Argentina's 'anarcho-capitalist' president revs up chainsaw strategy, cuts over 5,000 bureaucrats loose

Javier Milei, Argentina's self-proclaimed "anarcho-capitalist" president, continues to make good on his pledge to take a "chainsaw" to government spending and to what he has termed his country's "political caste."

Milei evidently kept the chainsaw running after signing an executive order earlier this month to cut the number of government ministries from 18 to nine, announcing Tuesday that his administration would be cutting over 5,000 bureaucrats loose. Those government employees now on their way out were hired this year, prior to Milei's inauguration on Dec. 10.

A labor union representing public sector workers suggested the number of departing bureaucrats actually exceeds 7,000, reported Bloomberg.

The new president's administration indicated other government employees hired in previous years may similarly have their contracts reviewed.

The Associated Press indicated the decision not to renew the contracts of thousands of government employees in the new year is part of a broader strategy to reduce the size and expenses of the state in a nation of 46 million where inflation is expected to reach 200% by the end of the year.

"The goal is [to] start on the road to rebuilding our country, return freedom and autonomy to individuals, and start to transform the enormous amount of regulations that have blocked, stalled, and stopped economic growth," said Milei.

Extra to trimming the fat in Buenos Aires, the administration has set out to execute a number of shock measures to address the country's economic crisis resultant of past leftist governments' ruinous policies. These shock measures include cutting energy and transportation subsidies for residents; devaluing the Argentine peso by 54%; and halting new infrastructure projects.

While some leftists and media outfits have characterized Milei's economic strategy as extreme, various economists have recognized austerity and fiscal restraint as absolutely necessary to stabilize Argentina.

"It was a good start," Ivan Werning, an economist at the Massachusetts Institute of Technology, told the Associated Press. "If the [Argentine] economy were a house, it is already burning."

One in four Argentines are living in poverty. The country has a trade deficit of over $43 billion and a $45 billion debt to the International Monetary Fund.

A November report from the Organization for Economic Co-operation and Development stressed that the "new government from December 2023 will need to consolidate public finances to rebalance the economy. ... Continuous and decisive reductions in monetary financing will be key to stabilise the economy, and this will also require further fiscal restraint."

The New York Times acknowledged that various economists agree "severe reforms," such as those under way now, are necessary. However, the process will not be painless.

Martin Rapetti, an economist at the University of Buenos Aires, suggested the chainsaw initiatives "will increase inflation, will reduce income, will reduce activity and employment and it will increase poverty."

"The question is, what is society's tolerance for these measures?" added Rapetti.

While the measures may seem intolerable, Milei is of the mind that temporary pain is preferable to total collapse.

In his inaugural address, Milei said, "We will make all the necessary decisions to solve the problem caused by 100 years of profligacy of the political class. Even if it is difficult at first. We know that the situation will get worse in the short term."

Milei stressed that gradualism was a failed project and that there was "no alternative to shock."

"Of course, this will hurt the level of activity, employment, real wages, on the number of poor and destitute people. There will be stagflation, it is true, but it will not be very different from what has happened in the last 12 years," said Milei. "Let us remember that in the last 12 years GDP per capita has fallen by 15% in a context where we have accumulated inflation of 5,000%."

In an apparent effort to help relieve inflationary pressure and advance Milei's free trade agenda, Argentina also lifted import restrictions Tuesday.

Economy Minister Luis Caputo wrote on X Tuesday, "Starting today we are normalizing the import process that was absolutely blocked, generating greater inflationary pressure and shortages. ... On the flow side, today, after 15 years, SIRAs and any other import permits cease to exist."

"The state bureaucracy will no longer have the power to decide who imports a good and who does not," continued Caputo. "This measure has a direct impact on SMEs, which will have predictability in their operations, saving time and costs, since they will have certainty when importing. Starting today, it will be possible to import without quotas or product prohibitions."

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