After being elected, Javier Milei immediately started implementing bold measures. His economy minister, Luis Caputo, a former banker, swiftly announced initiatives to reduce public spending by 3% of GDP, devalue the peso, cut subsidies, and eliminate nine out of 18 government ministries. A week later, Milei decreed the potential privatization of state-owned companies, removal of price controls, and reform of labour laws, all aimed at pushing the budget into surplus by the end of 2024 amid Argentina’s most severe economic crisis in decades.
Milei’s government efforts were acknowledged by the International Monetary Fund (IMF). The IMF, owed $43 billion by Argentina, decided to resume pay-outs, commending Milei’s government for its rapid and decisive actions to restore macroeconomic stability. However, Milei’s agenda extends beyond fiscal rectitude; he is determined to dismantle what he refers to as “the caste” – a network of corrupt politicians, business associates, compliant media, and influential unionists.
Another key idea in Milei’s political vision is the need to dismantle the oppressive state. On December 27th, he presented a comprehensive bill to Congress aimed at freeing the nation’s productive forces from what he views as the oppressive state. The bill proposes granting Milei decree powers for two years and altering Argentina’s electoral system. In light of the extent and significance of the reforms proposed by Milei, it is not hard to infer why they were met with strong opposition.
One month into Milei’s presidency, various groups are pushing back against these reforms. The people impacted by the reforms cover a wide range, from national giants like football clubs to the middle class as well as the working class, which gives us an idea of how pervasive Milei’s government has been so far. For example, football clubs are trying to avoid plans to turn them into limited companies in order to attract investment from what Mr Milei calls “Arab groups”. Lawyers oppose plans for expedited divorces, doctors resist a requirement to prioritize generic medicines, and artists protest the closure of cultural institutions. Similarly,
fishermen are cross about permit deregulation and sugar producers are railing against plans to remove import-tariff barriers.
A particular target of Milei’s new policies has been trade unions, which now vehemently oppose Milei’s labour reforms. These reforms would necessitate employees to opt-in to union membership, rather than having dues taken automatically. As a result, Union financial standing may be jeopardised. In response, the General Confederation of Labour (CGT), Argentina’s largest union group, declared a national strike for January 24th, a record-setting response within 44 days of Milei’s term. They are also taking actions before courts. The chapter on labour reform in the emergency decree was suspended by a court, following an injunction filed by the CGT. Therefore, whether Milei’s government will be able to implement the most far-reaching of their reforms is in question. Ultimately, public discontent and opposition coming from several groups, including the most influential unions in the country, may not only halt the government’s reforms but also generate further instability.
Currently, the plan to build up the central bank’s net foreign exchange reserves by raising import and export taxes, and by devaluing the pesos, is likely to be opposed by the Congress. The latter has not yet approved the tax rises and by the time it might does so, the amount recovered might not be sufficient to achieve the reform’s aim, especially due to recession. Similarly, the fate of the omnibus bill, which includes controversial measures like ruling by decree, changing the electoral system, and enforcing prison terms for protesters, hangs in the balance. Apart from whether the reforms will be implemented, another aspect to consider is whether they would be sustainable. Given the obstacles already encountered and despite an initial positive market reaction, scepticism is growing among investors regarding the political viability of Milei’s ambitious plans.
Ultimately, although Milei’s government has certainly readily set the tone for their mandate, whether their political views will be implemented remains unclear. The growing opposition across society, especially that coming from powerful unions, the Congress’ apparent reticent attitude and the court’s power to alter reforms, combined with the economic crisis the country is facing, might put a halt to Milei’s ambitious reforms. When the bigger picture is considered, it becomes more likely that the circumstances will diffuse Milei’s potentially dangerous plans for Argentina.
By The European Institute for International Law and International Relations
