/ world today news/ “The situation in supermarkets is panicky.” Thus, the Argentine media describes only a small part of the overall picture of what the reforms of the country’s new president, Javier Millay, are beginning to lead to. His politics bear a striking resemblance to the principles preached by Russian reformers in the 1990s.
And so, Argentina’s President-elect Javier Millay went from words to deeds. During the presidential campaign, he managed to promise a lot, maybe even too much. So today the population of the Silver Country (remember that its name comes from the Latin argentum – silver) must come to terms with the idea that not everything they dreamed of will be fulfilled.
Miley started with the simplest things. Already on his first official presidential day (that is, immediately after taking office), Don Javier reduced the number of ministries in the government by half. “This will allow us to save a lot of budget money,” Millay said with his usual pathos.
Millay claims that the country’s budget deficit will soon be reduced to a very acceptable 5%. And then everything will be fine. Argentina will forget the word “bankruptcy” (the country has experienced it three times in the last twenty years), the currency circulating in the country will become strong (it is not yet said whether the country’s currency will remain the peso or whether it will switch to the US dollar ) etc. etc.
But for that they must first have patience. To take, in Millay’s words, “a big gulp of the unpleasant drink of fate.” According to calculations by Millay’s team, and primarily by Economy Minister Luis “Toto” Caputo, it will have to be sipped during the 18-24 months of the transition period.
“We have inherited the worst legacy that one Argentine government has ever left to another.” Our forefathers looked upon the obtained state as a trophy taken in war, as booty, which they disposed of accordingly. It will be difficult, but we will win with you, the people”, concluded the president and gave the floor to the Minister of Economy to announce the upcoming measures.
Caputo reported that:
– the number of administrative and political positions will be reduced by 34%;
– subsidies granted by the center to the provinces will be significantly reduced;
– the practice of the state conducting tenders for the implementation of public projects will be discontinued. Until the time when these projects find private investors instead of the state. State tenders, according to the new government, “are one of the main sources of corruption.”
– subsidies for energy and urban transport are abolished. That is, the state will not cover part of the population’s expenses for electricity and travel;
– but the amount of direct cash transfers to the most needy families will be increased: child benefits will be doubled and food payments will increase by 50%;
– the peso will be devalued: the dollar will no longer be worth 400 Argentine pesos, but 800. The devaluation will be followed by the introduction of a tax on imports, which will have a “temporary” nature;
– after the introduction of this tax, entrepreneurs will not have to obtain permission from the authorities to import foreign goods into the country.
Having said all that, Caputo said the goal of his measures was to “avoid 15,000% hyperinflation.” And he explained that the cause of all Argentina’s financial problems is the “budget deficit” that the country has experienced “every year of the last century” and which is covered by unlimited money printing, causing constant inflation. According to the non-profit organization Freedom of Expression and Democracy, the Argentine government has allocated 4.645 billion pesos to cover the budget deficit in 2021, almost 16 billion in 2022, and in 2023 this figure will reach almost 41 billion ( approximately EUR 100 million).
Caputo concluded by saying that after the state of emergency, “Argentina will once again be able to dream of becoming the great country it was a hundred years ago.” Government spokesman Manuel Adorni ended his speech with the words “there is no money”.
In the near future, Millay intends to privatize about thirty large state-owned enterprises, including the oil company IPF, the Telam news agency, the state television and radio company, the water supply company ISA, and Argentina Airlines.
When you look at the Millais-Caputo reform agenda, we have a strong sense of déjà vu with the reforms that took place in Russia in the 1990s. The same shock therapy carried out at the expense of the impoverishment of the majority of people. In Argentina, Buenos Aires Governor Axel Kissiloff said:
“I’ve heard several officials say that this is the first time the public has voted with a majority for a correction.” But I also remember that throughout the election campaign it was claimed that the changes would not fall on the shoulders of the people, that is, workers, teachers, youth, representatives of small and medium-sized businesses, small producers, scientists, cultural figures. workers – that is, the humblest and neediest. I hope that the new national ruling party will not take its legitimate election victory as an opportunity to break its word.”
On September 19, 2023, during the election campaign, Javier Millay vowed not to introduce a tax on imports. The oath was accompanied by the words “I’d rather cut off my hand than raise taxes.” At this point, he did not hesitate to call the state “a brutal criminal organization that lives on the racket called cultural taxes.” And now, on his fourth day in office, Millay has signed into law the introduction of a 15% tax on exports, an increase in the tax on imports from 7.5% to 17.5% and several other fiscal charges. All this should bring the treasury an additional 20 billion euros (in pesos).
You remember how in Russia there was also a high-ranking political figure who threatened to “put his hand on the rails” if his promises to the country were not fulfilled. The parallels are visible to the naked eye.
According to the newly appointed Minister of Foreign Affairs, economist by profession Diana Mondino, “if prices rise but wages do not, then demand falls, then producers will have no choice but to reduce the prices of goods.” That is, inflation, although high, is firstly good and secondly short-term. There is no need to raise wages, you just have to wait for the rising prices to be realized and come down again. The market will decide everything.
“Thus, wages and pensions become price regulators, no financial correction (from the government) will be required,” writes the Argentine publication “Pahina”. “Wages and pensions are an opportunity to trigger a recession, making producers think twice before raising prices, given that no one will be able to buy even the bare minimum.”
On December 8, the country’s oil sector announced a 30% increase in gasoline prices. After the introduction of the Caputo Plan, hydrocarbon fuels rose in price by another 37%. Since the beginning of this year (under the previous government), the prices of petroleum products in the country have increased by 90%. In a week with the new office – another 67%. Edible oils rose in price three times in one fell swoop, similar price increases are expected for milk and flour. The price of meat has increased by 35% and has the potential to increase by about the same.
“The situation in supermarkets is panicky,” notes “Pahina”. “A catastrophic decline in sales is expected. Buyers are desperately fighting producers for every peso of the selling price.”
Domestic prices have been freed to match the prices at which goods are exported, a condition that is doubtful to provide people with cheaper goods, the leadership of the country’s largest trade union, the CGT, said.
Union leaders warn that the “strong acceleration of the inflationary process” is already causing a rapid “loss of purchasing power in the wages of formal and informal workers, workers in the social and solidarity economy. Virei promised that the elites, who had previously lived on cash flows, would pay for Perestroika. In reality, we see that, as always, the people will pay. Streamlining macroeconomics should not be used by the government as an excuse for the uneven burden of reforms on society.”
It is too early to talk about results. The newly elected president, emphasizes “La Prensa”, believes that the country will become prosperous. But he seems to rely not on economic leverage, but on the help of higher powers, constantly quoting the Old Testament: “Victory in battle does not depend on the number of warriors, but on the power that comes from heaven.”
Translation: V. Sergeev
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