South American leader steps up ‘shock therapy’ reforms

Argentinian President Javier Milei has announced a plan to axe 70,000 state jobs

Argentinian President Javier Milei has unveiled a plan to slash 70,000 jobs from the state sector and terminate over 200,000 social welfare programs as part of reforms aimed at stabilizing the country’s ailing economy.

Milei announced the proposed measures on Tuesday during an hour-long speech at the IEFA Latam Forum in Buenos Aires. In a detailed speech, the president laid out the foundations of his economic plan, emphasizing the alignment of peso futures contracts with the central bank’s 2% monthly crawling peg scheme, and labeling calls to sharply devalue the currency again as “ridiculous.” 

“There’s a lot of blender,” Milei stated, referring to the dwindling of wages and pensions by 276% annual inflation. “There’s a lot more chainsaw,” he warned.

Throughout his presidential campaign, Milei regularly brandished a chainsaw, a dramatic illustration of his promises to slash social spending, cut retirement and pension funds, shut down the country’s central bank, and reduce the number of government ministries by more than half. He has proposed reducing the functions of state to a minimum and has placed his trust in the market alone, hoping to solve Argentina’s problems by boosting trade and exports.

According to local media reports, the Argentinian president has to reach a fiscal balance this year and plans to do so at any cost.

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Milei also said he will double down on attempts to reform the economy after the 2025 congressional elections, with more than 3,000 reforms in the pipeline. He envisions a V-shaped recovery, buoyed by increased public confidence in the country’s future.

“People have hope, they’re seeing the light at the end of the tunnel,” Milei insisted, referring to public polls.

The announcement of more austerity reforms has sparked a fierce backlash from the country’s labor unions, one of which went on strike on Tuesday. The leader of the state workers union ATE immediately announced national action on X (formerly Twitter) without providing further details.

A self-described anarcho-capitalist, Milei, who took office in December 2023, has warned it will take time for the results of his program to be seen and that things could get worse before they get better. Latin America’s third-biggest economy has been beset by a severe economic crisis after decades of financial mismanagement.