“There’s no money,” proclaimed President Javier Milei during his presidential inauguration speech on Sunday. The new maxim, repeated often over the last few weeks, has become his go-to as he prepares Argentina for a heavy dose of economic shock therapy. “The situation will get worse in the short term,” he said, driving the point home. 

The rest of the day saw his cabinet picks take their oaths, controversially without press present.  Milei also received foreign leaders, including Ukraine’s Volodymyr Zelenskyy. The event drew right-wing actors from far and wide: Hungary’s Viktor Orbán, Brazil’s Jair Bolsonaro, and Spain’s Santiago Abascal, to name a few. 

In the days that followed, Milei made good on his campaign promise to take a chainsaw to government spending. His administration unleashed a deluge of austerity measures aimed at shrinking the Argentine state, slashing the fiscal deficit, and aligning the official exchange rate with parallel ones. 

Tuesday began on a turbulent note. In a press conference, presidential spokesman Manuel Adorni announced that, per Milei’s campaign promise, the number of executive ministries and secretariats would be halved. “There’s no money,” he said, echoing Milei. The cuts — which, according to former Banco Nación director Julia Strada, amount to .00142% of GDP — were apparently necessary to prevent the country from spiraling into “hyperinflation.”

Things only intensified from there. Later in the day, Economy Minister Luis Caputo posted an 18-minute video outlining the government’s idea of shock therapy. To “neutralize the crisis” and stabilize the economy, said Caputo, the country needed rehab from its “addiction to fiscal deficit,” repeatedly comparing the nation’s finances with the bank balance of a profligate household. 

The medicine? A 54% devaluation of the Argentine peso, the largest in more than two decades. In a matter of hours, the currency’s official value against the dollar plummeted from AR$366 to AR$800. The move, said Caputo, sought to precipitate an increase in agricultural and industrial exports. 

The economy minister also announced a sharp reduction in subsidies for utility, as well as for transport in Greater Buenos Aires, which is home to roughly a third of Argentina’s population. The payouts were discriminatory against Argentina’s interior provinces, where fares are significantly steeper, argued Caputo. Milei’s administration will, for the short term, subsidize 35% of the full public transport fare while ultimately planning to fully eliminate transport subsidies in the medium to long term, said the economy minister. Those cuts are to begin at the start of the new year. For utilities, state assistance will be tapered over time, starting in February or March, and segmented according to both consumption and income levels. More details are to come.

What Caputo did make abundantly clear, however, is that “there is no money.” 

As a result, Milei’s government will eliminate all federal funding for public works that have not yet begun. No new public works contracts will be tendered, and all government advertising will be suspended for a year. Employees who have worked for the government for less than a year will not have their contracts renewed. And the country’s importing system, SIRA, which has been panned as overly bureaucratic, will be scrapped and replaced with a supposedly more streamlined apparatus. 

Recognizing the impact that these changes will have on the population, particularly lower-income households, Caputo said that payouts to families with children will be doubled and that the money provided by the country’s food assistance program will rise by 50%. To further balance the budget, import and export duties on non-agro products will temporarily rise.

Predictably, Peronist leaders aligned to the previous government blasted the policies. Juan Grabois’ take on Caputo’s announcement was particularly graphic. The leftist social leader and Unión por la Patria presidential hopeful described the new economy minister as having announced “a social murder without flinching, like a psychopath about to massacre his defenseless victims.” 

Others, like International Monetary Fund chief Kristalina Georgieva, celebrated policies, which she said would provide a “good foundation” to bring Argentina’s IMF debt deal, the Fund’s largest ever, “back on track.” Under the previous government, Argentina had missed most of the targets laid out in the agreement, such as reducing the fiscal deficit and ending money printing.  

Milei is clearly using whatever political honeymoon he has to pass these slash-and-burn policies. And for good reason. National statistics agency INDEC announced yesterday that annual inflation topped 160% in November, a 32-year high. With consumer prices on the rise (and expected to continue to climb in the near term), Argentine society, including many of Milei’s voters, may lose patience with the new president as the decline in their purchasing power accelerates.

What’s more, on Thursday, former Juntos por el Cambio presidential candidate and current Security Minister Patricia Bullrich announced her own series of measures that includes empowering federal law enforcement to disband street blockades. In Argentina, cortes de calle, or street blockages, are typical forms of social protest, which generally seem to be more common around the end-of-year holidays. The current economic situation makes protests all the more likely. 
Given all of that, everyone — government and opposition alike — is asking themselves a few questions: how long will Milei maintain social legitimacy? And how will his government cope as social and economic tensions invariably rise?