Javier Milei has turned Argentina into a libertarian laboratory

Javier Milei, Argentina’s president, has enjoyed the best week of his term. At dawn on June 13th the Senate passed two bills aiming to boost growth and raise revenue, giving Mr Milei his first legislative victory since he came to power in December. Hours later he travelled to the G7 in Italy, where he giggled with Giorgia Meloni, the prime minister, embraced Pope Francis and palled around with Kristalina Georgieva, the head of the IMF. “I always love our meetings,” he gushed to Ms Georgieva. Yet the relationship between Mr Milei and the fund, which has a $44bn lending programme with Argentina, may soon become less chummy. Uncertainty about the president’s plans for the central bank is worrying investors and the IMF alike.

Mr Milei’s early successes are impressive given the mess he inherited. For years, the central bank had created money to finance the fiscal deficit, fuelling inflation. It also had no foreign reserves. Another default seemed almost inevitable.

In his inauguration speech Mr Milei warned Argentines of hard times, declaring that “there is no money”. He immediately fired hundreds of bureaucrats, cut spending and devalued the peso by over 50% (which initially pushed up inflation). Meanwhile, public salaries and pensions were held down, slashing their real value. As a result, Argentina has enjoyed fiscal surpluses for five months, something not seen since 2008. Inflation has fallen to 4.2% month on month, the lowest since January 2022 (see chart 1).