BUENOS AIRES, Argentina (news agencies) — When libertarian President Javier Milei assumed office one year ago, Argentine supermarkets were marking price increases on an almost daily basis. Middle-class families tried to spend their rapidly depreciating pesos as quickly as they got them, and economists warned the country was teetering on the brink of hyperinflation.
It was popular outrage over this upside-down economy that fueled the rise of Milei, a self-declared “anarcho-capitalist” and former TV pundit who rode to power on vows to “blow up” the central bank, take an axe to the bloated government and kill sky-high inflation.
It was an almost impossible job, and Milei’s lack of government experience, unkempt hairdo, sexual boasts and missionary-like zeal for his dead dog, the Rolling Stones and the free market didn’t inspire much confidence in a country with a history of failed economic reforms.
“It wasn’t a given that he could govern Argentina when he took office,” said Marcelo J. García, Americas director at geopolitical risk firm Horizon Engage. “He was Mr. Nobody.”
On taking power, Milei implemented a series of austerity measures, including slashing energy and transportation subsidies, laying off tens of thousands of government workers, freezing public infrastructure projects and imposing wage and pension freezes below inflation.
It has been brutal. Unemployment has climbed, economic activity has declined and poverty has surged.
But now signs have emerged that Argentina’s bizarre and long mismanaged economy is starting to look a little more normal.
Monthly inflation has plummeted, bonds have rallied and the closely watched gap between the black market dollar and the official rate has shrunk as much as 44%. Argentina’s country-risk index, an influential measure of the risk of default, is at its lowest point in five years.
“He reaches the anniversary at the best moment of his administration,” García said.
Inflation, Argentina’s perpetual scourge and Milei’s top priority upon coming to office, slowed from a monthly rate of 25.5% in December 2023 to just 2.7% in October — its lowest level in three years.
“Inflation has gone down faster than what everyone has expected,” said Ignacio Labaqui, a Buenos Aires-based senior analyst at risk consultancy Medley Global Advisors. “That’s something that validates his narrative and sustains his popularity.”
In a sign of Milei’s long way to go — and the unmitigated shambles he inherited — Argentina’s annual inflation rate remains at 193%.
But Argentines are paying closer attention to month-to-month inflation, taking the sharp decline as a sign that Milei’s fiscal shock therapy is paying off.
“Last year, it was brutal, like a shock to the system, I couldn’t keep up with the prices,” said 34-year-old deli worker Jazmin Quintana. “I’m not saying I like the guy, I find his personality very weird and aggressive, but I admit — if he continues on this route I’ll be very happy.”
A stronger peso is also boosting confidence. The black market dollar price has dropped since July, narrowing its gap with the official rate of 980.
Chileans, once accustomed to bargain-hunting in Argentina, are now surprised to see the traffic reversed. Shoppers unable to afford iPhones, imported perfumes and kitchen appliances in Argentina arrive at Chielan border towns by the busload to get the most bang from their buck. The customs office shut down briefly last month because officials were overwhelmed.
Underpinning the currency appreciation is a new tax amnesty to lure Argentines to declare their hidden U.S. dollar savings — longs squirreled away in offshore bank accounts and under mattresses. Ahead of the first-phase deadline on Oct. 31, the scheme drew some $19 billion into Argentina’s banks, the tax agency reported, boosting scarce foreign exchange reserves.
But a strong peso also carries risks — squeezing domestic industry by making exports more costly, deterring investors and raising fears of a crash. Foreign visitors are warned of higher prices as peak tourism season begins.
“The prices are INSANE,” reads a popular Reddit post about travel in Argentina, filled with cautionary tales of $50 dinners and $100 T-shirts.
Argentina’s first budget surplus in 12 years has come at a steep cost. Milei halted inflation increases for university budgets, leaving some universities struggling to keep their lights on and elevators running. He downgraded the culture ministry, closed the national theater institute, shuttered a state-funded news agency and defunded scientific research.
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