On my recent trip to Europe, it was difficult to avoid the subject of Argentina’s new President.
As a new Labour government was elected in my beloved UK, with premier Keir Starmer heralding sensible rule after the mop-headed loon that was Boris Johnson, and promising more impetus to neglected public services and a tanking economy, friends wondered how Argentina could elect a wild-coiffed libertarian who wants to slash the state and privatise everything that moves.
Even people who have no interest in politics or the parlous state of Argentine economy were prompted into recognition of Javier Milei by the phrase: “you know, the mad-haired bloke with the chainsaw.”
As I reported in my blog on the new government in January, most people voted for Milei out of desperation, and rejection of Peronist corruption and cronyism.
Milei immediately announced: “there is no money”, as his government cut public sector wages by 20%, and social security by 37%, according to Spanish economic think-tank the Elcano Institute.
Even more dramatically, public infrastructure investment was slashed by 76%, and transfer of money to the provinces by 85% (though of course the provinces have their own ways of raising funds through local taxation).
(My fervent hope is that the last two measures are also intended to tackle the flagrant corruption which leads to so much public money being personally trousered by politicians.)
Despite these harsh measures, Milei remains surprisingly popular, currently with a 52% approval rating according to latest polls (compared to outgoing President Alberto Fernandez, who was castigated with a record 79% disapproval as he departed in December 2023.)
Most Argentines accept radical measures are necessary to revive an economy which has been on life support for decades.
As Bloomberg recently reported: “The country has spent more time in recession since the 1950s than any other nation… an Argentine born when the country returned to democracy in 1983 has already lived through hyperinflation, record unemployment, sovereign defaults, multiple peso devaluations and several invented currencies that no longer exist.”
Bearing in mind our biggest problem has been inflation (a record-busting 211% during 2023), let’s take a look at how Milei has tackled that so far during 2024: here are the month-on-month figures:
Jan: 20.6%
Feb: 13.2%
March: 11%
April: 8.8%
May: 4.2%
June: 4.6%
July: 4%
That’s 87% over the course of the year so far, but with most of the shock in the first three months of the new government.
“July has given us the lowest inflation for 30 months. The figures are great news for the government,” said Lautaro Moschet, an economist from the Fundación Libertad y Progreso, a neo-liberal NGO which is hardly biased, but he has a point!
August’s figures will come out in mid-September, and fingers crossed we can keep inflation in single digits for the rest of the year.
But the new government is not having quite so much success attempting to eliminate the parallel economy.
The breach between the official dollar and the blue dollar has nearly doubled: from 14% in January to 27% now: as I write today, the official dollar is worth 983 pesos, while the blue is at 1,355.
Meanwhile, the Dolar MEP (the rate you get when you use your foreign bank card) is 1,292 pesos to the dollar.
Home again in Salta, I fuelled the 4×4 yesterday and it cost me 1,348 pesos per litre, only a slight rise on 1,245 pesos in May: though actually cheaper in blue dollar terms (the blue was at 1,100 then).
Here’s an idea of other daily costs from shopping trips in my home town (with the value in US$ at the blue rate to make it easy to understand): 47 cents for six eggs, a dollar each for a kilo of bread and a litre of milk, US$8 for a kilo of the best meat for a barbecue.
The meat prices seem pretty steep, and is perhaps why cow consumption has fallen to its lowest level in 26 years.
On holiday in Italy in June, we paid 2 euros for six eggs and the same for a litre of milk (I didn’t buy any steak!)
What this means for those of you who planning a holiday in Argentina is that it’s still good value.
You should bring dollars in cash, as I always recommend: not only will it save you money, but you’ll be injecting much-needed liquidity into the nation’s economy.
I’d recommend using your foreign bank cards as much as possible to take advantage of the Dolar MEP rate, but always bring US$ cash which we can change into pesos for your day-to-day expenses, as some places randomly add up to 20% surcharge for card use.
And be assured that the pesos in your pocket is not devaluing as seriously as it was during 2023.
My hopeful message would be: Don’t cry for Argentina any more… fingers crossed, the future’s brighter as we emerge from the economic gloom.
And as past visitors will already know, it’s a great place for a tailor-made trip with an English-speaking guide from Poncho Tours!
- For further reading on Milei’s economic reforms, I recommend both very detailed articles from the Elcano Institute (in English).
- Milei figures toting the chainsaw featured in the photo are available to purchase for US$30 on Mercado Libre.
