics with those of Milei. They could not be more different. Milei is all about free markets, fiscal discipline, free trade, and deregulation of the economy. As mentioned in our previous work, Trump has a proclivity for protectionism, pays scant attention to fiscal discipline, and favors industrial policy via tax initiatives. It remains to be seen whether the two sets of policies will intersect with the creation of Trump’s DOGE (Department of Government Efficiency), but there is ample evidence that deregulation and fiscal prudence in liberal democracies has become increasingly difficult to implement, as evinced by the collapse of France’s government this week.
Milei’s economic program still faces a bevy of challenges, economic growth remains lackluster, and poverty levels are high. Importantly, while Milei’s approval rating remains solid between the high-40 percent and the mid-50 percent levels depending on the pollster, and has even creeped up recently, congressional resistance to Milei’s policies remains strong and Argentine history shows that one should never rule out the opposition Peronists from making a comeback. Further out, the future success of Milei’s program will be a function of his ability to implement his more durable and vital structural reform plans for the Argentine economy. To this end, the mid-term legislative elections next October loom very significantly.
