Why It Looks Like Milei’s Reforms Might Actually Be Working

this video is brought to you by nordvpn we're now just over 100 days into Javier Mill's Premiership and a lot has happened drastic cuts to public spending and a sharp currency devaluation have pushed Argentina's economy into an inflation heavy recession and while this was exactly what melee predicted he's now in a race against the clock to get Argentina's economy back on track before public patients wains so in this video we're going to have a look at Argentina's economic turmoil whether M's forms are working and why he's still surprisingly [Music] popular before we start if you haven't already please consider subscribing and ringing the bell to stay in the loop and be notified when we release new videos so as we see it melee had broadly three objectives going into his Premiership the first was a short-term economic goal to reduce Argentina's fiscal and trade deficits which mainly involve cutting government's spending the second was a longer term economic goal to quote dollarize the Argentinian economy in order to prevent future administrations from overspending or the Central Bank from printing silly amounts of money as has happened in the past the third and final objective was a political one to remain sufficiently popular throughout all of this to actually get his reforms through because in Argentina what often happens is that politicians come into office promising reform but either get voted out of office or give up when the approval ratings start tanking so to evaluate his Premiership so far we're going to go through these objectives one by one and see how he's doing on each of them let's start with the first one balancing the books when he came to office mle had some pretty bold plans he wanted to cut government spending by 40% and run a balanced primary budget in his first year by scrapping all electricity and gas subsidies getting rid of 10 of Argentina's 18 government Ministries and private izing all of Argentina's 34 State companies so how has this all been working out for him well in certain respects mle has been more moderate than his campaign rhetoric suggested melee's first cabinet included a handful of establishment politicians and his Finance Minister actually served under former president Mauricio MRE in the late 2010s when he was responsible for borrowing a whole load of dollar denominated death which is exactly what mle doesn't want to do mle has also been unable to enact his most radical policies because it's two Landmark bills a series of presidential decrees known as the Urgent necessity decree and an economic reform package known as the Omnibus Bill have been held up in Argentina's Congress and courts provincial Governors have also resisted his reforms which has restarted a long-standing debate within Argentina about the extent to which its politics should be federalized his foreign policy has also been a bit more moderate than expected especially with regards to China during his campaign he said he would cut trade ties with China because it was Communist and quote an assassin but in the past month he's changed his tone insisting that bilateral relations haven't changed quote one bit and that if people want to do business with China they can this is almost definitely because he wants to preserve Argentina's swap line with China which basically allows the Argentinian Central Bank to exchange PES source for Yuan at a favorable rate and provide an invaluable source of foreign currency nonetheless despite legislative gridlock and hints of pragmatism melee has still introduced at least three pretty radical economic reforms first he significantly cut government spending which has fallen by 12% year on-ear he's achieved this via basically ditching price controls cutting energy and transport subsidies and refusing to uprate spending in certain departments with inflation second he's devalued the peso by roughly 50% against the dollar bringing it closer to the market exchange rate the context for most of modern history Argentina has had basically two exchange rates the official rates claimed by the government and the unofficial actual market rate known as the blue rate before melee took charge for instance the official rate was about 370 to the do while The Unofficial rate was about $1,000 to the dollar mle cut the official rate to $800 to the dollar with plans to devalue it a further 2% every month until it matches the unofficial rate while this triggered a spike in inflation which reached a peak of 276 in February in the long term it should eventually unify the currency and reduce Imports thereby improving Argentina's trade balance third despite Rising inflation he's cut interest rates both to encourage investment and also to reduce the amount of Interest the central bank is currently paying on some of its debts which should paradoxically end up reducing inflation by reducing the overall money supply while these measures have caused some serious short-term economic pain including a recession Skyhigh inflation and a 12% spike in relative poverty this was inevitable and there are signs of Promise measured month on month inflation has already started falling and the government ran a budget surplus in both January and February the first in over a decade Argentina's borrowing costs have started falling reflecting growing confidence amongst International investors and Argentina's foreign exchange reserves have grown by $7 billion since melee took over so let's move on to his second objective dollarization dollarization basically involves doing two things first you have to Red denominate your peso debts into dollars and second you have to buy back all those pesos in circulation with dollars or at least enough of them to deter a bank run this means you need a lot of dollars in the first place roughly 50 billion in Argentina's case which the state really doesn't have at the moment this is why dollarization was never going to happen in the short term and melee has since started talking about currency competition instead which would involve allowing transactions in both dollars and pesos ultimately dollarization looks unlikely to happen anytime soon and will probably come after melee's other reforms if he ever gets them through Congress finally let's have a look at his third objective staying popular polling at the moment suggests that melee's popularity has held up remarkably well and he currently enjoys an approval rating of about 50% mle has been able to protect his popularity by blaming any and all of his shortcomings on Argentina's political establishment which he calls the cast to be fair Argentina's establishment have done a remarkably terrible job at running its economy and Argentina's Congress which is currently dominated by more establishment parties are indeed resisting melee's more radical reforms nonetheless blaming everything on the cast has its risks because it makes Congress less likely to compromise and at a certain point the electorate will demand he takes responsibility for things this presents melee with a bit of a dilemma going forward either he can refuse to compromise and continue to rail against the cast in the hope that the electorate will buy it and reward him with a congressional majority at the midterm elections next year or he can compromise to get at least some of his reforms through but risk undermining his status as a radical outsider nonetheless all in all it's been a pretty good few months for melee and Argentina's economy looks like it might finally be tending towards normality now watching our videos it's understandable if at times you feel like the world isn't terribly safe and unfortunately this can be the case online too you might try your best to keep everything secure maybe you're try to rotate through favorite passwords online but that's not always enough to keep you safe in fact the most common form of account hacking these days is called credential stuffing essentially you use one 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Channel: TLDR News Global

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Length: 9min 5sec (545 seconds)

Published: Tue Apr 09 2024