The libertarian leader attacked what he considers the origin of all national economic ills: the fiscal deficit and he did it almost without consideration, giving rise to at least three results that, a priori, were highly improbable: achieved a surplus in the Treasury accounts, society tolerated and to a large extent endorsed an unprecedented adjustment and is obtaining a reduction in inflation with an incipient recovery of activity.
Milei won the elections promising that the adjustment would fall on “the caste” although one of the sectors that contributed most to the containment of expenditures It was retirements that fell 22%, followed by economic subsidies -33%; public salaries -27%; capital expenditures – 71% and transfers to provinces – 87%.
Incidentally, austerity was not exclusive to the Nation, but the provinces also tended to balance their budgets or have surpluses. In the last 12 months, all of them had a primary surplus, except Buenos Aires and Entre Ríos, according to economist Martín Polo de Cohen.
Something that analysts discuss is how the libertarian administration managed to get society to peacefully accept an adjustment of these proportions. There doesn’t seem to be a single explanation. The lack of credibility in politics led people to vote for Milei and accept the “sacrifices” made by the libertarian leader.
Social containment
Poverty
But management also showed signs of pragmatism. Thus, it served the most vulnerable sectors by increasing by more than The Universal Child Allowance is 100% above inflation along with an increase, also in real terms, of the Alimentar card.
The Government also points out that the elimination of the “intermediaries” that led forward the Minister of Human Capital, Sandra Pettovellomade it possible for people to have a significant increase for these benefits. Official calculations estimate that the “poverty managers” kept between 10% and 50% of the funds.
The report on income distribution for the third quarter of 2024 allows us to estimate poverty of 38.8% for the quarter, implying that the worst of the crisis has passed. after the peak of 54.8% reached in the first quarter of the year. It should be noted that the last Kirchnerist government ended with this figure at 41.4%.
Inflation control
Inflation Inflation Prices Retirees Supermarket Consumption
Mariano Fuchila
The fiscal surplus together with the reduction of monetary excess led to a slowdown in inflation that was greater than expected by most analysts. After starting in December of last year with 25% (driven by the devaluation of the peso), the index progressively fell to reach 2.4% last November.
A significant fact is that this slowdown is occurring along with a process of rearrangement of relative prices. Thus, with data as of Novemberelectricity, gas and water rates had a year-on-year adjustment of 276%, significantly above the 166% average increase in the consumer price index.
Dollar and stocks
dollar exchange rate
Image created with artificial intelligence
Another of the Government’s greatest achievements was the stabilization of the exchange market. 2024 began with cash settlement in the area of 1,300 pesos and a gap greater than 60% to end the year with a lower value in nominal terms for the CCL, below 1,200 pesos, and a gap less than 10% .
The Treasury Palace, during the last months, The stocks were progressively made more flexible, but at all times both President Milei and Minister Caputo insisted that the total lifting of the restrictions recently It will be done when they are sure that there will be no turbulence in the exchange market.
Within this process, more than one analyst has expressed concern about the loss of dollar positions. Indeed, the peso has tended to appreciate and the real exchange rate is approaching levels like those it had at the end of 2017 or in the final stage of Convertibility, that is, moments that preceded a correction.
At the Ministry of Economy They point out that this time it is different because we are facing a much more orderly economy.
However, episodes such as the fall of the Brazilian currency throughout the year – it went from less than 5 to more than 6 reais per dollar -, the recent international strengthening of the US currency or the decrease in international soybean prices (seen is around 350 dollars when at the end of last year it was 480), for more than one economist the yellow lights turn on. And even more so when net reserves remain negative at nearly $5 billion.
Employment
In the third quarter of 2024, it was stable with an activity rate of 48.3% and an employment rate of 45% and with a slight decrease in unemployment: 6.9%,
Job insecurity is observed since the fall of 379,000 formal employees -3.7% year-on-year – was offset by an increase of 378,000 non-salaried employees (+7% yoy) and a slight increase of 4,000 informal employees.
Activity
With the expansion of family purchasing power and the reappearance of credit, the latest indicators show an incipient increase in consumption that would tend to promote industry activity.
In this regard, the official commitment is to free the private sector from all regulations that make business activity more expensive or hinder. In this rolethe Minister of Deregulation, Federico Sturzenegger has a key role.
It is striking that, despite the magnitude of the adjustment, the positive image of the Government’s management remains high – between 47 and 57%, according to the different consultancies – and opinion polls show that among the population it has to predominate optimism regarding the future, both personally and for the country.
Taking into account the inheritance received and the severe adjustment that was carried out, the high level of approval that the libertarian government still has remains surprising, one of the reasons that explains the high international interest in Milei’s government.
2025 will be a year of challenges: maintaining what has been achieved, allowing activity to grow strongly and consolidating what has been achieved at the polls.
Source: Ambito
