It may be frivolous to say that in Buenos Aires – with inflation already heading towards 200% and families of three or four children sleeping on the sidewalks – one can have a pretty good time. But the complaints of some foreign visitors who come to Buenos Aires are still a bit hypocritical. Especially when it comes to those who comment, already with enthusiasm, on the expectations for the new government of Javier Milei, which will take office today.
Andrés Oppenheimer, for example, veteran columnist for the Miami Herald: “I had to pay for my meals with huge wads of 100 pesos,” he lamented after visiting the Argentine capital to promote his book How to Get Out of the Well. “A dinner for two cost 35,000 pesos, about $35 at the black market exchange rate.”
“At the end of our dinner in a chic Peruvian restaurant, my Irish uncles made gestures of astonishment as they photographed the stack of bills needed to pay the $90,” comments a journalist from the Financial Times. “I was dying of shame.”
The truth is that there is an easy solution for those who are embarrassed to pay for dinner with wads of bills: use a credit card. Although the bank applies the official exchange rate of 450 pesos per dollar, it will not be excessively expensive for a tourist, much less a well-paid columnist for an international media. And it will be even less so next week, when the new government lowers the official rate to 650, as predicted by Interior Minister Guillermo Francos.
At the Chiquilín restaurant, for example, on Montevideo Street, I paid for dinner with a visa card – first course of spinach fritters, second strip of roast with a glass of Malbec wine from Mendoza. It cost ten euros, according to the exchange rate applied by CaixaBank. El Chiquilín was packed with diverse people, even at one in the morning. There were plenty of tourists and other locals spending their remaining pesos before the next phase of devaluation and the inevitable rise in inflation.
The same thing happened in the modernist Club Español, on 9 de Julio Avenue, with its immense painting of the Battle of Lepanto, or in other nearby restaurants, such as Imparcial or El Globo, so authentically Spanish that they would have already closed in Spain to be replaced by a gastrobar.
Tourists, many Brazilians, flock to Corrientes Street with its pizzerias and theaters – where Milei performed as a stand-up comedian – to take advantage of the cheap peso. Whoever has dollars can have a great time in Buenos Aires.
The real problem is for Argentines who do not have dollars, that is, the vast majority. The average salary is an amount in pesos equivalent to 331 dollars, six times less than during the government of Mauricio Macri (2015-2019) or Cristina Fernández Kirchner (2007-2015). This is the nominal salary. If three-digit inflation is taken into account, it can be understood that the purchasing power of the average Argentine plummets. Put another way, this is the worst time to face a textbook Chicago School adjustment.
Many middle-class Argentines who voted for Milei want the libertarian to end the inflationary vice through a mega-adjustment that cuts subsidies to the poor, transportation, health, education and fuel. But few have assimilated what Milei has never hidden. The first phase of the adjustment will involve an acceleration of inflation as the peso is devalued in a full liberalization of the exchange rate.
For fear of provoking unrest, “I don't think Milei dares to cut subsidies to the poorest at this time, so the weight of the adjustment will fall more on the lower middle classes due to the rise in prices,” said one veteran journalist in Buenos Aires. Those are precisely the ones who voted for Milei.
Everyone in Buenos Aires assumes that on Monday the official peso will be devalued by 40%. This will result in a skyrocketing of prices. It's already happening. Supermarkets are already preparing an imminent increase of 30 or 35%. Gasoline just went up 15%. This is just the beginning. “Yerba mate increased by 35%, flour the same, from 35% to 40%, or an outrage,” said the president of the federation of grocers in Buenos Aires in an interview with La Nación.
The outgoing center-left government of Alberto Fernández already eliminated price controls and attempted to protect the purchasing power of the average Argentine through a complex system of multiple exchange rates and gradual deprecation, although the IMF wanted more. Milei is going to accelerate everything and the paradoxical result will be that the first phase of the anti-inflationary adjustment is going to be one of skyrocketing prices.
With the other hand of libertarian adjustment, Milei intends to cut public spending by 3% of GDP, which will cause a slowdown in the economy and the destruction of employment. It will not be the “chainsaw” adjustment that the far-right libertarian announced in the campaign when he said that the cut would be 15 points of GDP. Milei, in the presidency, is not the provocateur that he was.
But, coinciding with the rise in inflation, the result will be a more serious social crisis than what exists. The period of adjustment and stagflation can last six months, up to a year. Perhaps Milei's resounding victory will reduce the capacity for action of the unions and the famous picketers. Some in Buenos Aires quote Perón: “The most sensitive viscera of the human being is the pocket.”
Of course, those complaints about annoying wads of cash in the influential international media have a purpose. They are the preamble to applaud Milei's arrival to the presidency, already normalized in the global narrative and incorporated into the mainstream after his pact with former President Macri. “Milei is a pragmatist,” Oppenheimer said. From now on, the crazy people, extremists and radicals will not be Milei's libertarians, but those who protest against his adjustment.
