He was not one of those Buenos Aires people who believe that Javier Milei is a breath of fresh air for the decadent Argentine politics. He prepared his bed of old cardboard boxes on Viamonte Street, just behind the grandiose Colon Theater, where two thousand guests, the men in suits, the women, like Fátima Flórez, Milei's girlfriend, dressed to kill, had listened to opera and tango. , including Ballad for the Fool.
“What do you think that, three hours after announcing the biggest adjustment in history, the new president is holding a gala at the Colón Theater?” I asked the homeless man, one of thousands on the streets of Buenos Aires. “That's just how they are,” he responded, with a gesture of unfathomable resignation.
Those responsible for the event did not see any contradiction. “There is always a gala when there is a new president,” said one of the theater's production managers who was waiting at the door at the end of the party. “In any case, it doesn't cost more because all the costs – the workers, the musicians, etc. – are fixed, they get paid, even if there is no event.”
It may or may not be true. The theater's press office did not want to provide information on the matter. But the gala reinforced the feeling that Milei is no longer the rebel she was. “Who are invited to participate in the party for a few?” asked a radio presenter on Monday. “The usual caste,” he answered himself.
This impression was reinforced on Tuesday, when Luis Caputo, the billionaire Minister of Finance, former right-hand man of the magnate President Mauricio Macri (2015-2019), announced the first ten measures of the austerity, liberalization and deregulation plan.
The plan is not as radical as Milei's rhetoric in the elections. It was praised by the IMF and has the approval of the mainstream media, as well as the majority of economists from banks and market consultancies. The markets reacted favorably. “For economists, the measures are positive,” headlined La Nación. But the perception that Milei is already another member of the caste is deepening.
The measures include the suspension of all public works and the reduction of energy and transport subsidies. Caputo justified the first of these measures as follows: “Public works has always been one of the sources of corruption in the State, and with us that ends.” The cut in subsidies for fuel and transportation, on the other hand, is justifiable because “what they give you in the price of the (transport) ticket they charge you with the price increases in the supermarket.”
All of that may be true according to the liberal playbook. But construction companies estimate that the cancellation of public works will mean the destruction of 270,000 jobs and a sharp drop in economic activity. It has already provoked complaints in many provinces, which will be exacerbated by another measure: the reduction to a minimum of all transfers to the regions.
Cutting fuel and transport subsidies always leads to increases in inflation in other essential goods, such as food. In countries like Ecuador and Mexico, this measure unleashed riots and pitched battles against the police. The devaluation of the official exchange rate to 800 pesos per dollar – almost half of the previous value – will have immediate repercussions on inflation. Given the absence of currencies, there is a danger of uncontrolled devaluation in unofficial markets. Annual inflation of 200% is already expected, but it could be much more and hyperinflation cannot be ruled out.
Right now, the price of all basic foods is rising at a double-digit monthly rate. Now it will accelerate even more. Lately, restaurants in Buenos Aires use the QR electronic menu not because of the memory of covid but “because we have to change twice a day,” said a waiter at Los 36 Billares.
With these measures and those announced in the coming days, poverty and destitution will increase. There's no doubt. The first to join the ranks of the poor will be many of the eleven million retirees, whose pensions do not maintain their purchasing power. Caputo made no reference to the need to raise pensions to compensate for inflation.
It's still early. If Milei is able to maintain her image as an outsider immune to corruption, she may be able to get people to make these sacrifices. Something that is very clear in conversations with people from different classes and neighborhoods in Buenos Aires is the unconditional rejection of the previous government of Alberto Fernández and that of Macri as well. Members of Congress's spending cuts – including cell phone spending – will help maintain the president's credibility.
Caputo announced measures to cushion the blow to the most vulnerable layers and thus prevent the inevitable union protests from turning into social outbreaks. The so-called social plans will be maintained, including aid to the unemployed, which he said will benefit 1.2 million Argentines. There will be an increase in subsidies for the poorest, including a 50% increase in the food card.
But if the VIP gala at the Colón theater did not seem like the best way to start an austerity government, the selection of Caputo to lead the Treasury and announce the new adjustment plan does not seem like the best either. It is worth remembering that, in the government of Mauricio Macri, Caputo was responsible for the disastrous management of the mega credit package for more than 45 billion dollars agreed with the IMF in 2017. The result was a capital flight. As announced by former minister and presidential candidate Sergio Massa, the IMF is carrying out an investigation into allegations of what part of that money was used to pay investment funds such as Templeton and Black Rock.
Likewise, it is known, from the leak of the Panama and Paradise papers, that Caputo – whose assets are estimated at five million dollars – had several companies based in offshore centers in order to evade taxes. According to a quick search of the International Consortium of Investigative Journalists (ICIJ) database, Caputo was involved in the company Noctua, which managed high-risk investment funds in the Cayman Islands, as well as other companies. settled in tax havens.
When Luis Caputo – whose nephew is Milei's new political advisor – finished his period in charge of the Treasury and the Central Bank, inflation had doubled and the country had accumulated an enormous external debt, almost impossible to repay, and even less so now with the weight in free fall.
