https://www.nysun.com/article/argentinas-milei-gains-legislative-victory-days-after-making-history-with-zero-food-inflation
President Milei of Argentina is making history. His economic reform bill just passed into law, marking his first big legislative win as the self-described anarcho-capitalist attempts to extract the country from the grasp of Perónist socialism.
The new legislation — which passed 147 to 107 in the lower chamber — incentivizes investment, privatizes a number of state-owned entities, and reduces regulations.
Mr. Milei achieved a second legislative victory simultaneously with the approval of a fiscal package which deals with lowering income taxes and managing personal assets. The Senate had previously rejected some of the articles in this package, but the lower chamber reintroduced these measures.
Though the opposition bloc has watered down portions of the legislation in the past six months, the bill’s passage marks a triumph for Mr. Milei’s vision for free-market reforms to correct for socialist policies which have impoverished a once-prosperous nation.
The legislation comes on the heels of a historic achievement for Mr. Milei in tempering inflation. Argentina recorded zero inflation on food and beverages for the first time in three decades, a private consulting firm, Econométrica, found earlier this week.
“The recent decline in inflation is a Godsend for Argentines, most of whom have barely seen stable prices in their lifetimes,” an associate senior research fellow at the American Institute for Economic Research, Thomas Hogan, told the Sun. “Milei’s reforms bring fresh air and breathing room to the Argentine people.”
During the third week of June, the price index of food and beverages did not move up or down from the previous week. The last time this occurred in Argentina was 30 years ago.
Previous governments have relied on price controls and export restrictions, among other measures, “to keep costs down at the supermarket,” the director of the center for Latin American Studies at the Wilson Center, Benjamin Gedan, told the Sun. “It is reassuring to see food prices stabilize without those interventions.”
Government policies of the past, such as spending-driven deficits, have devastated the economy. Food inflation, in particular, is one of the forms of inflation with a political impact. Mr. Milei’s success, therefore, is a win both for the economy and his politics.
Despite short-term pains of austerity policies, Mr. Milei’s popularity remains relatively high. Part of the reason is the president’s perceived authenticity, as well as lower inflation boding well for improved economic prosperity in the long run.
Mr. Milei was “candid about the pain involved in his ‘shock therapy’ during his presidential campaign,” a Latin American studies research professor at the U.S. Army War College Strategic Studies Institute, Evan Ellis, tells the Sun.
Argentines’ approval of Mr. Milei hovers around 50 percent despite the hardship they face and because of their understanding of his efforts to correct for socialist policies of the past. The newest legislation could boost those ratings significantly.
The Perónists’ policies led Argentina to “the brink of economic collapse,” Mr. Ellis says. The Perónist unions and politicians, he adds, are still working to block Mr. Milei from tearing down “the bloated patronage politics machine they created.”
Zero inflation on food and beverages marks a significant milestone for the Milei administration. The passage of the economic reform bill could prove transformational for Argentina’s economy.
Analysts suggest these early successes are an opportunity to push further on Mr. Milei’s reform agenda.
This is the first step of many that “Argentina will need to take to get its economy back to sound macroeconomic principles,” the director of the Americas program at the Center for Strategic and International Studies, Ryan Berg, told the Sun.
“Milei has an opportunity to begin dismantling policies that clip the wings of the country’s farmers, with implications for economic growth and global food security,” Mr. Gedan says. Providing farmers with the proper incentives to increase production could reduce hunger abroad, he adds.
Mr. Milei’s next priority could be dollarization in order to sustain his economic achievements. That policy would eliminate the nation’s debased peso and replace it with the American dollar — a promise he campaigned on, but has not yet fulfilled.
“If Milei can follow through with his plan to adopt the US dollar as the official currency, he can create a path to long-term price stability and ease his other reforms such as cutting government spending,” Mr. Hogan says.