top of page

Milei Moves Argentina in a New Direction

Isabella Baker


Source: The Economist

Argentina’s new right wing president Javier Milei came into power on December 10th 2023 after promising to dramatically shake-up Argentina’s moribund economy amid rampant inflation and widespread poverty. In a series of sweeping shock-therapy measures taken by the new government, the Argentinian currency has devalued by 54 percent, and state subsidies for fuel and transport have been slashed, with annual public spending to be reduced to just 3 percent of GDP. Under Milei, the price of fuel has risen by 60 percent, the cost of beef has soared by 73 percent and basic household goods like diapers have doubled in price. With the poverty level having surpassed 40 percent in the first half of 2023, some economists have forecasted an 80 percent jump in prices for Argentina over the period of December to February.


Milei, the self-proclaimed ‘anarcho capitalist’ radical libertarian president, claims such measures are necessary to rebuild Argentina’s economy, which has been chronically mired in crisis and suffers from 140 percent year-on-year inflation. Years of populist rule and political instability have rendered the Argentinian economy into decades of financial turmoil and huge international debt, with the rising poverty and economic unrest paving Mr Milei’s way to presidency, who as a political outsider, economist and television pundit, rallied against what he called corrupt politicians and exploited Argentinian’s disillusionment to build public support during his presidential campaign. 


Now seeking to deregulate Argentina’s tightly controlled economy and extinguish decades of government intervention, Milei is set to remove restrictions on the privatisation of state enterprises, dollarise the economy, announcing a sweeping reform bill that wipes out and amends about 300 regulations by emergency decree. The ‘Ley Omnibus’ bill, which has 664 articles, proposes extensive changes to the country’s tax system, electoral law and public debt management and requires approval from lawmakers in both chambers of Congress. Milei’s government sent the bill to Congress in late December and has called for extraordinary sessions to fast-track its agenda which are to run through to January 31st. Milei has threatened to launch a referendum if Congress rejects his decree. 


Amongst other changes, the decree would see the abolishment of a ceiling price on rent, the elimination of some worker protections and scrap laws shielding consumers from abusive price increases. The decree would also involve an end to automatic pension increases, the termination of 7000 civil service contracts, restrictions on the right to strike and the privatisation of some public companies. 


Thousands of Argentinian protestors have demanded that the courts intervene to invalidate the mega-decree that they say is unconstitutional and will diminish worker and consumer protections. Labour and rights groups have also criticised the government’s heavy handed security response, which involved military police and security services threatening to strip welfare from protestors and photographing protestors who were blocking traffic. 


In further changes to Argentinian foreign policy and economics, Milei also withdrew Argentina from its planned entry into the expanding Brics club of nations. Seen as a counterweight to the Western world, whilst the Brics alliance is portrayed as promoting a more multipolar world, the club is heavily dominated by China, which accounts for 70 percent of the bloc’s combined GDP. Unlike former president Left-wing Peronist Alberto Fernandez, whose views were more aligned with those of the bloc’s existing members, Milei campaigned on the basis of downgrading relations with China and described the Chinese government as assassins. Milei’s decision to pull out of the Brics alliance reflects his strong criticism of China and could suggest that Argentina is more likely to orient itself towards Washington rather than Beijing in the future. In this way, the election of Milei could present opportunities for geopolitical and strategic realignment, with his assertion of loud desires for closer ties with the United States and Israel representing a shift away from Chinese influence in the country and a reversal of the significant geopolitical inroads made by the PRC. 


Ultimately, Milei’s success will rest on his administration’s ability to reconcile a fragmented, discredited and centre-right political platform in Argentina. Whilst Argentina may have voted against the Peronista government rather than in favour of Milei’s radical libertarian agenda, the outcome of Milei’s administration is critical for the future of Latin America’s socio-political environment. If Milei’s administration is successful, similar leaders may emerge, reflected in Chile, with the recent establishment of a new far right “libertarian party”. As Argentina grapples with rising economic and social unrest under Milei, observing the country’s trajectory in the next four years will undoubtedly shed important insights on the future of the region’s political landscape.


 

Isabella Baker is a Dalyell scholar at the University of Sydney studying a Bachelor of Arts and Advanced Studies in Global and International Studies. She is interested in global affairs, national security and human rights with a particular focus on Australia’s relationship with China and the Indo-Pacific.


Featured