LEILA FADEL, HOST:
Argentina's newly elected far-right president, Javier Milei Millete, was sworn into office over the weekend.
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PRESIDENT JAVIER MILEI: (Speaking Spanish).
MICHEL MARTIN, HOST:
The former TV personality and self-described anarcho-capitalist won in a landslide victory, promising to bring big changes to an Argentina struggling with nearly 150% inflation. He expressed admiration for former President Donald Trump and former Brazilian President Jair Bolsonaro.
FADEL: The Economist's Latin American correspondent Ana Lankes joins me now from Buenos Aires. Good morning.
ANA LANKES: Hi, Leila.
FADEL: Hi. So Milei ran on tackling the country's skyrocketing inflation, but he seems to have backed away from his campaign promise to scrap Argentina's peso in favor of the U.S. dollar. What changes can we expect to see?
LANKES: Yeah. So between winning the election in mid-November and taking office on Sunday, Milei backpedaled on many proposals, including the one you mentioned, dollarization, which was, like, his flagship proposal. And instead his priority is going to be shrinking the size of the state. So in his inauguration speech yesterday, he said he'd cut public spending by around five percentage points of GDP, and he's expected to table a lot of reforms in Congress in the coming days, including cutting the number of government ministries, simplifying the tax system and maybe even privatizing some state-owned companies. So it's starting to sound a lot more like a conventional kind of liberal shock-therapy program than the anarcho-capitalist platform he ran on in the campaign.
FADEL: So, I mean, as you point out, this was his flagship campaign promise, and now he's backtracking. How will Milei's followers respond to this different approach, this softer approach to reform?
LANKES: Yeah. That's a really good question because Miller's whole campaign was anti-establishment. He took pride in being this outsider who was coming to blow up the system, a bit like, you know, Trump draining the swamp. And instead, since winning the election, he has appointed a lot of moderate technocrats and establishment figures to the top jobs in his cabinet. So I think a lot of people close to Milei are a bit disappointed.
But despite the kind of shifting alliances at the top, he's trying to maintain a close connection to his followers. So, for example, yesterday he delivered his inauguration speech outside of Congress rather than inside Congress to legislators, as is customary. So I think that if Milei manages to fix Argentina's inflation problem in the next year, basically, his followers will forgive him. But if the situation gets really bad, I think he's going to be left with very little support.
FADEL: Now - but in his inauguration speech, Milei didn't promise a quick fix. He predicted things will get worse before they get better. What obstacles does he face in his first year in office?
LANKES: Yeah. That's right. So Milei was really frank in his inauguration speech. He said there's no alternative to austerity. And he also said, we know that in the short term, the situation will worsen. And he's right. Things are going to have to get harder in Argentina before they get better, because that's what you have to do if you want to fix the country.
So I'll give you an example. Currently, Argentina spends around 2% of GDP on electricity and transport subsidies, so that keeps prices low for consumers. But it costs the state a lot of money, and money it doesn't currently have. But if you start cutting subsidies, prices for transport and electricity will go up, and that will push inflation up, too. So in the short term, Milei is going to have rising inflation, and he's going to have to cut spending. And none of those things are popular. And he only has a minority in Congress.
FADEL: Ana Lankes from The Economist talking to us from Buenos Aires. Thank you so much.
LANKES: Thank you.
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