It may be frivolous to say that in Buenos Aires – with inflation already heading towards 200% and families with three or four children sleeping on the pavements – one can have a pretty good time. But the complaints of some foreign visitors who arrive in Buenos Aires are a little hypocritical. Especially when it comes to those who comment, already with enthusiasm, on the expectations for Javier Milei’s new government, which will take office today.
Andrés Oppenheimer, for example, veteran columnist of the Miami Herald: “I had to pay for lunches with huge bundles of 100 pesos”, he lamented after visiting the Argentine capital to promote his book Cómo salir del pozo. “A dinner for two people cost 35,000 pesos, about $35 at the black market exchange.”
“At the end of our dinner in a chic Peruvian restaurant, my Irish uncles made gestures of surprise as they photographed the pile of bills needed to pay 90 dollars”, comments a journalist from the Financial Times. “I was dying of shame”.
The truth is, there’s an easy solution for those who feel embarrassed when paying for dinner with wads of bills: use a credit card. Even if the bank applies the official exchange rate of 450 pesos per dollar, it will not be excessively expensive for a tourist, let alone a well-paid columnist for an international media. It will be even less next week, when the new government lowers the official rate to 650, as predicted by Interior Minister Guillermo Francos.
At the Chiquilín restaurant, for example, on Carrer Montevideo, I paid for dinner with a Visa card – first course of spinach fritters, second course of roast beef with a glass of Malbec de Mendoza wine. It cost ten euros, according to the exchange applied by CaixaBank. El Chiquilín was full of various people, even at one in the morning. There were quite a few tourists, and other locals spending their remaining pesos before the next phase of devaluation and the inevitable rise in inflation.
The same goes for the modernist Club Espanyol, on Avinguda 9 de Julio, with its huge painting of the Battle of Lepanto, or in other nearby restaurants, such as l’Imparcial or El Globo, so authentically Spanish that they would have already closed in Spain to replace them with a gastrobar.
Tourists, many Brazilians, arrive en masse on Calle Corrientes, with pizzerias and theaters – where Milei performed as a stand-up comedian – to take advantage of the cheap peso. Anyone with dollars can have a good time in Buenos Aires.
The real problem is for Argentines who don’t have dollars, which is to say the vast majority. The average salary stands at an amount in pesos equivalent to $331, six times less than during the government of Mauricio Macri (2015-2019) or Cristina Fernández Kirchner (2007-2015). It is the nominal salary. If you take triple-digit inflation into account, you can understand that the purchasing power of the average Argentine is plummeting. In other words, it’s the worst time to face an adjustment from the Chicago school handbook.
Many middle-class Argentines who voted for Milei want the libertarian to put an end to the inflationary vice they associate with their country through a mega-adjustment that cuts subsidies to the poor, to transport, health, education, fuel. But few have assimilated what Milei has never hidden. The first phase of the adjustment will mean an infernal acceleration of inflation, so that the peso will be further devalued in a full liberalization of the exchange rate.
For fear of provoking riots, “I don’t think Milei dares to cut the subsidies of the poorest for now, so the weight of the adjustment will fall more on the lower middle classes due to the rise in prices”, said a veteran journalist in Buenos Aires. These are precisely those who voted for Milei.
Everyone in Buenos Aires takes it for granted that on Monday the official peso will be devalued by 40%. This will translate into a skyrocketing rise in prices. It’s already happening. Supermarkets are already preparing for an imminent increase of 30 or 35%. Gasoline just went up 15%. It’s just the beginning. “Mate increases by 35%, flour also, from 35 to 40%, in other words, a barbarity”, said the president of the federation of storekeepers in Buenos Aires in an interview with La Nación.
The outgoing center-left government of Alberto Fernández has already removed price controls and tried to protect the purchasing power of the average Argentine with a complex system of multiple exchange rates and gradual depreciation even though the IMF wanted more . Milei will accelerate it completely and the paradoxical result will be that the first phase of the anti-inflationary adjustment will be skyrocketing prices.
With the other part of the libertarian adjustment, Milei aims to cut public spending by 3% of GDP, which will cause a slowdown in the economy and the destruction of employment. It will not be the “chainsaw” adjustment that the far-right libertarian announced in the campaign when he came to talk about a serious cut of 15 points in the GDP. Milei, in the presidency, is not as provocative as he was.
But, coinciding with the rise in inflation, the result will be a more serious social crisis than the one that exists. The period of adjustment and stagflation can last six months, even a year. Perhaps the decisive victory of Milei will reduce the capacity for action of the unions and the famous pickets. Some in Buenos Aires quote Perón: “The most sensitive viscera of the human being is the pocket”.
Of course, the complaints about annoying bundles of bills in the influential international media have a purpose. They are the preamble to applaud Milei’s arrival in the presidency, already normalized in the global narrative and incorporated into the mainstream after the pact with ex-president Macri. “Milei is a pragmatist”, said Oppenheimer. From now on, the crazy, extremists and radicals will not be the libertarians of Milei, but those who protest against the adjustment.
