Argentina’s Milei praises free markets, slams socialism at Davos

© Reuters. FILE PHOTO: Argentina’s presidential candidate Javier Milei addresses supporters as he reacts to the results of the presidential election, in Buenos Aires, Argentina October 22, 2023. REUTERS/Matias Baglietto

By Leela de Kretser and Victoria Waldersee

DAVOS, Switzerland (Reuters) -Argentina’s libertarian President Javier Milei held a positive meeting with International Monetary Fund chief Kristalina Georgieva in Davos on Wednesday, focused on the South American country’s deep economic crisis and its $44 billion IMF program.

“Very good meeting with Argentina’s President Javier Milei,” Georgieva wrote on X after meeting the right-wing leader who is pushing a tough austerity package to bring down inflation above 200%, even while two-fifths of people are living in poverty.

“We talked about Argentina’s deep economic and social challenges and decisive steps underway to bring down inflation, promote private sector-led growth, and use scarce public money to help the most vulnerable people,” she said.

Earlier in the day Milei had praised free markets, while slamming socialism and “social justice” in a speech at Davos that marks the first overseas tour for the self-proclaimed ‘anarcho-capitalist’ since taking office last month.

“Socialism is a phenomenon that creates poverty,” he said in a special address to a large and well-heeled crowd at the World Economic Forum, warning the West was “in danger” of its spread.

“Free enterprise capitalism is the only tool we have to end hunger and poverty.”

Milei shot to power last year on the back of voter anger at the worsening economic crisis, often campaigning with a chainsaw to underscore his plans to slash the size of the state. He needs to rebuild depleted foreign currency reserves and spur growth.

He is pushing major economic reforms, including spending cuts and deregulation, in a bid to improve the government’s finances and boost the economy. But he faces high poverty levels and the real threat of social unrest.

Milei earlier met British foreign minister David Cameron, discussing “deepening commercial ties, the support they will give us in the IMF and how to promote British investments in Argentina,” Milei’s office said in a readout.

En route to Switzerland by commercial jet, Milei had said he was attending the Davos conclave in order to “plant the idea of freedom in a forum contaminated by the 2030 socialist agenda”.

AUSTERITY ‘DETOX’

Argentina is racing to salvage its massive loan program with the IMF, the Washington-based lender’s largest globally. Last week it secured an agreement with IMF staff over the program’s latest review, which should unlock some $4.7 billion of funds.

According to a Davos briefing on Argentina, the country’s relationship with the IMF is “very good” and the government is confident of meeting objectives in a tough economic plan that surpasses what the fund was demanding.

Milei’s libertarian coalition, which only has a small bloc in Congress but has won over conservative allies, was confident of passing its major ‘omnibus’ reform bill, part of a first wave of economic reforms, but had back-up plans if it failed.

Planned tax hikes as part of these reforms – going against campaign pledges to cut taxes – were a necessary step to bring in revenues to pay for social programs for the most vulnerable, but the aim was that these would last no more than a year. Those tax hikes have irked Argentine soy and corn farmers.

Milei would stick by plans to dollarize Argentina’s economy and shut the central bank, but the conditions were not yet right for doing so and the government first had to stabilize the economy and navigate a tough period of austerity “detox”.

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