He was not one of those residents of Buenos Aires who believe that Javier Milei is a breath of fresh air for decadent Argentine politics. He was making his bed out of old cardboard boxes on Calle Viamonte, just behind the grand Teatro Colón, where two thousand guests, the men in their twenties, the women, like Fátima Flórez, Milei's partner, dressed to kill , they had heard opera and tango, including Balada para el loco.
"What do you think that, three hours after announcing the biggest adjustment in history, the new president is celebrating a gala at the Teatro Colón?", I asked the homeless man, one of the thousands on the streets of Buenos Aires. "That's just the way they are," he replied, with a gesture of unfathomable resignation.
Those responsible for the event saw no contradiction. "It's always gala fauna when there's 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 because all the costs - the workers, the musicians, etc. - are fixed, they charge, even if there is no event".
It may or may not be true. The press office of the theater did not want to provide information on this issue. But the gala reinforced the feeling that Milei is no longer the rebel he was. "Who are invited to participate in the party for a few?" asked a radio host on Monday. "The old caste", he replied to himself.
This impression was reinforced on Tuesday, when Luis Caputo, the billionaire finance minister, former right-hand man of the tycoon president Mauricio Macri (2015-2019), announced the first ten measures of the austerity, liberalization and deregulation plan. The plan is not as radical as the rhetoric of Javier Milei in the elections. It was praised by the IMF and is favored by the mainstream media and most economists from banks and market consultancies. The markets reacted favorably. "For economists, the measures are positive", headlined La Nación. But the perception that Milei was just another member of the caste is taking root.
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 have always been one of the foci of corruption in the State, and with us this ends". The cut in fuel and transport subsidies, on the other hand, is justifiable because "what they give you in the price of the (transport) ticket, they charge you with price increases in the supermarket".
All of this may be true according to the liberal handbook. But construction companies calculate that the cancellation of public works will mean the destruction of 270,000 jobs and a sharp drop in economic activity. It has already caused complaints in many provinces, which will be exacerbated by another measure: the minimization 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 such as Ecuador and Mexico, this measure triggered riots and pitched battles against the police. The devaluation of the official exchange to 800 pesos per dollar – almost half of the previous value – will have immediate repercussions on inflation. Given the absence of foreign exchange, there is a danger of uncontrolled devaluation in unofficial markets. Annual inflation of 200% is already predicted, but it could be much higher and hyperinflation cannot be ruled out.
At the moment the price of all basic foods is rising at a monthly rate of double digits. Now it will accelerate even more. Lately, restaurants in Buenos Aires are using the QR electronic menu not because of the memory of covid, but "because we have to change it twice a day", said a waiter at Los 36 Billares.
With these measures and those announced in the coming days, poverty and destitution will rise. There is no doubt about that. 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 allusion to the need to raise pensions to compensate for inflation.
It's still early. If Milei is able to maintain his image as an outsider immune to corruption, he may be able to get people to make these sacrifices. One thing 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. Cuts in spending by members of Congress – even cell phone expenses – 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 outbursts. 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 Vipsal Teatre Colón gala didn't seem like the best way to start an austerity government, the selection of Caputo to lead the Treasury and announce the new adjustment plan doesn't 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 package of credits for more than 45,000 million dollars agreed with the IMF in 2017. The result was a flight of capital. As former minister and presidential candidate Sergio Massa announced, the IMF is conducting an investigation into allegations of how much of that money was used to pay investment funds such as Templeton and Black Rock.
Also, it is known, from the Panama Papers and Paradise leaks, that Caputo - whose patrimony is estimated at five million dollars - had several companies established 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. , and also other companies established in tax havens.
By the time Luis Caputo – whose nephew is Javier Milei's new political adviser – ended his tenure as head of the Treasury and the central bank, inflation had doubled and the country had accumulated a huge, almost impossible, external debt. to repay, and even less now with the peso in free fall.
