Milei's mega adjustment scares even the IMF

At 676,000 pesos a night - almost 800 dollars -, the Four Seasons Hotel in Buenos Aires was the perfect place for Javier Milei to repeat the formula already tested two months ago in Davos: praise for the business and banking elites who attended the Economic Forum of Americas (IEFA), and draconian austerity measures for everyone else.

Oliver Thansan
Oliver Thansan
01 April 2024 Monday 16:23
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Milei's mega adjustment scares even the IMF

At 676,000 pesos a night - almost 800 dollars -, the Four Seasons Hotel in Buenos Aires was the perfect place for Javier Milei to repeat the formula already tested two months ago in Davos: praise for the business and banking elites who attended the Economic Forum of Americas (IEFA), and draconian austerity measures for everyone else.

In his now famous appearance at the World Economic Forum in Switzerland in January, Milei described high-net-worth businessmen and financiers as "heroes" facing collectivist globalism: "Don't apologize for your ambition!" he advised them. Elon Musk, whose company Starlink is already preparing to enter the deregulated Argentine market, tweeted his admiration for her: "Hot," he wrote alongside the image of a tanned couple sexually stimulating themselves with the Argentine president's speech.

At the Four Seasons in Recoleta a few days ago, before an audience that included the second richest man in Argentina - the oil magnate Alejandro Bulgheroni - the erotic taste became closer to that of the Marquis de Sade. It was the hot effect of the most draconian adjustment in the history of Argentina, of Latin America, perhaps of the world.

"We fired 50,000 employees and there will be 70,000 more," the president promised in a speech peppered with words like "blender," "drain," "apes" and "rats." After giving the order for the spotlights to be lowered on the podium to perfect the gloomy effect, he continued: "We have already completely eliminated public works."

Thanks to the chainsaw and presidential decrees, inflation is stabilizing, he insisted, although the monthly price increase of 13% in February compared to 25% monthly in December, is still equivalent to a stratospheric annual inflation of 264%.

The collateral damage of Milei's mega adjustment causes consternation even in Washington. Rodrigo Valdés, the representative of the International Monetary Fund who participated in the event at the Four Seasons, warned that more emphasis must be placed on "the quality of the adjustment than on the quantity."

In front of the hotel, on the other side of Avenida 9 de Julio, a woman with white hair and pink pants was sleeping on one of the "surreal" benches of Buenos Aires, made of steel but that disguise themselves as comfortable soft leather sofas. Perhaps she was the victim of the freezing of public pensions in January and February that caused a 44% drop in the purchasing power of those who receive the minimum pension, about 200 euros.

"There is no other way out than with pain," said Bulgheroni after the event, who - with a net worth of 4.9 billion dollars - competes with Marcos Galperin, with a net worth of 6.3 billion dollars and residence in Uruguay, for reach the record for tweets praising Milei.

Of course, pain is scarce in the stock markets where the shares of Argentine companies have skyrocketed to reach highs in the last six years. "There is a financial euphoria that contrasts with the real economy," said an economist who has just been fired from a public bank.

Something curious happened after the event at the Four Seasons. The government announced that Milei, in her desire to impress, had exaggerated the magnitude of the adjustment.

To date, not 50,000 officials have been fired but 12,000 and, for the moment, only 15,000 more are scheduled to be destroyed in the next phase of the purge, as corrected by the government spokesperson. "We are going to be extremely surgical so that no one who does not deserve it loses his job..." he assured, adopting the language of techno war and not of Milei's blitzkrieg.

The obvious question is who deserves to lose their job. "We are waiting, I hope it doesn't affect us because we are essential," said a young passport controller at the Ezeiza airport.

But essential is difficult to define in times of the chain saw. The employees of the public meteorological service already undergoing the adjustment thought the same. "One of the dismissed meteorologists provided information for aircraft commanders," said a UBA sociologist.

Young Argentines, 70% of Milei voters, are not very moved. "Many had jobs that, in reality, do not exist; they did nothing," said a young waiter at the El Pobre Luis steakhouse in Belgrano where a chorizo ​​steak, salad and fries and two glasses of red wine cost 55,000 pesos ( almost 60 euros), something expensive given a minimum wage that stands at 196 dollars, the lowest in all of Latin America.

The IMF is suffering an attack of cognitive dissonance due to the adoption of the Milei plan. Ultimately, the ultra-liberal president has built political support for an adjustment that would make gray-suited technocrats in Washington envious. Milei has always boasted of having won the elections by proposing a tougher adjustment than what the IMF demands, an electoral feat without a doubt. He was counting on the fund to return the favor, applauding, like everyone else, at the Four Seasons.

But, under the banner of Kristalina Georgieva's quasi-progressive neoliberalism, and with the Biden administration behind it, in the midst of a campaign against Donald Trump, the fund does not want to share responsibility for a social catastrophe in Argentina. The strongest irony of all will be that Milei begins to accuse the IMF, along with Davos, of being an insidious vehicle of neo-Marxist globalism and the malevolent doctrine of "social justice."

On the other hand, the fund is aware that the adjustments by presidential decree, no matter how harsh they are in Milei's speech, run into political obstacles in the medium term. For the moment, Milei, whose parties are a minority in Congress, has not built a parliamentary coalition necessary for the second phase of the adjustment.

Of course, for the moment, the presidential decrees have been more than enough to start the chainsaw. Milei has converted a fiscal deficit of more than 5% of GDP into a surplus in three months. "Because of the zero deficit, I tied myself, like Ulysses, to the mainmast," the president pontificated at the Four Seasons.

The corresponding collapse of economic activity - a 6% drop in GDP in three months - is already manifesting itself in the streets of Buenos Aires. Some look like open-air dormitories for thousands of homeless people. Four young people were making their beds on the grass in front of the Recoeatas cemetery and the pantheon of Eva Perón. The good news is that nighttime temperatures are very pleasant and the streets are relatively safe. The bad news: an infestation of Aedes aegypti mosquitoes that has already caused more than 150,000 cases of dengue.

The adjustment has slowed inflation "more than we expected," Valdés acknowledged. But since the peso devaluation in December, inflation has been the highest in the last 22 years, decimating the purchasing power of wage earners as well as pensioners.

What can be bought with a minimum wage has fallen 20% in the last four months. The situation will soon be aggravated by the imminent reduction of subsidies on electricity and gas will soon cause skyrocketing increases in fixed rates, of 424% in the case of electricity, and 1745% for gas, according to Econojournal magazine.

Despite the anxiety, the middle classes hold on by dipping into their dollar savings. The roads were clogged on Thursday for the massive outing to the beaches of Mar del Plata for Easter. People paid more than $100 for rooms in hotels that were not at all luxurious. Milei tweeted the news on her account to counter the news of the economic collapse. But, after the southern summer, everyone expects the ordeal in the fall.

The most shocking thing of all is that Milei's sadistic speech seems to be reciprocated by a collective psychology of masochism. Milei still has a favorable rating of 55% of the population, according to a new survey by the University of San Andrés. Everyone seems to accept the sacrifices in exchange for a better future. Everyone has resigned themselves to suffering. Except those who swarmed around the Four Seasons at the networking session at the end of the IEFA forum.