Workers in Argentina took to the streets on Wednesday in a general strike to protest the austerity measures implemented by far-right President Javier Milei.
When Milei took office on December 10, Argentina was already suffering from triple-digit inflation. He was elected on the promise of fixing the sputtering economy and quickly implemented austerity measures that he claimed were necessary to restore Argentina’s financial stability. In his inauguration address, he warned the country that its situation would deteriorate before improving, and his prediction proved accurate.
One of his earliest actions was to devalue the Argentinian peso by 54 per cent, which further accelerated the already sky-high inflation rates. According to the National Institute for Statistics and Censuses (INDEC), Argentina ended 2023 with annual inflation at 211.4 per cent. This made it the steepest rate in Latin America, surpassing even Venezuela. The year also witnessed the fastest inflation hikes since 1990, resulting in higher prices for consumers.
Milei implemented his currency devaluation measure while simultaneously implementing immediate cuts to government spending, including consumer subsidies. In December, he issued a presidential “mega-decree” that reformed or overturned dozens of laws. It also opened the door for the privatization of state-run companies. Another decree resulted in the elimination of 5,000 government jobs.
However, more changes are in the pipeline. The nationwide strike coincided with congress’s consideration of a slimmed-down version of Milei’s “omnibus law.” The original bill aimed to reshape the country’s elections, restructure the lower chamber of congress, and impose strict new restrictions on protests, including penalties of up to six years in prison.
NO HAY PARO QUE NOS DETENGA
Sindicalistas mafiosos, gerentes de la pobreza, jueces cómplices y políticos corruptos, todos defendiendo sus privilegios, resistiendo el cambio que decidió la sociedad democráticamente y que lidera con determinación el presidente @JMilei. No hay paro…
— Patricia Bullrich (@PatoBullrich) January 24, 2024
Strike evidence of backward thinking according to Milei
If approved, the streamlined version of the bill will grant Milei’s executive branch legislative powers for an “emergency” period lasting one year.
The president dismissed the strike as backward thinking. “There are two Argentinas,” he told local media. “One wants to stay behind, in the past, in decadence.”
Members of his administration also criticized the protesters.
“Mafia union leaders, poverty managers, complicit judges, and corrupt politicians, all defending their privileges, resisting the change that society democratically decided upon and that the president is leading with determination,” said Security Minister Patricia Bullrich in a tweet.
However, despite the protests, Milei still enjoys broad support among Argentinians.
One survey conducted this month by the pollster Escenarios found that 55 per cent of respondents believed Milei’s reform measures were necessary to improve the economy. Political scientist Federico Zapata, the director general at Escenarios, says poll numbers reflect the president’s successful messaging to voters.
The other half of austerity actions used to reduce overall inflation and facilitate economic growth involves slashing public coffers through privatizations and introducing greater opportunities for foreign direct investment.
Milei aims to transfer as much of the industry as possible to the private sector. This includes selling the state’s 51 per cent stake in the oil and gas company YPF Sociedad Anónima.
Furthermore, Milei has said that he will leave the development of the green hydrogen and renewable energy sectors to private investment, as mentioned by Marina Pera, associate analyst at the political risk consultancy Control Risks.
That also includes the pursuit of battery metals.
Argentina’s lithium production could pass Chile by 2027
The growing demand for its vast lithium reserves has turned Argentina’s mining sector into a significant economic force. However, the recent economic turmoil has diminished the sector’s global competitiveness.
Historically, the country has focused its mining activities on gold, silver, and copper. However, the increasing demand for lithium-ion batteries is driving new investments in lithium. Argentina boasts 108.1 million mt of lithium in reserves and resources, surpassing any other country in the world. Despite this, production in 2022 only reached 35,046 mt, making Argentina the third-largest producer after Australia and Chile, as per data from S&P Global Market Intelligence.
Lithium prices are currently at historical highs and the government presently has an openness to foreign investment. There are currently more than 30 lithium projects in development in the South American country. Argentina’s lithium production is expected to see gradual year-on-year increases and could potentially surpass Chile by 2027, according to S&P Global’s research databook released on September 25th.
Both Bullrich and Milei have proposed loosening capital controls and unifying the multiple exchange rates used to slow down the devaluation of the peso. They have also both pledged to eliminate the 8 per cent export tax on mining products.
Pera explained that strict import controls limit a miner’s ability to import equipment and machinery, and slow approval times can also have an impact on production.
This suggests that the future for lithium producers like the newly constituted Arcadium Lithium plc (NYSE: ALTM) (ASX: LTM) and Lithium South Development Corporation (TSX-V: LIS) (OTCQB: LISMF) (Frankfurt: OGPQ) is a bright one. The former will benefit from export taxes, while the latter, which continues to make progress with drilling campaigns, will enjoy the expedited approval times for new equipment.
Lithium South Development Corporation is a sponsor of Mugglehead news coverage