Awakening and skepticism in Argentina - Milei's economic balance sheet
Just a few minutes' walk in the Boedo district of Buenos Aires, the Argentine capital, separates two moods: optimism and skepticism, acceptance and rejection. "No entry" reads a sign beneath the raised shutters of a department store. It refers to President Javier Milei and Security Minister Patricia Bullrich.
Neither is welcome here, as the crossed-out portraits of the two politicians indicate. But nearby, there's a lot of construction going on again, hammering and bricklaying: a new residential building is being built, and investments are being made in the future again. A spirit of optimism.
Javier Milei has now been in office in Argentina for 500 days. And hardly any other head of government attracts as much global attention as the libertarian president in Buenos Aires. He is sometimes met with outright hatred from the left wing for his economically liberal course, while the majority of economists see the economist as the liberator of a country shackled by bureaucracy and regulations.
Milei's latest coup is the end of the so-called cepo ( the shackle). The cepo (meaning "the shackle") was an instrument repeatedly used by various Argentine governments since 2003 to restrict access to the coveted US dollar in the fight against inflation. Since mid-April, this cepo has been lifted, allowing unrestricted foreign exchange transactions by private individuals and companies.
"Contrary to the alarmist predictions of many local and international economists and analysts, the exchange rate did not skyrocket," said Aldo Abram of the Buenos Aires-based economic liberal think tank Fundacion Libertad y Progreso in an interview with Deutsche Welle. "On the contrary, the exchange rate stabilized below the level prior to the parallel opening. Trade normalized without a crisis, without a run, and without devaluation." The government celebrated the result with a picture of Milei and his Minister of Economy, Santiago Caputo, celebrating as if they were scoring a goal.
Milei gives hope and asks for patienceThe president himself sees himself on the right track: "After more than 100 years of chronic budget deficits, we are now among the five countries in the world that only spend what they earn and not a single peso more," Milei said in his TV address a few days ago, which the newspaper Clarin documented.
Milei announced the end of foreign exchange restrictions and promised his citizens a promising future : "Argentina will be the country with the highest economic growth over the next 30 years." This won't happen overnight, Milei continued. But it will happen gradually and with the certainty "that we have done our homework on both the internal and external fronts to mitigate any volatility as much as possible."
On the plus side, according to the statistics agency INDEC, poverty has been reduced to 38.1 percent, slightly below the level Milei inherited from the previous government when he took office. According to INDEC, inflation also fell by 44.5 percent in 2024 under Milei compared to the previous year.
Svenja Blanke of the SPD-affiliated Friedrich Ebert Foundation in Buenos Aires is much more skeptical about the economic situation. In an interview with Deutsche Welle, she criticized the government for "using the exchange rate as a kind of 'support' to curb inflation."
As a result, the peso has become stronger compared to other currencies, with the result that a "Big Mac" in Argentina, at €5.48, costs roughly the same as in Germany – but the hourly minimum wage, at €1.06, is far below the German minimum wage of €12.82. "So there's a kind of social chainsaw massacre affecting incomes, education policy, research, culture, public infrastructure, and memory policy."
EU-Mercosur agreement as an opportunityHans-Dieter Holtzmann of the Friedrich Naumann Foundation in Buenos Aires is more optimistic: "With the abolition of capital controls and the flexibilization of the exchange rate, important obstacles to Argentina's economic recovery have been removed," he told DW.
"Despite tax incentives, international investors have so far been reluctant to make concrete investments in Argentina, even though the country boasts attractive resources in the energy sector (gas, hydrogen) and raw materials (lithium, copper)." It is now all the more important to ratify the EU-Mercosur agreement as quickly as possible so that Argentina and Germany can fully utilize the opportunities for trade and investment.
In the center of the capital, the two faces of the country are visible: packed restaurants and cafes, which seem to be at odds with the opposition's talk of a crisis. Only a few people participated in a general strike a few days ago, and the unions seem to have overstepped the mark with three general strikes since the beginning of Milei's term. The vast majority of Argentinians want to move forward, work, and put the crisis behind them.
And then there are the images of the weekly protesting pensioners, which in turn contradict Milei's promises that only the "caste," that is, the elites and powerful people from the Peronist camp who will rule until December 2023, will be asked to pay for the reforms. They are feeling the effects of the austerity policy in their own wallets through real losses of purchasing power.
dw
