On Sunday, Argentina took a sharp turn as libertarian economist Javier Milei was sworn in as president, introducing a radical approach to address the country’s worst economic crisis in decades. The move comes as Argentina faces rapidly escalating inflation, heading towards 200%.
Javier Milei, a 53-year-old former TV pundit known for his provocative language against rivals, China, and the pope, received the presidential sash from the outgoing Peronist president, Alberto Fernandez, during a ceremony at the packed Congress, with crowds gathered outside.
Milei’s unconventional economic plan involves sharp spending cuts, which has resonated positively with investors. While it could potentially stabilize the embattled economy, there are concerns that the austerity measures might exacerbate the hardship for a population where over two-fifths are already in poverty.
Elected in a November run-off against a ruling Peronist coalition candidate, Milei’s victory represents a major gamble for Argentina. His sometimes radical ideas include proposals to shut down the central bank and implement dollarization.
Many voters who supported Milei expressed a willingness to take the risk on his unconventional approach, viewing him as the last hope amid years of economic crises and what they perceive as inept governments. Some of the challenges Milei faces include Argentina’s negative net foreign currency reserves, estimated at $10 billion, annual inflation at 143% and rising, an impending recession, and capital controls affecting the exchange rate.
Argentina has a history of boom-bust cycles, characterized by money printing to fund deficits, leading to inflation and a weakening peso. The situation has worsened in recent years, with dwindling reserves and external factors like a major drought affecting key crops.
Additionally, Argentina needs to restructure its $44 billion loan program with the International Monetary Fund (IMF). Milei will also need to navigate diplomatic relations with significant trade partners like China and Brazil, both of whom were criticized during his election campaign.