1 of 6 Javier Milei promised to drastically cut public spending, but his “chainsaw plan” was met with major controversy Photo: Getty Images/Via BBC Javier Milei promised to drastically cut public spending, but his “chainsaw plan” was met with major controversy major controversy accompanied controversial Photo: Getty Images/Via BBC
Javier Milei assumed the presidency of Argentina less than a month ago, on December 10th.
But the measures he announced were so numerous and so devastating that many Argentines find it difficult to believe that the “libertarian” government has less than three weeks left in power.
On Wednesday (27), the new Argentine president sent a legislative package to Congress that amends or repeals around 20 laws in various areas such as taxes, elections and criminal law.
The package consists of more than 600 initiatives to be debated by Argentine lawmakers in extraordinary sessions called by Milei until January 31.
This is the third and final part of the series of liberal reforms proposed by the new leader since he came to power earlier this month.
Last week, Milei sparked controversy when he announced another package of measures on national television these were approved directly by the executive branch without being debated in Congress.
The “megadecree,” signed on December 20, hours after the first of several protests by social organizations, amends or revokes 366 laws in the country. The aim is to deregulate several sectors of the economy, from work to commerce and real estate to health and sport.
The controversial “Decree of Necessity and Urgency” (DNU) caused several stirs in different parts of the country and questions about its constitutionality that should reach the Argentine courts.
One of the measures provides for price deregulation, which will further increase the cost of living in the country.
In addition to both packages, there is also the very strong adjustment that Economy Minister Luis Caputo announced two days after taking office.
Among the “emergency measures” that Caputo introduced as part of the shock therapy to lift the Argentine economy out of its stagnation was the sudden 54% devaluation of the peso against the dollar, which immediately affected prices in shops and supermarkets.
All these measures, coupled with the unexpected storm that caused enormous destruction and loss of life in parts of Buenos Aires province, made December a dizzying month for many Argentines who are ending the year full of fear and anxiety.
But how many of these ads match Milei's promises during the campaign, when he appeared at rallies armed with a chainsaw, symbolizing his proposed public spending cuts?
And what happened to your proposals to dollarize the economy and “blow up” the central bank?
2 of 6 One of the main proposals of Milei's campaign was the dollarization of the economy, which was not included in the new government's first measures Photo: Getty Images/Via BBC One of the main proposals of Milei's campaign was the dollarization of the economy, which was not included in the first The new government's measures were ignored Photo: Getty Images/Via BBC
Most of Milei's legislative proposals, both in the controversial DNU and in last Wednesday's package, are in line with his “liberal and libertarian” ideas. Finally, they want to eliminate many of the rules that restrict market freedom, which is their main goal.
The drastic spending cuts announced by Caputo were also expected.
One of Milei's key campaign promises was to reduce the budget deficit (i.e. the imbalance between government revenue and expenditure).
The president believes that the deficit is the cause of all of Argentina's economic problems, especially inflation, which already exceeds 160% per year.
But during the election campaign, Milei assured his supporters several times that the adjustment would fall “on caste,” as he pejoratively calls the political sector.
After taking office, Milei replaced the word “caste” with “state”.
In his inaugural speech, he declared that the adjustment would fall “full force on the state and not on the private sector.”
In fact, his first action as president was to issue a decree halving the number of ministries from 18 to 9 and reducing the number of secretariats from 106 to 54.
According to Caputo, “hierarchical political positions and 34% of the total number of political positions in the nationstate were reduced by more than 50%.”
The new government also announced it would cut other benefits that politicians are normally entitled to, such as the use of advisers, drivers and cell phones.
“When we arrive [ao governo], my sister began to analyze. We had 121 cars. Two drivers per car for the General Secretariat of the Presidency. “Everything has been removed,” Milei said in an interview with Argentine television channel LN+ on December 26.
“Luis Caputo found 600 [carros no Ministério da Economia]”Milei continued. “Out! Privileges are gone.”
On the same day, the Argentine president signed another state reduction decree, terminating the contracts of around 7,000 public employees hired last year.
The President explains that, taking into account all these savings and the oneyear freeze on public works and public advertising, the Argentine State will be the most affected by the cuts.
“60% of the adjustments fall on the public sector and 40% on the private sector,” repeats Milei in several interviews with local media supporting him.
3 out of 6 Milei guarantees that his adaptation plan is the first to fall primarily on the state and not the population, but his critics claim the opposite Photo: Getty Images/Via BBC Milei guarantees that his adaptation plan is the first to fall mainly at the expense of the state and not the population, but its critics claim otherwise Photo: Getty Images/Via BBC
However, critics of the libertarian president point out that his “chainsaw plan,” as it has been called by the press, primarily affects workers and not “the caste.”
According to the construction union, his plan to freeze public works, for example, will put around 250,000 workers out of work.
The proposal to suspend the socalled “official agenda” (the government's institutional announcements in the press) for a year will lead to layoffs and could lead to the closure of small media companies that rely heavily on this revenue.
The biggest blow to workers, however, was the dizzying rise in the official dollar, which rose from around 400 pesos to over 800 pesos in an instant.
And the resulting transmission of that increase into prices caused inflation to double that month, rising from less than 13% in November to over 25% in December, according to most private consultancies.
The influential North American investment bank JP Morgan has even calculated that the price increase in the Argentine summer will reach 60% per month.
And there is also the announcement that from January energy and transport subsidies, which are one of the main causes of the budget deficit, will be cut.
Currently, these subsidies represent a large percentage of the price of fuel and utilities.
And millions of people depend on this government help.
“This is not about politics, but about Argentines,” summarized the wellknown Argentine radio journalist Marcelo Longobardi.
Economist Diego Giacomini, who was Milei's partner for 15 years and wrote four books with him before cutting ties, said he was unsure whether the burden of adjustment would fall primarily on the state.
“Javier Milei always promised that the caste would pay for the adjustment plan, not the people, [mas] If we look at the measures based on the official figures from the Ministry of Economy, we see that 67% of the adjustment is paid for by the people and not by the caste,” he told Perfil newspaper.
“With generosity, only 37% would have a chance of not being paid by people,” emphasized Giacomini, director of economic consulting firm E2.
4 out of 6 Critics of the new government claim that the 'chainsaw' plan is actually a 'liquidisation' of salaries Photo: Getty Images/Via BBC Critics of the new government claim that the 'chainsaw' plan is actually a 'liquidisation' the salaries are. is a salary mixer Photo: Getty Images/Via BBC
“Chainsaw vs. Blender”
Many people in Argentina fear that the adjustment will push a significant portion of the middle and lower classes below the poverty line.
According to the latest Argentine Social Debt Survey conducted by the Argentine Catholic University (UCA), this level already reaches almost 45% of the country's population.
Even before the new government took office, a third of registered workers were poor due to real wage cuts.
And this problem will now get worse as inflation accelerates even further.
“[Milei] “He traded the chainsaw for the blender,” accused Carlos Melconian, former candidate for economy minister of the centerright “Together for Change” coalition, in an interview with Rádio Miter in Buenos Aires.
For the economist, the actual cost reduction is achieved by liquidating the purchasing power of salaries and pensions.
Some also argue that the new government's measures to reduce the size of the state have more symbolic than real significance, as they represent a very small saving for the state treasury.
“Pure smoke: the cut in Javier Milei's cabinet represents 0.00142% of GDP,” the political journalism portal Letra P emphasized in a headline, referring to the economy compared to Argentina's gross domestic product.
Critics point out that the official announcements do not include salary cuts for officials and lawmakers.
“There is money for the capitalists and an adjustment against those who have less, which contradicts exactly what Milei said, that the adjustment would be paid for by the caste,” emphasized the leader of the social organization Polo Operário, Eduardo Belliboni, who called for this first march against the adjustment government on December 20th.
“Caste is in the government and adjustment is done by the people who pay,” he charged.
However, the government emphasizes that in addition to the adjustment measures, a 100% increase in support for families with fewer means through the general child allowance has been announced and the food card has been increased by 50%.
“We are making a big effort,” explained Milei.
5 of 6 Javier Milei doubled the monthly allowance that the government pays to families with children 56% of Argentine children come from poor families Photo: Getty Images/Via BBC Javier Milei doubled the monthly allowance that the government pays to families with children 56% of Argentine children come from poor families Photo: Getty Images/Via BBC
But it is not just the liquidation of wages that has an impact on the wallets of Argentine workers, who, according to official statistics, have already lost around a quarter of their purchasing power due to the constant devaluation of the peso and rising inflation since 2017.
The other route that Milei plans to use to achieve its goal of reducing the budget deficit by around 5% of GDP is by increasing certain taxes.
This increase is so antithetical to libertarian ideals that one of his most famous and frequently repeated phrases before he came to power was: “I would rather cut off an arm than raise taxes.”
His critics now often remember this quote on social media.
But his first package of “emergency” economic measures raised taxes on imports, exports and the purchase of dollars.
And the most controversial thing is that the new president has declared that he is ready to return a tax that he himself had voted to abolish, just two months before his election victory, when he was still a national MP.
It is an income tax (or “profit tax,” as Argentinians say) that was abolished last September at the request of the then Minister of Economy Sergio Massa Milei's opponent in the presidential election with a vote favorable to the libertarian.
On September 19, Milei gave a short speech outlining her support for the measure before voting to repeal the tax.
For him, “the state is a violent criminal organization that thrives on a coercive source of revenue called taxes, and therefore taxes are an attack and I will agree to any initiative that consists of reducing taxes.”
Milei added that the income tax “punishes capital accumulation, which ultimately manifests itself in fewer jobs, lower productivity and lower wages.”
“But as if all this were not enough,” he continued, “we are faced with the enormous illusion of treating wages as profit, which is a complete illusion and therefore this tax is also dirty and must be abolished.”
6 of 6 Argentina's Economy Minister Luis Caputo guaranteed that his measures would create more jobs and reduce taxes Photo: Getty Images/Via BBC Argentina's Economy Minister Luis Caputo guaranteed that his measures would create more jobs and reduce taxes Photo: Getty Images/Via BBC
Now in office as president, Javier Milei said he is ready to reintroduce this tax to help finance provincial governments that rely on this revenue to pay their salaries.
Therefore, he included the bill as a third item in the topics submitted to Congress when it called for extraordinary sessions starting December 26.
“To me it doesn't seem nice at all, but the reality is that it is [a revogação da lei] “A great imbalance is created in the provinces,” argued the Argentine president in an interview with LN+.
Government spokesman Manuel Adorni also justified the aboutface in one of his daily press conferences.
“As an MP, Milei voted to abolish the tax. He never failed to express this at the appropriate moment [a medida] “It had to be accompanied by a reduction in spending, which is what the executive branch should do,” he explained, criticizing the government of previous President Alberto Fernández, which reduced spending and then increased it again.
Javier Milei also stressed that he prefers to reintroduce this tax, one of the most progressive in the country, rather than sending national funds to the provinces, as this would not allow him to achieve his goal of achieving a balanced budget in 2024.
“We will not change our zero deficit policy, it is unshakable,” he explained in an interview with Rádio Rivadavia.
This reversal must be submitted to Congress, which may or may not approve it.
But Milei claims it will be a temporary measure while the country's economy recovers and the central bank's reserves, currently in the red, increase.
The president said the same thing about his overall adjustment plan: “What falls on the private sector is temporary,” he said.
This concept was confirmed by his spokesman Adorni: “This is an emergency package and any upward correction will be very shortterm.”
The Minister of Economic Affairs asked for patience.
“You can trust that once the country takes off and we have a surplus and an economy, we will give everything back to the people,” Caputo told broadcaster LN+.
“How? With fewer taxes, with more job opportunities. And we will get there faster than anyone thinks.”
But many are skeptical about the possibility that Milei will ultimately cut taxes even those who share the same ideology as the government.
“In Argentina, transition taxes are permanent,” emphasized liberal economist Roberto Cachanosky on X, formerly Twitter.
He stressed that the income tax itself was introduced on a temporary basis, and listed three other taxes that were introduced “as an emergency” and later retained, including “withholdings” or export duties, introduced with the 2001/2002 crisis and eventually increased again by Milei became .
The three controversial packages that Milei announced in his first weeks as president ignored what was perhaps his most controversial proposal during the election campaign: the abolition of the peso and its replacement by the US dollar, with the resulting closure of the Central Bank Argentina.
When asked about these famous election promises, the Minister of Economic Affairs assured that they were still in sight.
“The president has always advocated for dollarization and closing the central bank, and those banners have not been lost,” Caputo said.
“A lot of people ask and they continue to be the figureheads.”
However, for the minister, these measures “cannot be the starting point”.
“We admitted a patient to the intensive care unit,” he said.
“First we have to take him out of intensive care… you can't send him to exercise the next day. We are in this process, doing what needs to be done and is the only thing that could be done.” ”
“The starting point is controlling this chaos,” Caputo said, and dollarization “is the goal.”
“The President does not lie and I want to make this clear: it is necessary to have a real contract with the people,” concluded the minister.