Buenos Aires (AFP) – The ultraliberal Javier Milei, elected president of Argentina on Sunday by proposing shock therapy for Latin America’s third economy with record inflation, will face major economic challenges, but also governance and social peace.
Inevitable adjustments
“Argentina has had a significant budget deficit for decades: a strong culture of social expectations, but little growth, therefore expenses that are no longer financeable,” summarizes historian Roy Hora, of the Conicet research center.
The “shock treatment” promised to balance the accounts aims to reduce public spending (by 15%) and privatizations, to achieve the budgetary discipline required by the IMF, to which the country is struggling. repay a $44 billion loan granted in 2018.
He also advocates the end of chronic subsidies (transport, energy), a liberalization of prices, the elimination of export taxes. Mr. Milei advocates “a much harsher adjustment” than that requested by the IMF.
Social pressure cooker
This desire to dry up public spending raises the problem of the social impact, in a country where 40% of inhabitants live below the poverty line and 51% receive some form of aid or subsidy.
“The pain will be acute and widely felt if there is a real stabilization plan, and it is not clear that the Argentines see the good side of it,” predicts Benjamin Gedan, Argentina specialist at the American think tank Wilson Center.
“Mr. Milei brings with him an ingredient of political-social confrontation, a bellicose, aggressive discourse, of adjustment towards sectors, such as the public service, with a strong capacity for mobilization”, estimates Gabriel Vommaro, political scientist at the University of San Martin. “With, perhaps, a repressive path, of which we do not know how it could end.”
The dollar, what dollars?
The dollarization of the economy, to let a constantly depreciating Argentine peso die a beautiful death, is a key to the future president’s program to “dry up” inflation. But how to dollarize a country lacking foreign exchange reserves and dollars?
Easy, says the Milei camp: use the dollars that Argentines have been saving under their pillows for years. The country “is the third largest in the world in quantity of physical dollars” held. It would be a question of giving them back the confidence and the possibility of using them.
But faced with an official exchange rate considered unreal (369 pesos to the dollar), “things could spiral out of control” between now and the inauguration on December 10. Devaluation? Increased inflation? “A period of instability begins,” for analyst Ana Iparraguirre, from the GBAO Stratégies firm.
Which allies to govern?
-Mr. Milei’s party, La Libertad Avanza, entered Parliament in 2021 with three deputies. It is now the 3rd force – 38 deputies out of 257 – in a lower house without an absolute majority, but where the Peronist bloc (center-left) remains dominant (108).
-Alliances, one-off or lasting, will be essential, as with the right-wing bloc Juntos por el Cambio (93 deputies). But it never seemed so close to imploding, after being torn apart over the question of whether or not to support Javier Milei in the second round.
What friends outside?
He will have to rebuild relations with key countries for which he had very harsh words, notably Lula’s Brazil, China, Argentina’s two main trading partners.
“I will not do business with communists. I am a defender of freedom, peace and democracy,” declared Mr. Milei for whom his allies are “the United States, Israel and the free world “. Brazilian President Lula, whom he had called a “corrupt communist”, wished him “good luck and success” on Sunday.
On the other hand, he could bring a new tone to the question of the Falkland Islands, where he said he was willing to negotiate, not Argentine sovereignty, but a long-term solution of the type that led to the handover of Hong Kong to China (1997).
Fractured memory?
For the first time in 40 years of democracy, a consensus on the legacy of the dictatorship (1976-1983) was fractured during the campaign, with the denial by Mr. Milei of the toll of dead and missing (30,000 according to the organizations human rights). “8,753”, according to him.
His reference to a “war” (between left-wing guerrillas and the State) rather than “dictatorship” to describe this era was shocking. As his demand for “fair” justice for the soldiers currently in preventive detention (around a hundred) as part of the 360 ongoing proceedings for crimes during the dictatorship is disturbing.
The legacy of the dictatorship, a hyper-sensitive subject, has until now been spared partisan divisions. A rupture could, here too, give rise to mobilizations.
A few planets aligned?
It’s not all trouble for future President Milei. 2024 should, in theory, offer a welcome windfall: the historic drought of 2022-2023, the worst in a century, linked to the La Niña phenomenon, had deprived the country, an agro-export par excellence, of some 20 billion dollars in revenue. . They will be welcome.
Will also help the gradual ramp-up of the gas pipeline, inaugurated this year, from the Vaca Muerta gas and oil field, which should save some $10 billion per year in energy imports, according to economist Elizabeth Bacigalupo from the Abeceb firm.
© 2023 AFP
