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McDonald, Currie Lecture

The lecture discusses Argentina's economic challenges under President Milei, highlighting a history of stagnation, inflation, and public discontent. Milei's government has made fiscal adjustments, reduced inflation, and improved security, but faces ongoing economic challenges and potential social unrest. The future of Milei's popularity and success in elections hinges on his ability to maintain order, address economic issues, and navigate a fragmented political landscape.

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2 views3 pages

McDonald, Currie Lecture

The lecture discusses Argentina's economic challenges under President Milei, highlighting a history of stagnation, inflation, and public discontent. Milei's government has made fiscal adjustments, reduced inflation, and improved security, but faces ongoing economic challenges and potential social unrest. The future of Milei's popularity and success in elections hinges on his ability to maintain order, address economic issues, and navigate a fragmented political landscape.

Uploaded by

pkass727
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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McDonald, Currie Lecture, "Milei's Argentina: Understanding the Present and

Shaping the Future"

Discussing Argentina’s economic landscape under President Milei’s government.

How did we get here?


-​ Stagnant economy performing below expectations for a long period of time, after a glorious past
-​ In 1974 GDP was high, but then there were significant crises, and in 2011 the GDP was 10%
below what it used to be
-​ Strong anger against establishment due to repeated failures of government
-​ Failure in the representation of lower socioeconomic groups, in bringing these groups
improvements in quality of life and security
-​ If there is high inflation the poor don't have access to the financial market
-​ Also it is an economy with a very high level of informality
-​ If you are poor you are very unprotected
-​ Milei’s messages:
-​ Defeat inflation through dollarization
-​ Kick off the establishment
-​ Going to bring order and security

How are we doing?


-​ Weak support but government had huge fiscal adjustment
-​ Cam from reduction in expenditures
-​ Inflation went down significantly
-​ Problem→ exchange rate over appreciation
-​ Significant improvement in order and security
-​ Tightening of prison conditions
-​ Rosario crime rate reduced
-​ Increased deployment of federal security forces in the city
-​ Large reduction in the number of manifestations and pickets in the streets
-​ Government still has strong support

Where are we going?


-​ Can't say that Peronism is over
-​ Government will have economic challenges: how to overcome a real exchange adjustment in a
situation of weak reserves without a large pass through on inflation and popular support in an
electoral year
-​ Population preferences doesn't have a classic distribution

IMF agreement, exchange rate:


-​ Some people claiming that there is a new social uprising building up and on the brinks
-​ Milei has good chance in the midterm elections
Why did Milei win?
-​ Essentially: Inflation.
-​ His idea of “La Casca”
-​ Dual constituency of people (wealthier and poor) which it was crucial that the poor got
dissolution with the state

Does he continue to be popular? (In spite of the static performance we have seen so far)
-​ Maybe the crypto scandal?
-​ He overstepped in trying to broaden the cultural battle to include human rights violations, the
legacy of the dictatorship
-​ BUT: his success with inflation is enough to keep his popularity

Why his likely success in the elections might be sufficient in terms of his ability to crystalize his
project for the country?
-​ Order and security (Drastic reduction in homicides in Rosario ⇒ coordination by the police in the
criminal markets )
-​ Has to do with what the opposition has been doing: fragmentation, fighting, opening chances for
Milei to win Buenos Aires in the elections
-​ Mileei who doesn't have a party yet might end up getting many of the seats he needs for him to
lead in the second part of the term
-​ Very strong electoral constituency in the poor peoples in the North

How to look at Argentina’s political spectrum compared with others in Latin America?
-​ In an election, you go from horizontal polarization to vertical polarization
-​ Prevention of crime will become an important program, the police is a very powerful actor in this.
(the relationship between the government and the police forces could get into tension)

Crises in Argentina:
1.​ Hyperinflation end of the 80s
2.​ Hyper inflation and restructure of the deposits of the saving of the people
3.​ Another crisis with defaults and restructure of deposits, high unemployment

●​ Macro program: He did dollarization (didn't end up happening), devalued the currency, he cut the
public expenditures, reduced fiscal deficit
●​ Micro program: increase productivity of economy in order to open the economy

Problem: haven't got access to credit (the amount, the dispersion, and the exchange rate)

Total factor productivity: It's now 15% below where it was in 1960s
Participation in world trade: Its now 0.3 but it used to be 1 in 1960s
What coalition in Argentina has to be broken for the country to prosper?

-​ Increase tariffs to get other countries to invest in Argentina


-​ Introduce price controls and grow the role of state enterprises (solution to growing fiscal deficit,
high inflation)
-​ Enhanced labour protection (but doesn't really help create new ones)

Tierra de Fuego regime: to promote reallocation of population to the south (if they moved they didn't have
to pay tariffs)

Under Milei
-​ Government expenditure went from 25-42 in just 9 years (macroeconomic homicide)
-​ Very first year of Milei: reduced the size of the consolidated

This experiment can work if Argentina works rapidly towards lifting parts of the capital controls ⇒ to
have more liquidity in the central bank.
We need to bring down inflation rate and promote growth

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