Miley inherits a country that has seen a 15% contraction in GDP since the end of the commodity super cycle in 2011.
Inflation reached an annual rate of 300% in September and October, approaching the starting point of hyperinflation. Central bank reserves stand at $21 billion, but are closer to zero once Chinese swap lines are introduced, according to Arturo Porzycanski of the Emerging Markets Investors Alliance.
Argentina is in arrears in paying a $44 billion package from the International Monetary Fund. Companies were unable to access the dollars needed to pay $16 billion in bills to foreign suppliers. All of this must be covered before normal trading resumes.
Argentina was never as rich as legend says. But it was in the upper echelon before World War I, with its per capita GDP and economic role very similar to Australia’s.
It supplied the British trading empire with raw materials. Australia’s GDP per capita is five times higher today. This divergent fortune represents the contradiction between accountable government and authoritarian patronage.
If you had to identify one cardinal sin, it was forcing commodity exporters to sell their products to the state at below market prices, generating money for the patronage machine of Juan Peron and his followers. com. descamizados.
When that dried up, the Peronists borrowed the crude, leading to a series of defaults. When the loans dried up, the central bank covered the fiscal deficit.
The situation is desperate, but despair is a good thing. The advantage that Miley has is that young Argentines know beyond doubt that the Peronist clamor for trade unions and the corporatist state – inspired by Mussolini – has reached a historical dead end.
It emerged in a jungle of subsidies, price controls, theft, and three separate exchange rates.
Miley had a landslide win of 56% due to his Chaotic Capital Saw. He promised violent shock therapy: closing 16 government ministries and shrinking the state by 15 percentage points of GDP. He promised to adopt the dollar and turn the central bank into a museum. They voted for him anyway.
Mauricio Macri failed to achieve the free-market revolution he launched in 2015-2019 because he neglected the deeper spirit of the times. Miley has learned her lesson.
He is fighting the war on two fronts: he is a technical economist of the Austrian Hayek school; It also copies the Gramscian methods of the political left, and calls for a cross-institutional march to defeat “Marxism” – collectivism and wokeness in all its forms.
Axel Kaiser, dean of the Austrian School in Chile, said: “This is not the time to take gradual measures, they will be radical measures: he announced that, so the country is preparing psychologically, something Macri did not do.” Ally Miley.
“It’s a huge challenge. He may fail, but he has to take risks and do his best,” Dr. Kaiser said in an explanatory podcast for the Institute for Economic Economics. If he cannot tame inflation and restore some prosperity, he will not be forgiven.”