Argentina’s Javier Milei begins his radical experiment in libertarian rule

The new president is overriding Congress to push through reforms

Argentina’s Javier Milei begins his radical experiment in libertarian rule

Image: DPA

A very December  in Argentina protesters gather in the Plaza de Mayo, Buenos Aires’s central square, to mark the riots that took place during an economic crisis that month in 2001, which left 39 people dead across the country. This year, left-wing organisations again called for thousands of people to take over the square on December 20th. They were angry about a series of shock-therapy measures taken by Argentina’s new government, run by the libertarian Javier Milei, including plans to slash annual public spending by 3% of gdp.

But the new government was prepared. Days before, Patricia Bullrich, the hawkish security minister, had made an announcement that piquetes, or the type of disruptive protests popularised after 2001, would be dispersed if they attempted to block roads. Later, another minister warned that those who block roads during marches could have their welfare payments cut. As a result, the protest was underwhelming. It was an initial boost for Mr Milei, who some analysts doubt will be able to see out his full term.

Indeed, even as the demonstrators went home, Mr Milei had more shocks in store. That evening he announced a sweeping package of over 300 measures to deregulate many sectors of Argentina’s economy. It repeals or amends 30 laws ranging from the small—one law forced food retailers to stock at least five different brands of biscuits and dedicate 5% of each aisle to products from “family, peasant or indigenous farms”—to the significant.

One reform opens the door to the privatisation of the country’s 33 state-owned companies. Another change will introduce competition in protected industries. Nestled in the 83-page package is a clause that could also lay the foundations for the dollarisation of the economy. It stipulates that contractual obligations and debts can be expressed and settled in a foreign currency, even when it is not legal tender in Argentina.

The decree contains much else, including a boost to generic over branded drugs, which could reduce the cost of medication, and significant labour reforms. Severance payments may now be replaced by unemployment insurance after a collective-bargaining agreement, and could be reduced. Employees can be dismissed if they participate in strikes that block the entry or exit of people or goods from the workplace, and workers in “essential” sectors, including health and education, will have to continue to provide 75% of services even if they go on strike.

In addition, the decree weakens the power of trade unions. For example, trade-union members currently pay part of their health-insurance premiums into a social-security fund run by the union, which keeps a share before transferring the funds to health-insurance companies. The measure ends the involvement of the unions. Such reforms will probably be challenged in court. Hugo Moyano, a leader of the lorry drivers’ union, described the measures as “unconstitutional”.

Since the decree is long and diverse, it is likely to take years for its full effects to become apparent. Yet Mr Milei has signalled he doesn’t plan to stop here. The morning after, he said “I’m warning you that more is coming”. He has signalled that his government wants to lift capital controls within a few months.

His government also wants to introduce a bill to shrink the size of the state. For that, he will have to face Congress. For the latest reforms, Mr Milei avoided this body, by declaring an economic emergency for two years, during which he can issue wide-ranging decrees. These cannot be changed unless both houses of Congress strike them down. This is contrary to what Mr Milei told The Economist in an interview in September, before he was elected. When asked if ruling by decree was an option, he responded: “No. All our proposals are intended to go through Congress.” Some opposition politicians warned that Mr Milei’s moves appeared illiberal. “Don’t be afraid of democratic debate,” Germán Martínez, the leader of the opposition Peronist coalition in the lower house, taunted him.

Mr Milei appears to be by-passing Congress precisely because he has little support in it. His coalition controls just 10% of seats in the Senate and 15% in the lower house. Even with his centre-right allies, he cannot muster a majority in either house.

Instead, the president has provided clues as to how he plans to rule. One version is with the direct support of the masses. On the day of his inauguration Mr Milei broke with a tradition established after Argentina’s return to democracy in 1983, following a bloody military dictatorship. Rather than deliver his inaugural address to Congress, he turned his back on the legislative assembly and spoke to the crowd outside on the esplanade. In his first week in office Mr Milei broadcast himself live from the presidential office on Instagram, raffling off his last legislator’s salary to fans and showing viewers the baton he had designed for the inauguration, which included etchings of his five cloned English mastiffs.

Mr Milei is unusual in Latin America for his libertarian beliefs. However he is part of a broader anti-incumbent trend. Politicians who defy the status quo have been installed in power over the last few years across the region. Yet their ability to push through change is mixed. Reformists such as Gabriel Boric in Chile or Gustavo Petro in Colombia have seen their plans get stuck in Congress. Revolutionaries such as Pedro Castillo in Peru, end up trying to shut down Congress—and get ousted in the process.

Mr Milei looks as if he has taken note, and is trying to use his political capital early on to push through radical change. “He might have four or five months of honeymoon,” says Ignacio Labaqui of Medley Global Advisors, a consultancy. But if the president wants to be successful in the long term, he will need to work with Congress. ■

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