One hundred days of Javier Milei brought fiscal adjustment to Argentina with social costs

Argentine President, Javier Milei, today completes the first 100 days of a Government limited by the absence of laws approved in Parliament and challenged to show benefits from the effort of budgetary adjustment with social costs, according to analysts.

“After many years, we have a government in Argentina that tries to solve problems, without delaying solutions or pushing unfriendly decisions under the carpet. It is a government with a correct diagnosis and a clear objective, but with implementation problems due to its hyper minority in Parliament”, economist Luis Secco, director of the consultancy Perspectiv@s Económicas, tells Lusa.

“I see public opinion and the market willing to support the government because, for the first time, a government aims to reduce the budget deficit, but to stabilize the economy and return to growth, generating jobs, the country needs a change of regime that Parliament denies it. Without action, we are faced with an incomplete regime change with a partial stabilization plan. For now, the costs are paid and the benefits do not appear”, warns Secco.

Milei became President with 55.7% of the votes, just 10% from the Senate and 15% from the Chamber of Deputies. Due to its parliamentary minority, it has not yet managed to pass a single law.

“This is a very ambitious, reforming government with maximalist objectives, something that is surprising due to the asymmetry with its real power in institutional, territorial and legislative terms. Milei has a very determined political will, but it comes up against her aggressive and confrontational personality. Because of his manners and his political inexperience”, noted political scientist Sergio Berensztein told Lusa.

“He is a President who has become his main obstacle”, he adds.

At the beginning of February, faced with the imminent defeat in the Chamber, he decided to withdraw from the debate the package of laws called “ómnibus law”, due to the initial 664 articles. Last week, the Senate rejected a decree with 366 measures, leaving government instruments at the mercy of the Chamber of Deputies’ decision.

According to Milei, these initial thousand measures of State reforms and deregulation of the economy represent only 25% of those planned. “There are another three thousand measures waiting,” she warned.

However, if it has not yet achieved any law, it has also practically lost no political capital or popular support, despite the highest inflation in the world at the moment.

Since taking office last December, the Milei government has accumulated inflation of 71.3%, a consequence of an initial devaluation of 120% and the liberalization of prices, many of which were frozen during the previous government of Alberto Fernández, despite accumulated inflation of 1,020%.

“Among the reasons for this apparent contradiction we see that a part of the electorate repudiates the political system and sees the freshness and courage of the presidential speech as a positive attribute. There is also social fatigue with traditional politics and a significant portion of the population that understands the current difficulties as a legacy of the previous government. This understanding is based on the fact that everyone knew that the first few months would be difficult, with significant costs”, interprets Berensztein.

“Milei’s voters knew it would be like this. As a candidate, Milei never lied. He always said that there would be an adjustment and that there would be a lot of inflation in the beginning. For this reason, Milei maintained the support of public opinion, despite the costs of unfriendly measures”, recalls Luis Secco.

However, during the campaign, Milei promised to use a “chainsaw” as a symbol of the cut in public spending, promising that, this time, the adjustment would be paid for by what he calls the “political caste”, the power elite that maintains privileges at the expense of of State. However, so far, more than half of the effort has come from the salary dilution effect and reforms.

Under a promise to reverse the annual budget deficit of 6.1% in 2023, Milei counts a financial surplus in the first two months of the year as a victory. “The premise of zero budget deficit is non-negotiable”, guarantees the President.

According to consultancy Empiria, based on official data, average salaries in January were around 7% below the poverty threshold, highlighting the widespread loss of purchasing power. In the last three months, prices for basic products have been above those in Europe or the United States, with salaries ten times lower in Argentina.

“If inflation does not clearly decrease, support will probably [a Milei nas sondagens] falls because people will feel like they made all the sacrifice without getting the benefits. The longer inflation lasts, the more problematic it will be”, points out economist Luis Secco.

The President seeks to extend the times, promising society that, “this time the effort will be worth it”, while changing strategy. The initial failure with ambitious measures without prior negotiation with Parliament taught the ‘outsider’ the importance of political ‘playfulness’ with governors and legislators, before resending the bills.

“Milei needs to change her attitude, delegating and adopting greater flexibility. You have to understand that giving in does not mean a reputational cost. No agreement can be closed with this degree of obsession”, says Sergio Berensztein.

“If Milei had adopted this stance earlier, perhaps we would have three or four priority laws approved. Instead, we have an economy in recession, a drop in purchasing power that leads to social tensions and pressures. I believe that the government still has a chance of achieving a more sustainable economic plan, but we are at the limit for this and worrying delays are beginning to appear”, observes Luis Secco.

“The question for economic agents in the general population is how long this can last. We, economists, don’t know how many months social patience will last, not even Milei himself knows”, asks Luis Secco.

“We don’t know what the limit of social tolerance is”, agrees Sergio Berensztein.