For exactly one year, the new president is leading Argentina in the direction where Estonia has been for a long time. However, our government seems to be turning the country towards Argentina, writes journalist, author of the media project “Pribaltaets” Andrey Demenkov.
A year ago, I wrote in DV that the election of the desperate anarcho-capitalist Javier Miley as Argentine president could give new breath to global liberalism, which was not in the best shape. And most importantly, to teach an important lesson to Estonia, whose leadership is taking the country further and further to the left of the right-wing liberal economic model that has proven its effectiveness. If you can’t understand your own experience, maybe someone else’s will impress?
What has Miley achieved in 2024? For the first time in many years, Argentina has a budget surplus. And so much so that even after paying interest on the national debt, it will still remain in a slight plus. Just last year the country was on the verge of default.
Cut to hell!
For the sake of recovery, it was necessary to radically reduce government spending. There were half as many ministries, only 9. About 30 thousand civil servants were fired (only 1%, so the main cuts are still ahead), numerous subsidies to the population (for example, to pay electricity bills), and all kinds of benefits were sharply reduced. In general, it was possible to cut the state’s expenditures by a good quarter.
Before Miley, Argentine governments were desperate to keep the national currency’s exchange rate relatively stable. All artificial measures only led to the prosperity of underground trade. The devaluation of the peso by a factor of three brought the official exchange rate almost into line with the black market rate. But Miley still intends to replace it with the American dollar, so that no one in the country can manipulate the national currency to suit the political course.
If in 2023, Argentines reduced their savings in banks by 2 billion dollars, then this year, by September, deposits were replenished by 19 billion. This was clearly facilitated not only by the general improvement of the financial system, but also by the tax amnesty announced by the government for those incomes that are legalized.
In 2023, inflation broke world records and exceeded 211%; by the end of 2024, it is expected to reach 140%. However, a more clear dynamics is provided by a monthly comparison: from 25.5% in December last year, price growth slowed to 2.4% in November this year.
The Central Bank, after a long period of increasing interest rates, lowered it from 126% at the end of last year to 32% in December 2024.
A sharp recovery in public finances has revived the economy and is bringing investment back into Argentina. At the end of 2024, a decline in GDP of 3-3.5% is expected, but by the second quarter a decent increase of 3.9% has already been recorded. Most forecasts for next year are for growth of 5%.
As of December 23, the PAIS (Argentine General and Solidarity Development Tax) will be terminated. It added 8% to the prices of imported goods and services. Among other things, this will affect the cost of foreign streaming services like Netflix and Spotify for Argentines.
Miley is celebrating the new year 2025 in a great mood. If last December he warned his fellow citizens that they would first face the difficulties of the transition period and a decline in living standards, then in his recent address to the people he promised only good news from now on.
If the processes are not stopped, if the Argentine economy continues to recover, and ours feels worse and worse, the states will definitely meet on the scale of well-being.
Of course, complete victory is still far away. Miley, not having a majority of supporters in parliament, is not able to carry out all the planned reforms, and those that are being carried out are often not implemented in full. The parliamentary elections in 2025 will be a serious test. However, oddly enough, the majority of Argentines, accustomed to paternalism, according to opinion polls, still support the president. Therefore, his optimism is well founded.
Meeting on the scale
Listing the measures taken by Miley in the past year, I could not help thinking how different they are from what our government is doing in solving Estonia’s economic problems.
The total tax increase planned for years to come does not in any way contribute to the revival of domestic consumption and the recovery of the economy from the protracted recession. Even at the beginning of the century, the attitude of any government towards the budget deficit was very wary, it was avoided in every possible way.
In recent years, the perception of this phenomenon, which is extremely dangerous for the health of public finances, has been rather calm. The government is only concerned with how to technically (but not in reality) keep the deficit to no more than 3% of GDP, as EU regulations dictate. And where there is a permanent budget hole, there is an increase in debt. For now, our public debt is one of the lowest in the EU, but it is growing rapidly.
The only thing in which we were ahead of Miley was the abandonment of the national currency, only in favor of the euro rather than the dollar.
Of course, today the financial and overall economic situation in Estonia is incomparably better than in Argentina, which the new president has just begun to treat. Even taking into account the negative trend, we can worsen our situation for a long time… But if the processes are not stopped, if the Argentine economy continues to recover, and ours feels worse and worse, the states will definitely meet on the scale of well-being. And then they will separate again: Estonia will go to where Miley leads his country, and Argentina will go to those positions from which we are already beginning to descend.
History teaches that many processes, once started, become a long-term trend and reach their logical conclusion. Who would have thought in 2000 that Vladimir Putin would come to the Kremlin for decades and lead the country to a monstrous war in Ukraine? Likewise, today we have no idea whether Estonia has taken a new path or whether this is still just a temporary deviation from the previous, well-known course.
Today many will think that I am exaggerating too much. Of course, both countries can still change the trajectory of the path. Argentina has already been repeatedly tried to reform, but time after time the people quickly swept away the reformers and returned to power those who kept the country in the usual swamp. Our current problems may turn out to be temporary, especially if a new coalition comes to power in the next elections. But so far there is no visible alternative to the reformists, who are all moving to the left, but are not losing popularity so rapidly.
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Source: www.dv.ee
