In a significant move that could reshape Argentina’s economic landscape, Donald Trump-loving President Javier Milei has launched a campaign targeting state-owned enterprises for major reforms. This initiative comes as Milei faces considerable legislative challenges in his bid to privatize these entities.
What Happened: Milei has initiated a bold campaign to reform state-owned enterprises, ranging from an airline to an oil group and the postal service, as he faces opposition from Congress on his privatization plans, Financial Times reported on Thursday.
Milei, inspired by Margaret Thatcher, aimed to privatize these companies during his campaign but has encountered legislative hurdles. In response, his administration has started extensive cost-cutting measures at numerous state-owned groups to achieve a balanced budget, sparking intense disputes with employees and unions.
According to Guillermo Francos, Milei’s interior minister, the state companies are inefficient, with a disproportionate amount spent on management rather than their primary objectives. Local NGO ASAP discovered that Milei’s government reduced funding to state companies by 61% compared to the previous year.
New leadership has been installed across the roughly 40 state companies, which include public services like passenger rail and energy, to cut staff and overhaul strategies. These companies have historically operated at a loss, but Milei’s aggressive approach has put him at odds with powerful unions.
One of Milei’s major targets is Aerolíneas Argentinas, the state-owned carrier that he attempted to transfer to its employees via an emergency decree. Although the Senate rejected the decree, it remains effective unless the lower house also votes against it. The airline’s new leadership has implemented various cost-saving measures, including a voluntary retirement program and the cancellation of unprofitable routes.
YPF, the energy group, has seen price increases and plans to divest from less profitable oil and gas fields. Despite these efforts, Milei’s goal to privatize these companies is still far from realized due to the need for Congressional approval.
Why It Matters: President Milei’s reformative actions are part of a broader economic overhaul that began with his shocking announcement to dismantle the central bank. This move aligns with his ultra-libertarian ideology and addresses Argentina’s staggering inflation, which hit a 30-year high of 211.4% annually.
Argentine stocks saw a rebound in February amid talks of a new deal with the International Monetary Fund (IMF), as Milei sought to exit from capital controls. The potential IMF deal could facilitate a quicker depreciation of the Argentinian currency and maintain interest rates above the inflation rate.
Moreover, Milei’s stance on economic recovery through “capitalism, savings, and hard work,” as he bypassed Congress to implement his austerity plan. His determination to use executive powers to push through economic reforms underlines the urgency of his administration’s efforts to tackle the country’s financial woes.
Photo via Shutterstock.
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