Notes on Argentina
jorgevelez.substack.com
jorgevelez.substack.com
The picture in Argentina was not rosy before Milei took office, it was a country on the verge of hyperinflationary collapse, with a population declining through emigration, a largely informal economy in decline, and people struggling to keep up with dramatic inflation.
I don’t know of another case where hyperinflation was arrested without introducing a new currency. Milei has apparently done it by simply cutting spending, which naturally comes with some pain as the subsidies and government employment are curtailed, but a sound currency sets the stage for distributed investment, lending, entrepreneurship and growth.
More recent policy changes have focused on opening up the country to exports and imports, which will be key to bringing about prosperity through growth in industry, and bringing prices into line with international norms. https://www.msn.com/en-us/politics/government/javier-milei-d...
This might be a valid observation in most other countries, but Argentina has been a basket case for ages. It’s defaulted nine times in a little over 200 years, and two of those defaults were in 2014 and 2020. I think this is one of those cases where you might could attribute a dramatic one or two year turnaround to the person actually doing something new (spending less).
The most prominent crashes I can remember are in the late 90s/early 2000s and the current one.
I'm just commenting on this specific article, in which the author repeatedly makes firsthand contact with the immediate outcomes of Milei's policies, finds them to be generally bad, and concludes that the experience is evidence that things are going well.
But the real issue is, the "oficial" dollar rate is controlled by Central Bank, and it won't be for long. When, as he promised, he let the peso float totally free, we'll really know even if the inflation can continue at 30% yearly.
Let alone, together with this, the growth of this year, that will likely pressure the inflation. They managed to reduce the inflation to 2.7% monthly, while the country was in a 3% GDP recession.
They're more likely to understand how they're better off than a tourist, or someone reading what a tourist wrote.
One thing that is amazing, is how quickly Milei was able to make these changes. I’m guessing Argentinian law allows the president a lot of power to make changes quickly. By comparison, efforts to make the government more efficient in America will probably fail because they will be bogged down in lawsuits and obstruction.
Milei's speech at Davos 2025: https://www.weforum.org/stories/2025/01/davos-2025-special-a...
The president has power to make only small changes in Argentina, but the previous system was so flawled that any minor change resulted in noticeable changes to the general economy.
[1] https://en.wikipedia.org/wiki/Law_of_Bases_and_Starting_Poin...
Milei is undoubtedly a skilled influencer. On a more practical note, consider this: if your software company needed a few laptops or notebooks to operate, you were previously limited to importing them by courier with a cap of USD 1,000, which was only recently increased to USD 3,000 a few months ago. This is one Apple powerful notebook, including taxes.
When it comes to managing inflation, certain strategies or "tricks" are often employed: inducing a recession, withholding increases in retirement benefits, and encouraging carry-trade practices [1]. In this binary world it is important to highlight that the previous governments were terrible.
[0] https://www.cato.org/blog/mileis-key-pending-task-ending-arg...
[1] https://www.investopedia.com/terms/c/currencycarrytrade.asp
Argentine industries have historically been prebendaries, relying heavily on state support, subsidies, and protectionist policies (e.g. corruption) rather than fostering competitiveness or innovation. This dependency created a system where industries benefited from privileges granted by the government, often at the expense of broader economic efficiency and sustainability.
[1] https://datacommons.org/tools/visualization#visType%3Dtimeli...
For example, companies like Samsung and others assemble electronics in a free-trade zone in Argentina, yet the final product prices are often double the international market price. This illustrates how policies intended to boost local production can become vehicles for inefficiency and potential misuse.
While Peronism has historically been associated with the country's decline, I don't believe it fully explains complex and multifaceted causes of Argentina's struggles until the XXI century.
As someone whose parents left Latin America a long time ago, this is why I'm still deeply skeptical of whether Milei's future will be a rosy one. Ideologies (libertarianism, communism, ancaps, etc) always seemed flimsy so long as there are mechanisms available for widespread abuse.
Moreover, cutting public services as aggressively as Milei did is bound to hurt the economy in the long term, with less access to education, healthcare, worsening public transit... All things companies rely on the state to provide their employees.
If you need proof of the dangers of austerity, take a look at the UK. They reduced spending, but are they really better off?
The picture in Argentina was not rosy before Milei took office, it was a country on the verge of hyperinflationary collapse. Given that starting position, IMO it’s remarkable how quickly things have turned around.
https://www.batimes.com.ar/news/argentina/expert-reports-say... https://x.com/marionawfal/status/1870100943418630363?s=46
All those people failing to notice Argentina was poor before Milei got the presidency either have no idea what they are talking about or are malicious.
Now, yes, about worsening public services; Milei did the basic thing so the country can actually do something, the real test for his government is how he fixes those problems. (From the shit he talks, I would be in he not fixing anything, but if he actually acted like he talks he wouldn't have got inflation under control and would probably be already out of the presidency by now.)
Also do keep in mind that in 2012 the Peronist government "intervened" the government's statistics department, and since then government stats were somewhere between unreliable and total fiction. Presumably that has changed now. Thus the poverty level before the election could have been understated, just as the inflation numbers then were.
But if you believed a country bordering hyperinflation had less than 50% of the population in poverty, I have a bridge to sell you.
It doesn't matter what the policy politics are. What's necessary is a non corrupt government.
The hyperinflation is invariably because of corruption, because when the corrupt steal everything and print money to keep the lights on temporarily.
Multifaceted shock changes like this smell of just another corruption shift. Deregulation is best accomplished by gradual reductions so all economic players have time to adapt. A shock shift probably means some insider is poised to cash in.
True libertarianism is insanity. Prohibition on murder and violence is a regulation. Use of currency is a regulation. The most libertarian unregulated market is illegal drugs, where mass murder and violence is used for business purposes.
Best of luck to Argentina.
Looks like today is the perfect day to keep repeating the things I've wrote.
This seems not true. The poor in countries with high gdp per capita are much better off than in countries with low gdp per capita. They are also better off than the poor were in prior times when those countries had lower gdp per capita. So some kind of trickling down must have happened.
It might be more convenient for your sense of moral indignation if it were otherwise but facts are facts.
Show me a single example of a country drastically slashing public spending and its citizens living better afterwards.
Poverty statistics are meaningless. The numbers under previous administrations were heavily manipulated and don't provide a solid basis for comparison.
The most recent reports say that it's now at 37%, it's probably correct, but take all reports with a grain of salt.
I'm not saying this is a good rationalization, but it is a fairly rational one, as those things go.
People couldn't even deal with 9% here.
There is no point in saving money at all with 200% inflation.
It is completely alien concept and unimaginable to anyone living in the US.
At some point they had to do something drastic.