This Monday, February 19th, there was positive news from the Argentine economy. this is that excess At sight registered in January, the first full month of Javier Milei's government.
The surplus was around $589 million, including interest payments on the national debt, the government announced on the night of Friday the 16th. This is the first monthly budget surplus in 12 years.
The authorities used the fact to defend their economic policies.
The Minister of Economy Luis Caputo quoted Milei in publication in X: “A zero deficit cannot be negotiated”. In response, government spokesman Manuel Adorni announced a campaign for Caputo to become the nation's president in 2031.
However, a single set of data never explains the entire economic scenario, especially not in Argentina.
How did Milei get the budget surplus?
The government ran a budget surplus in January because it took in more than it spent during that period. In this case, inflation was the driver of the surplus.
The annual value reached 254.2% in January it is worth remembering that inflation in Argentina has been in an upward spiral since 2022 and was suppressed at the end of 2023 by the then Minister of Economy Sergio Massa in his attempt to win the elections.
“The state reduced costs because its income was adjusted to inflation through taxes, but its spending remained constant,” says economist Claudio Zuchovicki.
Compared to January 2023, receipts for export taxes increased nine times, import taxes increased four times and consumption taxes (VAT) increased three times.
Milei did not increase any of these taxes; Inflation did the job for him.
The main cause of government spending cuts was the stagnation of pensions, according to a preview of a study by the consulting firm Analytica.
There were also direct cuts in public works and transfers to the provinces.
“Ultimately, it’s the purchasing power of people’s salaries that drives the expense,” Zuchovicki says.
How sustainable is the budget surplus?
It is clear that an inflationdriven surplus is not sustainable in the long term.
“The question is social: How many people can live with such a loss of purchasing power,” says Zuchovicki.
There are still no spontaneous mass demonstrations against Milei, but the Peronist opposition is already taking advantage of the situation.
Argentina's Peronistlinked main trade union federation, the General Confederation of Trade Unions (CGT), staged an action and general strike against Milei on January 24 in a record 45 days in government and is already planning a repeat.
The government needs…
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