New president of Argentina: we need an economic shock

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FILE PHOTO: Argentina's President Javier Milei addresses supporters from the Casa Rosada balcony, as his sister Karina Milei and his partner Fatima Florez look on, after his swearing-in ceremony, in Buenos Aires, Argentina December 10, 2023. REUTERS/Agustin Marcarian/File Photo

Argentina’s newly-elected President, Javier Milei, has issued a warning to the nation, urging citizens to brace themselves for painful austerity measures aimed at reversing years of economic stagnation and decline. In his inaugural address on Sunday, following his surprising election victory the previous month, the 53-year-old economist prepared the Argentinian population for the short-term hardships he deems necessary to address the country’s most significant crisis in history.

Breaking with tradition, Milei delivered his speech with his back turned to the legislature, emphasizing the unavoidable need for a shock adjustment, stating, “There is no alternative to a shock adjustment. There is no money.” The inauguration ceremony drew notable guests, including Ukrainian President Volodymyr Zelenskyy, Hungary’s Prime Minister Viktor Orban, former Brazilian leader Jair Bolsonaro, Uruguay’s conservative leader Luis Lacalle Pou, and Chile’s leftist President Gabriel Boric.

Argentina, the third-largest economy in Latin America, plagued by decades of crises, faces an annual inflation rate exceeding 140% and a 40% poverty rate. The country owes $45 billion to the International Monetary Fund. Milei, known for his hard-right libertarian views, has pledged radical measures to revive the economy, including a 5% equivalent cut in spending and previously, he had suggested a shift from the Argentinian peso to the United States dollar.

Self-described as an “anarcho-capitalist,” Milei emphasized that the state would bear the initial burden of stabilizing the country’s finances, acknowledging that the short-term situation would deteriorate before yielding the fruits of their efforts. One of his initial actions involved reducing the number of ministries by half, from 18 to nine, a move announced on social media.

Despite Milei’s abrasive style drawing comparisons to former US President Donald Trump, his anti-establishment message resonated with Argentinians, particularly the youth, disillusioned by successive governments overseeing the decline of one of Latin America’s richest economies. While Milei decisively defeated former Economic Minister Sergio Massa in the November 19 run-off election, he faces the challenge of negotiating with rivals, given his coalition bloc’s lack of a legislative majority.

There are indications that Milei may moderate his more radical positions, as evidenced by the inclusion of mainstream conservatives in his cabinet and a recent dissipation of discussions about shutting down the central bank or dollarization.

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