Argentina is a country of contrasts and bipolar temperament. In the distant past it was a beacon of progress for thousands of European immigrants who settled in these confines with hope and enthusiasm. In these latitudes it was easy to build a future and grow, this is how Vicente Blasco Ibáñez saw it during his stay in Buenos Aires: “This name makes the desperate dream. By repeating it mentally he feels strengthened, with a hundredfold energy for the fight. He Will Work!: Work doesn’t scare him. He will develop an activity… that will immediately see in his hands the result of his efforts and will know the ample remuneration.” (Argentina and the greatness of it, Madrid, 1910, Spanish American publishing house).
Today the outlook is more than discouraging. Inflation as of November reaches 148% and is traveling at an accelerated pace towards 200%, poverty reaches 40% of the population while almost 10% of people are indigent, that is, they do not cover the minimum needs to be able to survive. All this, in an economy that is one of the main food producers worldwide.
It is in this context that Javier Milei becomes president. He is a character who anywhere in the world would only have stood out as a stand-up comedian because of his extreme histrionics. Javier Milei is a political outsider, who through an alliance with sectors of the new extreme right and a dystopian campaign was able to channel the frustration of a disoriented and hopeless society.
But not everything that glitters is gold, nor is he who shouts right. His government has announced a set of spending adjustment measures that, if taken lightly, could lead to an even deeper social crisis.
The adjustment package contemplates a fiscal saving of five points of GDP, of doubtful fulfillment, of which two points would be explained by an increase in revenue and three points by falls in spending. Added to this, it has devalued the peso by 118%, unleashing an inflationary stampede that, if not stopped, could lead to hyperinflation. The weight of the adjustment will fall on the middle-income sectors and social security beneficiaries (retirees and pensioners), who are the engines of demand growth, so the probabilities of generating a deep depression are very high. If the recession deepens, compliance with fiscal objectives is in danger due to a drop in revenue, and with this the Government’s plan could fail.
To put ourselves in context, of the almost six million retirees, 64% earn the minimum salary, which does not reach $160 per month. With this income they will have to face increases in food prices that in December will be above 30%, adjustments in public service rates and increases in the price of health. On the other hand, if the return of the income tax on salaries is approved, the middle sectors will face nominal falls of 30% in their income in a context of accelerating inflation.
President Milei does not have parliamentary majorities in any of the chambers, so his projects could stall, allowing hyperinflation to run. The president’s temptation will then be to govern behind the back of Congress through decrees of necessity and urgency that will attack democracy and institutions, causing a political crisis.
The next few weeks will be crucial to gauge popular support for President Milei. His policies have gone squarely against his own voters, who will notice a real drop in his income in a context of accelerating inflation. It is illusory to rule out that the social climate will become increasingly more difficult, which is why large demonstrations could be observed in repudiation of such fierce fiscal adjustment.