Impact on Argentines and Economy
On the streets of Buenos Aires, Argentines are grappling with the ramifications of major austerity measures and a more than 50% devaluation of the local peso currency. This shock plan, unveiled by the government of new libertarian President Javier Milei, aims to stabilize the economy and has garnered support from the markets. However, the measures have raised concerns among the citizens.
Agustina Ferreira, a 19-year-old shop worker in the Argentine capital, acknowledges the theoretical benefits of the plan but worries about its impact on the people. Cuts to subsidies will lead to higher energy bills and transportation costs, while spending reductions will likely hamper economic growth.
The Real-Life Impact
The devaluation of the peso has abruptly reduced its official value against the dollar by more than 50%. However, due to existing capital controls, access to foreign currency was already limited, and individuals had to resort to parallel markets where they faced high exchange rates. This means that the devaluation may not have an immediate effect on everyone’s finances.
Still, the reality of the government’s tough measures is sinking in for many. Jose Diz, an agronomic engineer, says the news feels like a significant pay cut for him and his family. They are already cutting back on groceries, and the impending rise in costs for everything makes their situation even more difficult.
Challenges Ahead and the Risk of Social Unrest
President Milei, a political outsider who capitalized on voter anger towards the severe economic crisis, warns of a monthly inflation rate ranging from 20% to 40% in the coming months. He believes that without stringent measures, the country could spiral into hyperinflation. Milei acknowledges the harsh costs that lie ahead, including stagflation—an economic condition characterized by high inflation and recession.
Economist Gustavo Ber of consulting firm Estudio Ber highlights the need to keep social unrest in check. Many Argentines, exhausted by years of economic volatility, are initially willing to give the new president time to improve the situation. However, their patience is likely to wear thin if tangible progress is not made soon.
Facundo Marino, a 53-year-old worker in central Buenos Aires, supports the plan as a necessary evil to prevent further deterioration. Nonetheless, he expresses the pain it inflicts on people’s wallets, with the increasing dollar exchange rate, skyrocketing bus ticket prices, and rising costs across the board. The hardships are tangible and affect everyday life.