Argentina's president, Javier Millay, talks about an “economic miracle” that, for the first time since 2008, allows the country to run a fiscal surplus. The libertarian, who arrived at the Casa Rosada in December, promised to cut the deficit. The question is at what cost – including loss of income for pensioners, wholesale cuts in public works and the end of energy subsidies.
“I understand that the situation we are experiencing is difficult. We are already halfway there. This time the effort will be worth it”, Miley said confidently during his 16-minute televised report that aired in prime time on Monday. I would like to announce that, contrary to the predictions of journalists and a large part of the Argentine establishment, the national public sector has recorded a financial surplus of more than 275 billion pesos. It was 0.2% of GDP in the first quarter of the year”, he said, an unprecedented situation since 2008.
The President, along with Economy Minister Luis Caputo and Central Bank Governor Santiago Pausilli, recalled that “zero deficit is not just a marketing slogan” but a “mandate”. This first surplus was “nothing but the starting point to end the inflationary inferno,” he got from the previous administration.
Miley described himself as a “world-class achievement” that proved he was “right” in wanting to use “Chainsaw” to address a crisis that left “60% of the population in poverty”. Official data points to 48%, with some expecting the situation to worsen when reading the president's number.
A surplus occurs when the government spends less than it collects over a period of time. This is the opposite of scarcity, which Millet considers “the cause of all the evils in Argentina,” the result of politicians' “obsession” with “spending what we don't have.” The result, he recalled, was the issuance of more currency once the sources of credit and tax increases were exhausted—and thus inflation. It was 11% in March, ten points lower than 20.6% in January. It's still high, about 70% year-on-year, but falling faster than the IMF had predicted.
Milei's positive numbers come at the expense of public investment, with cuts in public works and transfers of central funds to Argentine provinces (about 62% compared to the same period last year). On the other hand, there was a reduction in the real value of pensions due to inflation and salaries and social programs, and many subsidies were eliminated (67% reduction in energy subsidies or 32% in the university budget).
The General Confederation of Labor (CGT), an Argentine trade union, condemned the “liquidation of pensioners' incomes”, a 40% decline in the space of a year. Pensions (except those too low to prevent them falling below the poverty level) rose by only 27%, below the rate of inflation.
The CGT has called for divestment in public universities, which took thousands to the streets yesterday. As the budget for universities has not been updated, some “can't function in the second semester,” they say. Millay's problem with public universities goes further, accusing him of “political indoctrination”, while critics decry attempts to “portray universities as centers of corruption”.
The question is whether Miley can keep up the positive results. Last week, in a speech to businessmen in Bariloche, the president issued a challenge: “Guys, at some point you have to be brave and invest”. Argentina is celebrating the fact that country risk has fallen to almost half of what it was in November, an indicator of rising market confidence and a replenishment of central bank reserves. But there are problems because with rising costs and falling sales, there are companies that are laying off employees and investing is not in their plans.
As for whether the surplus will last, Argentine newspaper La Nación wrote yesterday that the optimists believe so, though “note that there are those who argue that cutting everything and sitting back is “unsustainable”. Back to top”. The question is how long Mili will rely on popular support (50% already give him a negative rating in opinion polls).
Meanwhile, human rights activists, including 1980 Nobel Peace Prize laureate Adolfo Pérez Esquivel, petitioned the Argentine Congress for a “political investigation” of Miley for “poor performance of her duties and possible crimes.” More and more are accusing the president of an “economic genocide” affecting the Argentine population.
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