‘Most drastic ever seen’: Nation that Donald Trump is following in the footsteps of

A nation battling 193 per cent inflation and where over half the population has fallen into poverty has been hailed as a blueprint for the West to follow.

If you wanted a glimpse at what happens when you radically overhaul government spending and enact aggressively pro-business policies as Donald Trump has promised for his second term, Argentina could be a good starting point.

It was telling when the South American nation’s firebrand president Javier Milei last week became the first foreign leader to meet Mr Trump since his US presidential election victory on November 5.

Mr Milei visited the 78-year-old’s Mar-a-Lago resort in Florida ahead of a conservative investment summit, and was so gushing of the Republican that he said his victory proved “that the forces of heaven [were] on our side”.

Mr Trump returned the praise, saying Mr Milei was a “MAGA person.”

“The job you’ve done is incredible,” Mr Trump said. “Make Argentina Great Again … he’s doing that.”

The wild-haired leader has now ruled the South American nation for roughly a year and he has certainly made some radical changes.

Describing himself as an anarcho-capitalist who believes the government should have as little role in society as possible, Mr Milei promised to slash the size of the public sector.

Posted before he took office and in a video that has become an iconic meme for the right-wing, the 54-year-old stood in front of a whiteboard showing every government department on sticky notes.

Mr Milei promised to slash government spending.

He can then be seen ripping entire departments off the board — such as the departments for travel, energy and culture — as he describes how he would slash spending.

His image is not that of a typical politician either. At a book launch earlier this year, he looked more like a rock star than an economist-turned-politician.

Clad in a black leather jacket and jumping around as audience members waved and shouted, Mr Milei belted out his version of a metal song by Argentine band La Renga, ahead of the launch of his latest book.

“I’m the king. I’m the lion!” Mr Milei shouted. “I eat the elite for breakfast!”

Mr Milei took to the stage earlier this year.

So it’s not just his economic reform that draws parallels with Mr Trump - Mr Milei’s anti-establishment vibes and distrust of the press are straight out of the US president-elect’s playbook.

The similarities are so strong that one of Argentinian President’s youth leaders Juan Ignacio Boutet told SBS this week that Mr Milei was a trailblazer for Mr Trump’s second term and that he was laying down the blueprint for other western nations to follow.

“It worked here in Argentina electorally, and now he’s sharing it with the world,” he said.

How did Milei become so popular?

In simple terms Argentina was a basket case before Mr Milei took office.

The nation of almost 47 million people has the second biggest economy in South America, behind Brazil, and one of the world’s biggest food exporters. It has abundant natural resources and a highly literate population, but it has been far from smooth sailing for Argentinians in recent years.

Before Mr Milei became president in December 2023, Argentinians were crippled by high inflation, unsustainable debt, and stagnant growth.

Inflation was soaring above 140 per cent in 2023, one of the highest rates globally - making basic goods and services increasingly unaffordable for most Argentinians.

The Argentine peso had plummeted in value by a staggering 52 per cent in 2022, following eye-watering falls of 68 per cent in 2021 and a 90 per cent drop in 2020.

Argentina has been smashed by inflation. Picture: iStock

More than 40 per cent of the population lived below the poverty line while the nation was struggling with a massive public debt of over $276 billion, much of it owed to the International Monetary Fund (IMF).

Promising big changes, Mr Milei, a libertarian economist and political outsider, capitalised on widespread discontent by proposing radical measures like dollarisation (the process of adopting a foreign currency to help a nation’s economy), slashing public spending, and eliminating the central bank.

While these ideas were controversial, they resonated with Argentinians desperate for a solution to years of economic mismanagement.

How has he done in his first year?

This coming Tuesday will mark one year since Mr Milei was elected, and he has seen some recent successes.

This week it was revealed the nation’s annual inflation rate fell to 193 per cent. It still sounds staggeringly high (Australia’s is 2.3 per cent by comparison) but it’s the first time that inflation has dropped below 200 per cent in almost a year. In August it was at 230 per cent.

The month-on-month rate dropped to 2.7 per cent, which is the lowest since November 2021.

This doesn’t tell the whole story as prices of everyday goods have almost doubled since the start of the year and more than half of the country has fallen into poverty.

This means Argentinians are tightening the belt. Despite being a famously steak-loving country, they are buying far less meat after Mr Milei ended the previous government’s freeze on beef prices.

Beef consumption fell in the first six months of the year to its lowest level in 13 years, according to a report by industry group Ciccra.

In terms of his promise to “take a chainsaw to the state” - much like tech billionaire Elon Musk has been tasked with in the US - Mr Milei has stayed true to his word.

According to the Financial Times, he eradicated years of huge government deficits and money-printing by pausing capital spending, drastically cutting the government payroll and increasing pensions and public sector salaries by less than inflation.

This has resulted in government finances moving into the black by 0.3 per cent for the first eight months of the year. By comparison there was a 4.6 per cent deficit at the end of 2023. The mammoth shift has been called “the most drastic fiscal adjustment ever seen in a peacetime economy”, by one international finance official.

“The worst is now past,” Mr Milei told the Financial Times. “More than 80 per cent of (economic) indicators have turned positive … real wages have been growing for the past four months. We are laying the foundations for strong growth.”

However, there are doubts about how sustainable Mr Milei’s economic shock treatment is. His approval rating sits around 44 per cent, which could be much worse given his severe austerity measures. There have also been no barely any demonstrations in the streets, despite Argentina’s history of big protests against the government.

Poverty surges

However, it’s certainly not all coming up roses in Argentina as more than half of its 46 million people are now living in poverty, the latest figures indicate.

The poverty figure for the first six months of this year was 52.9 per cent, up from 41.7 per cent in the second half of 2023, said the country’s Indec statistics agency.

Millions of Argentinians are doing it tough. Picture: Supplied

Since taking office in December, Mr Milei has slashed subsidies for transport, fuel and energy and sacked thousands of civil servants.

Poverty was already rising in Argentina before the Milei government took office. As recently as 2017, only about a quarter of the population were affected.

Investors bet on Argentina to succeed

In a sign that things are turning around for the better, international investors have piled money into the country’s stocks and bonds even as they hit records - betting that the best is yet to come.

According to Reuters, investors are particularly excited by Mr Trump’s win and a possible alliance between the two nations forming - and the fact there has been no major unrest over Mr Milei’s tough policies.

“I think there’s a lot of confidence that if there is a path towards normality, this is probably the only administration that could do it,” Thomas Haugaard, portfolio manager of EM debt at Janus Henderson, told the agency.

“I’m not saying that they will be able to do it, but there is a shot at it, and they have proven it without too much unrest on the streets.”

Milei bolsters ties with China

Meanwhile, Mr Milei met with Chinese counterpart Xi Jinping on Tuesday to discuss closer trade ties with the Asian powerhouse, his office said, despite previous criticism of the communist nation.

Both countries “agreed to continue working to strengthen trade ties and develop joint projects that benefit both economies,” the Argentine presidency said in a statement after the meeting, which took place on the sidelines of the G20 summit in Rio de Janeiro.

According to the Argentine presidency, Xi “extended a formal invitation to President Milei to visit China and, in return, President Milei extended a formal invitation to President Xi to visit Argentina,” with both sides’ teams to work on plans for the trips.

The unlikely duo shakes hands. Picture: Handout / Argentinian Presidency / AFP

China is Argentina’s second biggest trading partner after Brazil, according to official data.

During his election campaign last year, Mr Milei had said: “I will not do business with China, I will not do business with any communist.”

However, the former economics professor has adopted a more measured stance in recent months, especially after Beijing in June agreed to extend a currency swap worth billions.

Argentina is also a part of China’s Belt and Road Initiative (BRI), a huge infrastructure plan launched in 2013 by Mr Xi.

“China is a very interesting trade partner. They don’t demand anything, all they ask is not to be disturbed,” Milei said in September.

Mr Xi said on Tuesday that China was willing to “continue financial co-operation with Argentina, helping Argentina to maintain economic and financial stability,” Chinese state-run Xinhua news agency reported.

“China is willing to continue promoting high-quality joint construction of the ‘Belt and Road’ with Argentina, and to deepen co-operation in energy, mining, infrastructure, agriculture, scientific and technological innovation, digital economy and other fields,” Mr Xi said, according to Xinhua.

Mr Milei also met separately Tuesday with International Monetary Fund chief Kristalina Georgieva and Indian Prime Minister Narendra Modi.

— with AFP