{"id":8497,"date":"2024-02-26T10:42:38","date_gmt":"2024-02-26T15:42:38","guid":{"rendered":"https:\/\/latinamericasecurityreport.com\/?p=8497"},"modified":"2024-02-26T10:42:38","modified_gmt":"2024-02-26T15:42:38","slug":"javier-milei-argentinas-new-president-presses-ahead-with-economic-shock-therapy-as-social-unrest-grows","status":"publish","type":"post","link":"https:\/\/latinamericasecurityreport.com\/?p=8497","title":{"rendered":"Javier Milei: Argentina\u2019s New President Presses Ahead with Economic \u2018Shock Therapy\u2019 as Social Unrest Grows"},"content":{"rendered":"
Do Argentinians have the patience for their new president\u2019s shock therapy? Juan Ignacio Roncoroni \/ EPA<\/figcaption><\/figure>\n

Only weeks into his term, Argentina\u2019s new president, Javier Milei, seems to be making good on his promise to put a chainsaw<\/a> to the country\u2019s crisis-ridden economy. In his inaugural address, Milei told the nation<\/a>: \u201cThere is no alternative to shock.\u201d He dissolved half of the country\u2019s ministries days later, and implemented a 50% devaluation of the peso.<\/p>\n

But amid massive spending cuts, prices continue to spiral<\/a>. Argentina\u2019s annual rate of inflation has reached<\/a> a three-decade high of 254.2%. Milei blames the poor economy on years of mismanagement, and has warned his compatriots to expect more pain<\/a> before any gains will be felt.<\/p>\n

While many support his measures, there are clear signs of disconnect. His government suffered the earliest general strike in history, conceding the streets to masses of protestors. More alarming for Milei, his all-reaching \u201comnibus law\u201d, which ranged from economic policy to the privatisation of state entities, failed to get sanctioned<\/a> by a divided National Congress in which he lacks a majority.<\/p>\n

However, this resistance seems only to be emboldening the president. His plan to dollarize the currency, which some dismissed as mere electoral strategy, now seems likely to come sooner than expected<\/a>. Milei has also launched a \u201ccultural war\u201d against his critics including Lali Esp\u00f3sito, a well-known Argentine pop star<\/a>. But unless the economy picks up soon, he may be fighting a growing mass of unhappy citizens.<\/p>\n

Echoes of the past<\/strong><\/p>\n

Shock therapy \u2013 involving the sudden removal of trade barriers and labour protection, and the implementation of drastic fiscal policies \u2013 is not new in Argentina. It was integral to the last dictatorship\u2019s economic plan (1976-1983), who had learned from the pioneer in shock therapy: Chilean dictator Augusto Pinochet. In both cases, an eventual debt crisis followed.<\/p>\n

In the 1990s, the then-Argentinian president, Carlos Menem, announced<\/a> \u201cmajor surgery without anaesthesia\u201d on the economy. Failing to curb escalating inflation, it took currency \u201cconvertibility\u201d \u2013 pegging the peso to the dollar \u2013 to break that cycle. But this generated new public debt, chronic stagnation, high levels of unemployment, and provoked the largest sovereign default<\/a> in history.<\/p>\n

Shock therapy is not only a Latin American phenomenon. The collapse of the Soviet Union<\/a> led to a rapid transition from state-based to free market economies for a large part of the world\u2019s population.<\/p>\n

In Poland, the Balcerowicz Plan<\/a> provoked an initial hike in inflation before eventually stabilising the economy based on free market capitalism \u2013 although new inequalities<\/a> and social problems were on the way.<\/p>\n

Milei\u2019s challenge<\/strong><\/p>\n

Two features distinguish Milei\u2019s shock therapy. First, he has a comparatively weak political position<\/a> \u2013 particularly in Congress. Second, it is unclear how much of Argentina\u2019s population is prepared to support his measures<\/a>, as memory of the crisis looms close in the public imagination.<\/p>\n

Milei has already introduced massive spending cuts, including a reduction of salaries and pensions via both inflation and suspending funding to subnational governments to pay salaries and subsidies. He has also launched an ambitious project to reset the Argentine economy, which includes the privatisation of all public companies, liberalisation of trade, and deregulation of labour.<\/p>\n

Social opposition was immediate. Despite the government discouraging mobilisation by banning road blocks and large public gatherings, spontaneous protests took place in cities across the country. Labour organisations and trade unions have provided the largest resistance<\/a>, through declarations, protests and legal claims.<\/p>\n

Then, on January 24, when Milei was barely a month into office, a general strike<\/a> was called. The strike, which included even Argentina\u2019s more conservative unions, brought the country to a standstill.<\/p>\n

Meanwhile, Milei has faced resistance in Congress<\/a>. His omnibus law was expected to collect support from centre-right parties and subnational governors in need of national funding. However, Milei\u2019s dogmatism prevented the government from accepting the changes requested by its potential allies, and the bill collapsed.<\/p>\n

Since taking office, Milei has had a fragile relationship with governors and deputies, calling lawmakers a \u201cdelinquent cast set out to get bribes and perpetuate the decadent status quo\u201d.<\/p>\n

Instead of taking advantage of his strong electoral victory and fragmented opposition parties, he has provoked confrontation<\/a> and ever-unified resistance. Public opinion<\/a> also seems to be turning, as the proportion of people living in poverty<\/a> has shot up from 45% to almost 60%<\/a>.<\/p>\n

With a sluggish economy, it is difficult to imagine how the president will find the necessary support for his shock therapy.<\/p>\n

Dollarization: Milei\u2019s big gamble<\/strong><\/p>\n

The most ambitious, yet unpredictable, element is Milei\u2019s well-publicised plan to dollarize<\/a> the currency. He claims this will generate hope and reboot a competitive economy, with the middle class able to travel and buy imported goods at ease.<\/p>\n

But, based on current exchange rates, the average wage<\/a> is set to be just US$218 (\u00a3171) per month, and this is likely to fall further following expected devaluations<\/a> in the coming months.<\/p>\n

If the plan fails, Milei can expect resistance to be mighty. Argentina has a deep history of popular uprisings. In 2001, five presidents resigned<\/a> in the space of two weeks, with one of them escaping the Pink House (the president\u2019s official workplace) in a helicopter<\/a>.<\/p>\n

Since then, despite regular protest and crisis, all governments have finished their terms and pursued their economic policies. Will Milei break the mould and be thrown out of office early? Or will he be able to show Argentinians a real economic turnaround before patience runs out?\"The<\/p>\n

Sam Halvorsen<\/a>, Reader in Human Geography, Queen Mary University of London<\/a><\/em> and Sebasti\u00e1n Mauro<\/a>, Associate professor, Universidad de Buenos Aires<\/a><\/em><\/p>\n

This article is republished from The Conversation<\/a> under a Creative Commons license.<\/p>\n","protected":false},"excerpt":{"rendered":"

Only weeks into his term, Argentina\u2019s new president, Javier Milei, seems to be making good on his promise to put a chainsaw to the country\u2019s crisis-ridden economy. In his inaugural address, Milei told the nation: \u201cThere is no alternative to shock.\u201d He dissolved half of the country\u2019s ministries days later, and implemented a 50% devaluation…<\/p>\n","protected":false},"author":124,"featured_media":8499,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"ngg_post_thumbnail":0,"fifu_image_url":"https:\/\/images.theconversation.com\/files\/577143\/original\/file-20240221-26-yma7wl.jpg?ixlib=rb-1.1.0&rect=8%2C125%2C5522%2C2761&q=45&auto=format&w=1356&h=668&fit=crop","fifu_image_alt":"Javier Milei: Argentina\u2019s New President Presses Ahead with Economic \u2018Shock Therapy\u2019 as Social Unrest Grows","footnotes":""},"categories":[189],"tags":[],"class_list":["post-8497","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-borders-commerce"],"_links":{"self":[{"href":"https:\/\/latinamericasecurityreport.com\/index.php?rest_route=\/wp\/v2\/posts\/8497","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/latinamericasecurityreport.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/latinamericasecurityreport.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/latinamericasecurityreport.com\/index.php?rest_route=\/wp\/v2\/users\/124"}],"replies":[{"embeddable":true,"href":"https:\/\/latinamericasecurityreport.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=8497"}],"version-history":[{"count":1,"href":"https:\/\/latinamericasecurityreport.com\/index.php?rest_route=\/wp\/v2\/posts\/8497\/revisions"}],"predecessor-version":[{"id":8500,"href":"https:\/\/latinamericasecurityreport.com\/index.php?rest_route=\/wp\/v2\/posts\/8497\/revisions\/8500"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/latinamericasecurityreport.com\/index.php?rest_route=\/wp\/v2\/media\/8499"}],"wp:attachment":[{"href":"https:\/\/latinamericasecurityreport.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=8497"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/latinamericasecurityreport.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=8497"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/latinamericasecurityreport.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=8497"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}