(CLO) Last month, Argentine President Javier Milei attracted attention when he posted a photo of himself and his cabinet posing with a golden chainsaw - a symbol of the drastic spending cut campaign he pledged to implement.
With the proud caption "Best Government in History", Mr. Milei somewhat asserted his determination, although the effectiveness of the policies is still a controversial topic.
Since taking office in late 2023, Milei has implemented a series of measures to adjust the country's finances. He has drastically cut public spending, abolished many government ministries, fired hundreds of civil servants and reduced pensions and public salaries.
These measures helped Argentina achieve a fiscal surplus in the first month of President Milei's term and maintain this achievement throughout 2024, a rarity in the country's recent economic history.
A woman in Argentina goes to the supermarket. Photo: GI
As a result, government spending fell 30 percent year-over-year, and monthly inflation, which had been running at 25 percent when Mr. Milei took office, fell to just 2.4 percent in November 2024, its lowest level in more than four years. Inflation, the biggest issue voters care about, is gradually coming under control, a positive sign for Mr. Milei’s efforts to revive the economy.
In addition, tight monetary policy and a tax holiday have attracted billions of dollars in new foreign reserves to the central bank. Argentina’s country risk index has fallen sharply from 2,000 to 750, its lowest level in five years, reflecting a change in how markets view Argentina under President Milei.
But these improvements have come at a social cost. The working class and the poor have been hit hardest by austerity measures. The poverty rate rose from 40% in 2023 to 53% in the first half of 2024, before falling slightly to 50%. Nearly 70% of Argentine children live in poverty, and more than a million children regularly go to bed hungry.
The removal of subsidies for energy and public transport has sent utility bills soaring, significantly reducing the purchasing power of working people. Although wages have risen faster than inflation for six consecutive months, the improvement has not been enough to offset the damage from austerity policies.
Politically, Mr. Milei has demonstrated his ability to govern in a context where his party has limited power in parliament and does not control any provinces. He has successfully passed some policies thanks to compromises with other parties.
Still, the challenges are formidable. Argentina’s economy remains fragile. Economists warn that the peso is overvalued, weighing on exports and making it difficult for the central bank to accumulate sufficient dollar reserves. A devaluation of the peso is possible, but that would come with the risk of a return to inflation, threatening Milei’s main achievement.
The Milei government is also facing questions about the sustainability of its reforms. While controlling inflation has been a notable success, other indicators such as industrial production, purchasing power and GDP are still falling. "There is nothing to celebrate when every other economic indicator is worse, except inflation," said economist Sergio Chouza.
While Milei’s approval rating remains high, at 56% after his first year in office, economic and social pressures are proving a major test for him. Milei has made no secret of the country’s difficult realities, even warning citizens that they must “go through hell” before they can hope for improvement.
Milei's reforms have brought short-term stability, but the long-term road to recovery for Argentina remains rocky. Milei proudly calls it "the best government in history," but only time will tell whether he can truly lay the foundation for a sustainable future.
Ngoc Anh (according to AJ, DW)
Source: https://www.congluan.vn/lam-phat-giam-ngheo-doi-tang-o-argentina-post328347.html
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