From Buenos Aires to Davos, Milei’s bold reforms spark fervent debate and global attention, challenging traditional economic paradigms while navigating domestic dissent and international scrutiny. The next step is up to Congress.

During the campaign, Argentine President Javier Milei often brandished a chainsaw as a potent symbol of what he would like to do to the administrative state, and how he would like to do it. Two months after his inauguration, Milei’s actions have lived up to his campaign promises and signature image. His administration has initiated an aggressive battery of reforms that have shocked the establishment and general population alike.  

On 10 December, the newly sworn in as president proclaimed “There is no alternative to austerity.” Forgoing a sugar-coated assessment of Argentina’s economic situation, Milei warned of the difficulties and pain that lay ahead.  

Two days later, Minister of the Economy Luis Caputo presented a lengthy list of economic reforms. Overnight, the peso was devalued by over 50 percent, which accelerated an already hyperinflationary environment, but it also cheapened Argentina’s exports, making them more competitive in the global market. Concurrently, taxes on imported goods were set to increase from 7.5 percent to 17.5 percent, generating much-needed revenue for the government’s depleting coffers. Meanwhile, plans to cut subsidies for electricity and transportation were announced, and all public works projects have been suspended. 

Then, on 20 December 2023, Milei signed a presidential decree, known as the Megadecreto or “mega-decree.” Consisting of 366 articles, the decree changes or revokes existing laws in order to deregulate and privatise Argentina’s economy. Using emergency powers, the decree was met with both acclaim by Milei’s supporters and outrage from his detractors. One week later, on 27 December, Milei sent an enormous “omnibus reform bill” to Congress, pushing for substantial changes to the country’s tax system and electoral law.  

It did not take long for the expected court challenges and wrangling within a special session of Congress to follow. Congress has until March to piece through the reform bill, the result remaining unseen, given Milei’s party’s limited numbers. It has already proven to be an uphill battle for the new president. The groundswell of Milei’s detractors culminated in a massive workers strike on 24 January, protesting the perceived undemocratic nature of the decree, the loss of purchasing power, and the deregulation of labour laws. The strike, organised by Argentina’s largest labour union, CGT, brought thousands onto the streets and shut down major roads in Buenos Aires.  

The week before, President Milei flew to Switzerland to take part in the World Economic Forum. The annual event in Davos is a conglomeration of “who’s who” in big companies and global government. While his detractors might see Milei’s presence in Europe as indecorous, the newly elected libertarian economist was there on a mission. 

On 17 January, Milei took to the stage and gave a fiery, unapologetic speech that quickly went viral. Milei spoke of free markets and the dangers of socialism to a crowd that, in his estimation, and the estimation of others like Elon Musk, has grown complacent. “Unfortunately, in recent decades,” Milei began, “the main leaders of the Western world have abandoned the model of freedom for different versions of what we call collectivism.” 

Milei then went on to analyse global GDP growth and stagnation over the last two thousand years. Recalling Argentina’s history with socialist programs and its lack of growth, Milei demonstrated how failed policies have kept Argentina destitute while going after neo-Marxist thinking he felt had infiltrated the thinking at Davos.  

“Socialism is a phenomenon that creates poverty,” Milei said, not mincing his words. “Free enterprise capitalism is the only tool we have to end hunger and poverty. Let no one tell you that your ambition is immoral. If you make money, it’s because you offer a better product at a better price.”  

The theatrical speech seemed to strike a chord with the corporate leaders and power brokers listening on headsets at the forum, which was precisely the point. In recent years, Argentina has become, by far, the largest debtor of the International Monetary Fund (IMF), and potential investors have come to view Argentina as an unsafe bet. Milei has openly sought to change such perceptions. 

While Milei’s speech at Davos was a strident celebration of free market capitalism, equally important is his new administration’s adherence to fiscal austerity. In December, Luis Caputo announced: “We have come to solve the addiction to fiscal deficits,” citing Argentina’s long history of indebtedness. Together, the combination of fiscal austerity, along with Milei’s public embrace of free market practices, entrepreneurism, deregulation, and privatisation, have begun to turn heads around the world. 

At Davos, Milei also held meetings with IMF chief Kristalina Georgieva. Apparently, she liked what she heard and, expanding on her first impression of Milei, the IMF chief went on: “We talked about Argentina’s deep economic and social challenges and the decisive steps underway to bring down inflation, promote private sector-led growth, and use scarce public money to help the most vulnerable people.” 

Milei came away from the meeting with his policies celebrated as “bold initial actions.” His meetings with various world leaders were equally met with optimism, all of which could open doors to much-needed injections of capital from the international community. 

While making hard choices at home to tame inflation and maintain fiscal responsibility, Milei has signalled to the world that Argentina is open for business. However, the new president does not command a majority government, so compromise is inevitable and already underway amid congressional discussions of the omnibus bill and presidential decree.  

Reportedly off the table is the sale of YPF, the nation’s state-owned oil company. However, as perhaps a negotiation tactic, Milei’s administration stuffed the bill with so many reforms that, even after concessions are made, Argentina’s economic landscape will likely look quite different. 

That said, Argentina’s Congress has the power to kneecap much of what Milei strives to do. Whether they will embrace their new president’s “bold initial actions” is the question. Time will tell.  

Fernando Rodriguez is based in Santiago, Chile. He is a Senior Partner at Stanton Chase where he leads the Natural Resources and Energy practice for Latin America.  He holds a degree in economics and a Master’s degree in International Trade from Monash University. 

This article is published under a Creative Commons License and may be republished with attribution.