Since climbing to the top of the Argentine mountain with his chainsaw, President Javier Milei has piled up victories – and the fun is just getting started. From achieving budget surpluses to boosting supply in the housing market, his ascent to the presidency has accomplished more for the country than the years under the socialist regime. The current administration has a lot of work to steer the ship on course again, but the early evidence may have given voters confidence that they made the right choice on Oct. 22, 2023.
The Javier Milei Budget
For the first time in nearly 12 years, Javier Milei and his government achieved a budget surplus of $589 million at the end of January. This included debt-servicing payments, too. The Economy Ministry confirmed this was "the first (monthly) financial surplus since August 2012, and the first surplus for a January since 2011." Quite the remarkable feat for nine-and-a-half weeks of work.
How did he achieve this? Shock therapy and a chainsaw. Soon after being sworn in, Milei outlined a plan to combat the country's putrid finances, including privatizing state-owned companies, laying off thousands of government workers, halving the number of federal ministries, reducing energy and transportation subsidies to residents, and trimming payments to the provinces.
Peter St Onge, a Heritage Foundation economist and Mises Institute fellow, recently stated on X that "Javier Milei ended a DC-sized deficit in nine weeks" and "it turns out it can be done, and the world does not actually collapse." For decades, Keynesians have typically argued that paying down debts and balancing budgets are unnecessary because governments can borrow and central banks can print the money. However, as history has repeatedly shown, Mephistopheles always pays a visit to Faust.
For the average Argentine, how will budget surpluses make their lives better? It turns out that the policies of Javier Milei and his merry men of anarcho-capitalists are seeping through the South American economy, too.
Rent Controls
If there is one thing that most economists agree on, it is that controls of any kind are bad news for an economy. The idea curbs new housing construction activity, limits household mobility, generates housing inequality, exacerbates housing inflation, and produces shortages. But the socialists in charge were indifferent to basic economic principles and followed through on the concept anyway.
The previous government instituted rent controls during the coronavirus pandemic, and the plan immediately backfired. Before the law was implemented, landlords dramatically increased rent prices by more than 60%. Additionally, it produced a housing shortage in Argentina. Milei dismantled this law almost immediately, and the result was unsurprising to anyone who took an Econ 101 class: a boom in the supply of rental accommodation and lower rents.
MAGA Markets
Financial markets have contracted the Make Argentina Great Again bug. Government bonds have surged to their highest levels in four years, while the country's risk index is at a two-year low. Investors emphasize their confidence in the new regime, especially as Milei purchased $5 billion in US dollars to bolster depleted reserves and rolled over import debts. Traders are also confident that Milei will strike a favorable agreement with the International Monetary Fund (IMF), an institution to which the country owes approximately $45 billion. Could this mean Buenos Aires is on the cusp of credit upgrades? It might be premature, but experts say it is possible as they monitor the situation unfolding in Argentina.
Tears of Joy in Argentina?
Of course, this does not mean Argentina has transformed into a libertarian oasis overnight. There is still plenty of misery and suffering throughout the country after decades of incompetence.
The cost of food remains exceptionally high, labor strife is intensifying, and several estimates suggest poverty has risen toward 60%. Argentina might already be in a technical recession – defined as back-to-back quarters of negative GDP – though it is unsurprising since many had anticipated this heading into the election. Still, Javier Milei is racking up monthly successes and proving that libertarian or common-sense ideas cure the ineptitude and uselessness of socialism.
After years of living crisis to crisis, the AnCap rockstar is allowing the sick patient to heal without masking the illness with perpetual drug interventions.
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