Lushington Brady: Argentina Is Turning the Corner at Last

No pain, no gain,’ as the saying goes. Overturning decades of economic decline in Argentina was never going to be easy, but Javier Milei’s revolution is already paying dividends, in little over a year.

When Milei slashed government spending, the mainstream media were quick to pounce. Never mind that Argentina had been on a century-long decline, from one of the most prosperous countries in the world in the early 20th century to chronic hyperinflation in the last few decades. But Milei’s economic policies already have the country turning the corner.

Abolishing rent controls in Buenos Aires led to a modest increase in rents, but that increase was already lower than previous increases. More importantly, the rental market boomed.

The rest of the economy is following suit.

Argentina emerged from a brutal recession in the third quarter, boosting the odds that President Javier Milei heads into next year’s mid-term elections with growth on the rebound alongside cooling inflation.

Gross domestic product expanded 3.9% from July to September compared to the previous three-month period, better than analysts’ expectations for 3.4% growth.

Poverty is also sharply dropping from its peak of 52.9 per cent in the first half of 2024.

With inflation tumbling from a peak of a monthly 25.5 percent and wages recovering some of the lost ground, the number of poor people had been reduced to as low as 36.8 percent by the end of the second half of last year, according to some private estimates […]

The data stem from the rigourous measurements by th [sic] economist and Universidad Torcuato Di Tella (UTDT) lecturer Martín González-Rozada. The specialist estimated December’s Total Basic Shopping-Basket, calculating a reduction of poverty by 16.1 percentage points from its peak […]

This situation propitiated a fall in the calculations of poverty and destitution for the last six months of last year, descending to 36.8 and 9.2 percent respectively with the number of destitute almost halved.

Work by the CNCPS (Consejo Nacional de Coordinación de Políticas Sociales) in tandem with the Human Capital Ministry estimated poverty as declining to 38.9 percent in the third quarter of 2024.

Key to Milei’s policies is a sharp cut in government spending. Like Margaret Thatcher in the ’80s, Milei is prising the dead hand of government from the economy.

Real primary spending in Argentina fell by 5.8 percent last month as against the previous month, according to a report by Analytica consultancy firm […]

Other items suffering important cuts were economic subsidies (minus 61 percent inter-annually in December) and social programmes (minus 47.2 percent inter-annually last month).

Economic subsidies were reduced by 37 percent in real terms throughout the year while social programmes fell 41 percent.

In contrast, some items registered real increases last month. Spending on goods and services rose 58.8 percent, family and child (AUH) by 47.6 percent and pensions by 20.3 percent with the latter the most relevant as representing 47 percent of total primary spending in December.

Despite this increase last month, pensions also experienced an accumulated fall of 12.5 percent, thus explaining around a fifth of the total adjustment of spending.

Public works was another item to suffer a major adjustment last year, being slashed by 76.5 percent.

The mainstream media will screech and have fainting fits, as they will, but in another five years or so, we’ll see which Latin American country is better off. ‘Neo-liberal’ Argentina or socialist dictatorship Venezuela.

Lushington describes himself as Punk rock philosopher. Liberalist contrarian. Grumpy old bastard. This article was first published HERE