Nearly seven months after taking office, Argentine President Javier Milei has begun to tame one of the worst economic crises in Latin America. His spending cuts and currency reforms have drastically cut high inflation. The government has seen its first budget surplus in 16 years. And with a strong mandate from voters, he has made some progress in Congress to pass reforms – despite his party being in the minority.
Much still needs to be done, such as reducing nearly $400 billion in foreign debt and privatizing state-owned enterprises. Yet, concludes a paper by the United Kingdom-based Economics Observatory, the changes so far mark “the first time since the turn of the century that Argentina is purposefully addressing the deep-rooted cause of all its economic struggles.”
To a large degree, Argentina is following the path of Greece, which faced a similar financial crisis 15 years ago. Greeks endured years of economic austerity, aided by a renewal of official honesty – such as data transparency and better tax compliance – and the resilience of individual citizens.
Mr. Milei’s biggest challenge may be in keeping a political consensus for his difficult reforms. He has brought key opposition figures into his Cabinet. And in a June 13 vote in the Senate, he won incremental changes that mix spending cuts with measures to strengthen cooperation between national and local officials.
In March, Mr. Milei asked ordinary citizens for their “patience and trust.” The reforms enacted so far have exacerbated hardships. The percentage of people living in poverty has reached the highest it’s been in 20 years (57.4% nationally). Yet two polls this month found that as many as 63% of citizens are willing to stay the course.
Their confidence may rest on a willingness of Argentina’s political leaders to work together with transparency. “It was crucial that he showed that he can work with the opposition to get something approved,” Eugenia Mitchelstein, a political analyst at the University of San Andrés in Buenos Aires, told The Wall Street Journal. “If everything is a conflict, and no negotiation, he won’t get anything done.”
Mr. Milei received similar advice this week during a brief visit with German Chancellor Olaf Scholz. While Argentina makes far-reaching economic reforms, it is important to protect “social cohesion,” Mr. Scholz said. Greece won that key battle. Argentina seems ready to do the same.