If you thought the cost of living in Britain was bad, spare a thought for the citizens of Argentina, who are facing the country’s worst economic crisis in two decades.
Inflation in the South American state is as high as 138 percent, the highest in the G20 countries, a major factor that has pushed about two-fifths of the population into poverty.
The economic collapse has been at the center of a volatile election campaign, with a vote today that could see Argentina’s presidency handed to a chainsaw-wielding ultra-libertarian who has promised to pull the country out of its quagmire by pushing dozens years of tearing apart center religion. Left political orthodoxy.
Opinion polls now point to a victory for radical free-market economist and ex-tantric sex guru Javier Milei over the ruling establishment.
In an effort to control rising prices, the country’s beleaguered central bank raised interest rates from 118 percent earlier this month to an astronomical 133 percent to prevent further devaluation of the national currency, the peso, which recently hit record lows. achieved. against the dollar. But the bank is struggling with dangerously low levels of foreign exchange reserves as it battles to prop up the ailing currency.
Crisis: The economic collapse was at the center of a volatile election campaign
Argentina’s treasury last week borrowed £5.3 billion of Chinese renminbi from Beijing to calm frenetic markets.
The move will worry observers who are already concerned about the growing dependence of many cash-strapped countries on Chinese loans.
Analysts do not predict that the situation will improve soon. Investment bank JP Morgan expects inflation to reach 210 percent by the end of the year. It has fueled fears that Argentina could experience a repeat of the “el hiper,” or hyperinflation, that rocked the country in the late 1980s, with the pace of price increases reaching an average of 2,600 percent by the end of the decade.
Argentina’s economic crises are nothing new.
The country has defaulted nine times since independence from Spain in 1816. But today’s vote could change the economic outlook for the country, which despite its woes has vast reserves of natural resources and is a major producer of agricultural products such as beef. Analysts have predicted that if Argentina’s strict controls on energy exports and prices are relaxed, the country could massively boost its oil and gas exports, allaying fears of a global supply crisis amid rising tensions in the Middle East.
Others have pointed out that the country’s large lithium reserves, a key component in electric car production, could accelerate the global transition to green energy if exploited effectively. Milei, nicknamed ‘the Wig’ because of his 1970s hairstyle, has promised to shrink the Argentine state and dismantle the central bank.
He has also called for the peso to be replaced by the US dollar, which he says will curb inflation, and encouraged Argentinians not to keep their savings in the national currency, calling these “pieces of garbage” that “do not represent the excrement can be worth’. ‘.
His stance has led to a rush on the Argentine black market for dollars, further increasing pressure on the national currency. If implemented, this policy will further entrench the dollar as the world’s reserve currency, countering China’s efforts to increase its influence in Latin America.
Other policies of Milei include the privatization of state-owned enterprises and changes to labor rules to make it easier for companies to fire workers.
The leather-clad economist, who often brandishes a chainsaw at rallies to symbolize his austerity promises, has previously said the sale of human organs should be legal, proposed deregulation of the country’s arms market and questioned whether people are responsible for the consequences of climate change.
“Argentinians face a choice between a shock therapy-style approach to tackling the country’s economic problems, or more of the same unorthodox policymaking when they go to the polls,” said Kimberley Sperrfechter, emerging markets economist at research firm Capital Economics .
Radical: Javier Milei
A political outsider, Milei shocked the Argentine establishment in August when he unexpectedly won the most support in the primaries.
Today he will again have to face several opponents, the strongest of which are Sergio Massa, the Economy Minister of the incumbent center-left government, and opposition candidate Patricia Bullrich, the right-wing coalition candidate.
For the past sixteen years, Argentine politics have been dominated by the populist left-wing power couple Nestor and Cristina Fernandez de Kirchner, who remains the country’s vice president. Although Milei remains the frontrunner, analysts do not expect him to receive enough votes in today’s poll. Instead, they predict he will face a runoff election in November.
“If Milei wins, Argentina will enter terra incognita (unknown land),” said Christopher Sabatini, senior research fellow for Latin America at think tank Chatham House. “Despite the push for radical change, Argentina’s political and economic system has grown and thrives under a greenhouse effect of public-private economic and political cooperation, and even collusion.
“Win or lose, Milei will remain in Argentina’s popular imagination and politics. Get ready for a bumpy ride.”
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