Argentine President Javier Milei declared a fiscal victory in his government’s fight against inflation and economic turmoil on Monday. In a televised national address, Milei announced that Argentina recorded its first quarterly budget surplus in over 15 years during the first three months of 2024.
The surplus of around 275 billion pesos, or $315 million, amounted to 0.2% of the country’s gross domestic product for the January-March period. Milei heralded this as an “historic achievement” and claimed it validated his administration’s austerity measures aimed at reining in public spending.
“Our plan is working,” the libertarian leader proclaimed. “If the state does not spend more than it collects and does not issue (money), there is no inflation. This is not magic.”
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Milei, who took office in December vowing drastic economic reforms, has moved swiftly to slash government subsidies and cut public sector jobs. His aggressive deficit reduction efforts go even further than conditions set by the International Monetary Fund for Argentina’s $44 billion loan program.
“The fiscal surplus is the cornerstone from which we will build the new era of prosperity in Argentina,” he said.
The speech highlighted early progress, but Milei cautioned that major challenges remain for reviving Argentina’s crisis-stricken economy. Annual inflation sits at 290%, poverty levels have soared to 60%, and wages have plummeted.
“I know the situation is difficult, but we’re more than halfway there,” Milei stated. “We’re going to give everything to pull this country out of the hell we inherited.”
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Milei’s economic “shock” treatment has sparked backlash from unions, the opposition, and much of the private sector. However, he dismissed critics and vowed no letup in austerity policies.
“Don’t expect a way out through public spending,” Milei warned sternly.
The cuts also impact higher education. Hundreds of thousands of people, primarily university students and teachers, along with unions and opposition parties, gathered on Tuesday to protest budget cuts in higher education.
However, many voters, after years of frustration from governments that failed them, are tolerant, if not willing to give the self-described anarcho-capitalist’s approach a chance. Investors and markets are also responding well to Milei’s shock treatment, sending bonds and equities soaring. But it may be too early still to celebrate.
“What they accomplished was impressive, but based on very short term measures,” Diego Ferro, founder of M2M Capital in New York told Bloomberg following Milei’s announcement. “Unless it changes into structural changes, it will likely become another ‘I told you so story’ ending in tears.”
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