On December 10, 2023, the libertarian economist of the Southern American State of Argentina took office and warned in his maiden speech that he had no alternative to a sharp, painful fiscal shock to fix the country’s worst economic crises in decades with inflation reaching 200 percent. Milei a former TV Pundit who shot to fame with expletive-ridden tirades against rivals namely China and the Pope, is taking over from Peronist leader Alberto Fernandez, whose government was dogged by failures to rein in soaring prices.
“There is no- alternative to shock adjustment,” he said on the steps of the Congress after taking the presidential baton and sash, with crowds of supporters cheering despite Milei saying the economy would worsen in the short term, “There is no money,” he added. “The outgoing environment has left us on track towards Hyperinflation, Milei said. “We are going to do everything we can do to stop the catastrophe, he said.
While the speech was light on details, he said key steps would include a fiscal adjustment equivalent to 5 percent of the country’s Gross Domestic Product (GDP) through cuts he said would fall on the state and not the private sector.
The main guests of his swearing-in ceremonies included Ukrainian President Volodymyr Zelensky, Hungarian Prime Minister Viktor Orban, and a US delegation. Right-wing former Brazilian leader Jair Bolsonaro also attended, as well as Uruguay’s conservative leader Luis Lacalle Pou. Chile’s leftist President Gabriel Boric was also present. But, leftists Luiz Inácio Lula da Silva of Brazil and Mexican Andrés Manuel Lopez Obrador were some of the major absentees.
Hopes on Milei
The wild-haired outsider marks a major gamble for Argentina. His shock therapy economic plan of sharp sending cuts has gone down well with investors and could stabilize the embattled economy But it risks pushing more people into hardship with two-fifths already in poverty. However, voters who drove Milei to victory in a November run-off against a Peronist coalition candidate have said they were willing to troll on the dice his radical ideas that included shutting the central bank and dollarizing.
“He is the last hope we have left,” said 72-year-old doctor Marcelo Altamira who slammed useless and inept governments for years of boom-busting economic crises and the outgoing Peronist government, which he said has “destroyed the country”. As per Laura Soto, 35 a restaurant employee in Buenos Aires, I think he will do well.
Milei takes over from unpopular outgoing center President Fernandez but will need to negotiate with rivals as his libertarian coalition has only a small block in the Congress. He has allied with the main conservative grouping. That has already had an impact. He has moderated his tone in the last few weeks packed his cabinet with mainstream conservatives rather than ideological libertarian allies and put more radical ideas like dollarization onto the backburners. That has helped buoy markets an reassure voters.
The challenges are huge. Argentina’s net foreign currency reserves are estimated at 10 billion USD in the red annual inflation is 143 percent and rising, a recession is at the corner, and capital controls skew exchange rates. The nation has gone through boom-and-bust cycles with money printing to fund regular deficits stoking inflation and weakening the peso. That worsened in recent years as reserves have dwindled with a major drought hitting earlier this year hitting many cash crops such as soy and corn.
If not tamed, the inflation could reach 15000 percent annually, Milei warned in his speech, pledging to fight tooth and nail to eradicate it. He also warned about a 100 billion USD debt bomb. The major grain exporter needs to revamp a creaking 44 billion USD loan program from the International Monetary Fund while Milei needs to navigate ties with important trade partners China and Brazil whom he heavily criticized during the campaign.
To fix the economic mess, Milei has chosen mainstream conservative Luis Caputo to helm the economy and commerce industry with a close Caputo ally Santiago Bausil as the central bank chief. Milei is expected to lay out a more detailed economic plan on December 12, or December 13, 2023, sources of his team told an international news agency.