A month of Milei

Javier Milei has just completed one month at the helm in Argentina. President of a country in crisis, whose inflation rate already surpasses that of Venezuela and is the worst in the Americas, Milei has set out to dismantle the state with the political power vested in him by the electorate.

Argentina’s summer vacations have been interrupted by the almost 1,000 measures that the president seeks to impose by means of a decree that is already being debated in Congress in extraordinary sessions. Meanwhile, the government, which has a minority in both chambers, is confident of being able to apply the necessary pressure on account of its popular support. Whether it succeeds remains to be seen: the most recent polls give Milei between 35% and 39% approval, lower than the 55% which propelled him into government in a second electoral round last November 19, but somewhat better than the 29% with which he came second in the first electoral round last October.

In a month, the new Argentine government has devalued the country’s currency by 50%, reached record inflation levels regarding the last three decades — 25.5% for December alone — and, thanks to drastic liberal reforms and adjustments, has increased the price of food, private health care and public transportation by up to 30%. There is unease in a country that is more expensive every day, and where it is only necessary to earn around $490 a month to belong to the richest 10%. But the unease is yet to put the brakes on Milei. There have been weekly protests, but all eyes are on January 24, when the General Workers Union (CGT) has called for a general strike and a march on Congress that will again challenge the heavy-handed protocol adopted by the government regarding public dissent.

Ever the populist, Milei has celebrated Chanukah with the Jewish community of Buenos Aires, sent a letter to the Pope to invite him to travel to the country, visited Antarctica, where he embraced the military bases that overwhelmingly gave him their vote, and even strolled around the seaside resort of Mar del Plata, where he went on stage with his partner, the performer Fátima Florez. The passionate kiss they shared went viral and had wider repercussions than many of his political decisions.

Milei’s government has also announced the dismantling of a “possible terrorist cell” consisting of a table tennis teacher, a hairdresser and a third man described as an “inorganic agent of the U.S. embassy” — the case has more holes than evidence, according to investigations by the national media. It also dismissed the person in charge of the social networks in the Casa Rosada — the seat of the Argentine presidency — a 22-year-old party member who shared personal photographs on official accounts.

After Milei’s inauguration on December 10, it took just two days for the Minister of Economy, Luis Caputo, to announce a raft of economic measures that included the 50% devaluation of the peso and the removal of energy and transport subsidies. The devaluation was to bring the official dollar rate, which went from 400 pesos to 820 pesos per dollar, closer to the one traded on the stock exchange or sold on the street. The impact — a sign that Caputo’s decisions were well received by the markets — lasted a few weeks. The exchange rate gap was reduced to less than 20%, but subsequently rose again to 40%.

The radical measure was accompanied by two others. The Minister of Security, Patricia Bullrich, presented a protocol to curtail protests and Sandra Petovello, who heads up the Ministry of Human Capital, which now encompasses Education, Labor and Social Development, threatened to remove benefits from any recipients of social programs involved in street protests.

Subsequently, there was a tsunami of other austerity measures. Milei imposed more than 300 regulatory changes and repeals by decree. The public went out on their balconies to protest with pots and pans and the unions gathered an estimated 20,000 demonstrators for street protests against a decree they consider “unconstitutional.” The government sent an initiative to Congress with more than 600 articles declaring the country in “public emergency” and transferring legislative powers in economic, financial, security, fiscal, health and even electoral matters to the executive. It was at that time the CGT, the country’s main labor union, called a strike.

The mega-decree has already entered into force, but it can still be rejected by Congress and there are parts of it that have been stopped by the courts: at least two rulings have suspended the labor reform and dozens of appeals are accumulating. The omnibus law, so-called because of its reach, is being dealt with in extraordinary congressional sessions. The government has stated that the content of the measures is non-negotiable, but Cabinet ministers showed the first signs of flexibility by recognizing “mistakes” in the drafting of the bill’s text and declaring they will analyze the “concerns” of the legislators opposing it in order to push the reforms through. Milei only has 38 deputies and seven senators in Congress, and needs the support of other parties to move forward.

Miguel De Luca, a PhD in political science, points out that presidents who come to power with a minority in Congress have two options: to expand the government coalition in order to build a majority, or opt for a shock strategy. Political analysis has shown that in the case of the latter, the confrontation between the legislative and executive branches escalates until either the president shuts down Congress, or Congress gets rid of the president. “Milei’s first measures are almost the same as those of other presidents seeking to impose themselves,” says De Luca. “The context is one of serious economic crisis, but the truth is that Milei did not even try to negotiate with Congress.” According to the political consultant Pablo Salinas, this is due to the fact the Cabinet has little experience: “They thought it would be easy to move forward with the bill, without modifications, and they found themselves with a chamber in which everything is negotiated because this has been the dynamic of the legislative power in Argentina for more than 100 years.”

Even the International Monetary Fund (IMF), which this week praised the “ambitious stabilization plan” promoted by the government and granted it funds amounting to $4.7 billion so that Argentina can continue to repay its $43 billion debt with the institution, has asked it to “build political support” so that its reform is endorsed in Congress. This week, after almost two months without news, the IMF and Argentina agreed to continue with the repayment plan agreed in 2022 by the left-leaning Peronist government regarding the $43 billion loan granted to conservative Mauricio Macri in 2018. The Peronist government came up short on fund targets and ended up paying its maturities with other loans, such as the currency swap with China. Milei has a different strategy, promising austerity measures more radical than demanded by the IMF to turn the 3% annual deficit into a 2% surplus, and to accumulate reserves of $10 billion.

The IMF expects the implementation of the reforms presented before Congress to be politically and socially sustainable if the repayment goals are to be guaranteed. Meanwhile, the government oscillates between dialogue and threats. “The extent to which the bill does not pass will be commensurate with the harshness of the measures that follow,” Caputo warned on January 10, after announcing the deal with the IMF. Caputo was one of the officials in charge of the $43 billion loan requested by Macri in 2018 and who returned to government with Milei as the face of economic shock measures that have raised prices in recent weeks. He has lauded Milei’s “courage” in adjusting the economy and noted that society has endorsed his approach by handing him a majority. “The question is whether politicians will rise to the occasion,” he said.

The back-slapping has been mutual between the president and his minister. Stirring up the ghost of hyperinflation since he took office, Milei has been shadowing Caputo while both waited for the December price index, the first inflation measure since Milei came to power. The president stated that if the figure was lower than 30% it would be a “great figure” and that his minister would have to be “carried on shoulders” in the event it was achieved. December closed with an average increase of 25.5% in the Consumer Price Index (CPI), and left year-on-year inflation at 211.4%, the highest in the world, pending the release of Lebanon’s figures for the final month of 2023.

The passing of the reform bill to rectify the economy is not the only challenge for the Ministry of Economy. Milei’s foreign policy has put the new government’s relationship with its main trading partners, Brazil and China, at risk after it withdrew at the last minute from BRICS, the block of emerging economies founded by Brazil, China, Russia, India and South Africa. According to local media reports, by approaching Taiwan, Milei’s Foreign Ministry has crossed a red line with China, the country’s second-largest trading partner and a multi-billion-dollar credit line in the last year, helping it to comply with the demands of the IMF. Chinese Foreign Minister Mao Ning said on January 11 that the Argentine government had told her that media reports regarding a meeting between Argentine Foreign Minister Diana Mondino and Taiwan’s economic and cultural representative in Argentina last month were untrue. On January 12, Mondino received the Chinese ambassador in Buenos Aires for the first time to iron out their differences.

During his daily address to journalists, presidential spokesman Manuel Adorni denied other rumors about internal fissures within the Cabinet, one of them between the president and the hardline vice-president, Victoria Villarruel. “This is absolutely false,” he said.

Villarruel, who obtained her first victory as president of the Senate by imposing a libertarian candidate as provisional president of the Upper House, does not yet have an office in the Casa Rosada. There is speculation in the media that the vice-president was displaced within the Cabinet by other figures, such as the president’s sister and Secretary of the Presidency Karina Milei, or Bullrich, the security chief, which was Villarruel’s turf during the electoral campaign. A report in The Financial Times, shared by the vice-president on social networks and later deleted, fueled speculation. The article closes with a quote from a diplomat suggesting that Villarruel could “mount her own political project” and is “ready for anything.” However, Villarruel attempted to scotch the rumors with a post on Instagram and a caption reading “Our efforts for the success of his management.”

After a month in government, Milei finally moved this week to the Quinta de Olivos, the official residence of Argentine presidents since 1955. Until now, he has been living in the Hotel Libertador, which was also the center of operations during his electoral campaign. The government has yet to provide explanations regarding payment for his stay there. The move was delayed, in part, due to the construction in Quinta de Olivos of living quarters for the president’s four mastiffs, according to the government. “The idea was to be able to adapt some structures so that my children can be as well as possible,” Milei said, referring to his dogs. The president was enraged by a inaccurate report that the dogs had already been moved to the official residence. “It is scandalous the impunity with which they invent and operate,” he wrote of journalists on social networks. His reaction has not helped him garner support in the media.

Milei has moderated his tone since becoming president. But every now and then, especially on social media, he returns to the irascible and histrionic individual who went from Argentina’s TV studios to the Casa Rosada.

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