By: Aidamol Joseph, Research Analyst, GSDN
Argentina is a South American country located in the southern part of the continent. It is a federal republic with a presidential system of government. Argentina, officially the Argentine Republic, is one of Latin America’s largest economies and most stable democracies, but the country has struggled with political dysfunction and financial crisis in recent times. Far-right libertarian outsider Javier Milei has won presidential election on December 10, 2023. The presidential elections were deemed free and fair by domestic and international observers. Milei’s proposals, which included “blowing up” the central bank, won support with voters desperate for change amid an economy in crisis.
Riding the wave of voter anger with the political mainstream, Milei won by a larger margin than expected. He received approximately 44% for his rival, Peronist Economy Minister Sergio Masta. Mr. Milei’s victory is being seen as a victory for the far-right beyond Argentina. Significant political and economic changes is anticipated, and President Javier Milei has promised to refocus the nation’s foreign policy to prioritize closer ties with the West and the United States. This might also include Argentina cutting ties with China, it’s second largest trading partner, and downgrading the Mercosur trade union.
Argentina spent more than a century alternating between military and democratic administration following its independence from Spain in 1816. After a coup in 1943, army officer Juan Peron governed Argentina intermittently for the following thirty years. Since then, the nation’s politics have been controlled by his populist political theory, sometimes known as Peronism. Peron adopted a number of left-leaning measures while in government, nationalizing the central bank and a number of big businesses, increasing health and welfare benefits, and forging a partnership with organised labor unions. The military persisted in its intrusions despite Peron’s popularity, forcing him into exile in 1955 and outlawing the Peronist party for almost 20 years.
In an effort to rid the nation of potential left-wing dissidents, a new military junta known as the National Reorganization process came to power in 1976. Argentina’s political instability persisted into the 1990s, even after military control came to an end in 1983 with the election of president Raul Ricardo Alfonsin. Today the nation has achieved relative democratic stability. Argentina’s major political parties such as Justicialist party commonly known as Peronist’s founded in 1945 by Juan Domingo Peron, The Union Civica Radical (UCR) or Radical Civic Union, founded in 1891. New emerging political forces, like the Civic Coalition (CC) and the National Proposal (PRO) parties, are concentrated in the urban centers and are working to build national party structures.
Amid persistent economic and political instability, Argentina has sought to play a greater role on the international sphere, including in its relations with China, United states and Europe. Over the past 20 years, Beijing and Buenos Aires have greatly strengthened their trade relations; as a result, China is currently Argentina’s second-largest trading partner, behind Brazil. Argentina formally joined the Belt and Road Initiative in 2022, a significant international infrastructure undertaking spearheaded by China. Chinese state-owned businesses have focused their foreign investment in Argentina’s infrastructure, telecoms and agriculture sectors in recent years. The state of domestic politics in Argentina has affected relations with the United States. Because of Peron’s socialist ideas and cold war neutrality, American authorities were frequently dissatisfied with him during the 20th century and finally stopped providing help to Argentina. Additionally, Milei has made a point of being a staunch supporter of the United States and the West. As President, he turned down Fernandez’s request to join BRICS, the economic alliance that consists of China, South Africa, India, Brazil and Russia before it grew in early 2024. In terms of commerce, Argentina’s exports to the EU continue to be significant, with over $22.6 billion in goods exchanged in 2022. Additionally, European businesses make significant investments; as of 2022, they owned 44% of Argentina’s foreign investment stock.
When Javier Milei’s administration assumed power, the goal was to create a more market oriented, less government-controlled economy where economic growth would primarily come from private sector. His main goals for macroeconomic policy are to terminate monetary issuance to fund public spending by 2024 attain fiscal equilibrium. Milei has also called climate change a “socialist hoax”. Short term pain long term gain that was Milei’s motto that’s what he said he described himself as an anarcho-capitalist. Milei was upfront in his inaugural address on December 10, 2023, “Our country demands action-and immediate action” he said, saying that Argentina was at “the brink of its biggest crisis in history”.
At that time, annual inflation stood at 161 percent with 45 percent of the population living in poverty. Milei’s initial actions fulfilled his pledge to reduce the states size by implementing internal changes inside the executive branch. He reduced the number of ministers from eighteen to nine by executive order and decided not to extend the contracts of thousand public servants. In addition, Milei declared that by the end of 2023, public sector spending would have decreased by 5% GDP. He started implementing this target by reducing state fuel and transportation subsidies, postponing public work contracts, and doing away with regulations.
Luis Caputo, the minister of economy, declared that the Argentine currency would similarly devalue by 50%. On December 20, 2023, Milei declared an economic emergency. December also saw mass protests against the Milei’s government’s sprawling reforms, which included new restrictions on protests. Never before in modern Argentinian history has a mass strike been called less than seven weeks into a new presidency. The mass Confederation of Labor demanded a mass strike 45 days after the new government took office, against his “shock therapy”. Protestors held signs with the message “La patria no se vende” (the homeland is not for sale).
Argentina had already been suffering from record triple-digit-inflation when Milei took office on December 10. According to National Institute for Statistics and Censuses (INDEC), Argentina ended 2023 with annual inflation of 211.4 percent, the steepest rate in Latin America, surpassing even Venezuela. And Milei could face further challenges to his reforms. However, despite the heavy presence of security forces, the demonstrations which the Milei’s administration claimed were intended to “destabilize” the government generally proceeded peacefully. Milei has sacked thousands of public sector employees as part of his aggressive campaign to slash state spending.
The government on April 3, 2024, announced that it had cut 15,000 jobs, triggering massive protests in the capital Buenos Aires and nearby cities. The terminated workers say their dismissal from public institutions is “unfair”. Milei had previously slashed energy and transportation subsidies, announced tax hikes. The state new agency was shut so was the country’s anti-discrimination and funding for scientific research was cut down.
As per the reports in Argentina, Javier Milei has completed more than 100 days of his presidency. He came with a promise to fix the economy with what he called a shock therapy and he faced a lot of backlashes for it as lot of protests. Argentina’s monthly inflation has cooled off in December, it was 25% in January 20.6% in February it was 13.2%. Trend looks positive cooling Argentina’s monthly inflation that is Milei calls it is the result of strong fiscal discipline.
The government also boosted of a budget surplus it’s the first in decade. Even the IMF approves so some success for President Milei there but it’s not all good, Milei has other problems like annual inflation looks like it is at the record 276 percent the highest in more than three decades. 57% of the country is living under poverty there are strikes people are protesting against the austerity. Argentina’s international bonds railed by 7% that’s a reflection of investor confidence. So, it started off on a positive note. Milei achieved some success but he also faced political hurdles. Last week the senate rejected a proposal a decree to change 300 existing standards like rent caps regulations on Health care, labor laws, privatizing state-owned enterprises, reducing maternity leave pay. So, this was a radical austerity plan and it met with opposition people took to the streets in protest. The courts called it unconstitutional; lawmakers did not support it and Argentina senate then struck it down. It’s s setback for the President and he said to be working on another strategy firming up his numbers waiting for the mid term elections will be held next year in 2025. If he does, his party does well in in those elections, he may get the bill through. And while his policies are delivering for now, they do have their own set of problems.
More than half of the Argentina’s population living in poverty, food prices are soaring people cannot afford so when the government cuts food aid these people suffer, some of them are scavenging to survive. Critics believe Milei’s policies could lead to mass unemployment something that would wreck the economy. But Milei is convinced about his plan, he says it will get way worse before it gets better. Anyway, Argentina is looking up for a better future.
