Three Cheers (so far) for Argentina’s Libertarian President by Dan Mitchell

The world’s most sensible political leader is President Javier Milei of Argentina.

But that doesn’t mean he will succeed in rescuing his nation’s Peronism-warped economy. Especially since left-leaning parties control the legislature.

But he’s definitely trying.

Let’s start with some good news. Here’s a tweet from Daniel Di Martino.

This is a remarkable achievement. Using his executive powers, he unilaterally clamped down on the growth of government.

And by having government grow slower than the private sector (the Golden Rule of fiscal policy), he’s quickly made progress.

Here are some excerpts from a report in Barron‘s.

The Argentine government in January saw its first monthly budget surplus in nearly 12 years, as new President Javier Milei continues to push for strong spending cuts, the Economy Ministry announced. January was the first full month in office for Milei, a far-right libertarian who took office in December, and it ended with a positive balance for public-sector finances of $589 million at the official exchange rate, the government said late Friday. The figure includes payment of interest on the public debt. …Milei, an economist, has advocated sharp cuts in spending and a reduction of public debt on the way to a dollarization of the economy. ..The year 2023, the final year of the center-left government of Alberto Fernandez, ended with a 211 percent inflation rate. With poverty affecting 45 percent of the population, Milei has predicted an economic rebound within three months.

Now for some bad news. What you just read is a report on the initial skirmish in a long war.

Given my unfamiliarity with Argentina’s fiscal system, I don’t know how much progress he’s made. But I’m guessing he only solved 5-10 percent of the problem with his executive actions.

The main battle will involve whether Milei can now somehow convince a hostile legislature to approve structural reforms. And that won’t be easy.

That being said, he presumably has some ability to veto budgets (do they have “government shutdowns” in Argentina?).

And he arguably has the ability to “dollarize“, which in the long run would be very important since the government would lose the ability to finance the budget by printing money.

Fingers crossed that President Milei can save his country.

P.S. I was going to speculate whether Milei could be the Ronald Reagan or Margaret Thatcher of Argentina, but he faces a much bigger challenge. If he succeeds, he will be the global role model for how to deliver an economic renaissance.