Shock Therapy: Argentina’s New President Milei Takes Drastic Steps to Stabilize Struggling Economy

New President Javier Milei of Argentina has implemented drastic measures to stabilize the country’s struggling economy. During his campaign, he warned voters of the “shock therapy” approach that would be painful, and this prediction has proven to be true. Since taking office on December 10th, consumer price inflation has accelerated significantly. Through February, prices have risen 71% and 276% from a year earlier. The surge in prices can be attributed to Milei’s decision to scrap price controls, devalue the currency, and cut subsidies that previously kept transportation and utility bills affordable.

Wall Street investors have reacted positively to Milei’s reforms by pushing Argentina bond prices higher. However, the general population has been hit hard by the economic consequences. Consumer spending has plummeted as inflation erodes wages and pension payments. As a result, Argentina has now entered its sixth recession in the past decade.

Milei defends his aggressive approach by stating that it is necessary to undo the damage caused by his predecessors. He places blame on them for the country’s poverty rate, which is now nearing 42%, a significant increase from 26% in 2017 and just below the peak experienced during the Covid-19 pandemic. Despite these challenges, Milei remains determined to implement his policies in order to improve Argentina’s economic situation in the long term.