(Bloomberg) -- Javier Milei took office as Argentina’s president Sunday, promising to eradicate inflation and rescue the nation’s troubled economy with a shock-therapy program based on drastic cuts to public spending.
The libertarian leader, who beat out Argentina’s traditional political coalitions to win an election run-off last month, took the oath of office in a ceremony in congress, where he received the presidential sash from his predecessor to the chant of “freedom, freedom.”
He then delivered a somber message to the nation, warning that Argentines will have to endure additional pain while he works to pull the country from the economic crisis inherited from his predecessor. The outgoing administration of Alberto Fernandez has planted inflation that could reach 15,000% if the government doesn’t change course, he said.
“They’ve ruined our lives,” Milei told a large public waiting for him outside congress. “There’s no money.”
He reiterated his pledge to cut spending rapidly, saying “there’s no alternative, nor much time.” The economy will worsen in the short term before turning around, he added.
Attending the ceremony were the Latin American presidents of Uruguay, Paraguay and Chile, alongside European leaders including Hungary’s Viktor Orban and Ukraine’s Volodymyr Zelenskiy. Brazil’s Luiz Inacio Lula da Silva didn’t attend his inauguration, being represented by his foreign minister.
During the campaign, Milei’s radical proposals to rein in inflation — such as introducing the dollar as an alternative to the peso and shutting down the central bank — resonated with Argentines outraged with consumer prices soaring more 140% a year. But in an unexpected turn to pragmatism, he seemed to put such difficult-to-implement plans on the back burner, prioritizing a classic program of fiscal adjustment instead.
His first measures will be announced at a news conference Monday morning, according to his spokesman.
Signs of Milei’s pragmatism became apparent with his first cabinet choices, which pleased investors and triggered a rally in the nation’s dollar bonds and stocks.
Read More: Milei’s Wall Street Fan Is Dismayed by Softer Economic Policies
He appointed Patricia Bullrich, a former adversary who joined forces with him after being defeated in the first round of the presidential election, to be his security minister. And he handed the crucial economy ministry job to Luis Caputo, a former finance chief and central bank president who also negotiated with holdout debt investors and the International Monetary Fund during the administration of Mauricio Macri.
Caputo then tapped his longtime colleague Santiago Bausili, a Deutsche Bank and JPMorgan Chase & Co veteran, to run Argentina’s central bank.
Tough Times Ahead
Milei will also need sharp political skills to navigate tough and relatively long periods of still fast inflation coupled with economic stagnation aggravated by his own austerity measures. Stagflation is likely to last for more than a year in the country, he’s been warning Argentines, whose tolerance to economic pain may quickly run out after years of failed stabilization policies.
On top of that, Milei will have to build a support base in a fragmented congress whose lawmakers in recent years have rejected IMF deals and budget bills proposed by presidents from their own parties. His pivot to pragmatism is seen as an attempt to build bridges in congress in order to win votes for his reform agenda.
Read More: Milei to Send ‘Shock’ Package to Argentina’s Congress on Day One
Another challenge for the president will be to maintain popular support amid likely cuts to government subsidies that currently bring some relief to vulnerable Argentines, particularly the 45% of the population living in poverty.
Powerful labor unions and social movements have already vowed to resist his austerity campaign, although he has promised that spending cuts wouldn’t affect the poor. Previous belt-tightening plans in Argentina led to a surge in inflation as prices of transportation and utilities jumped when subsidies were removed.
Milei has already set himself apart from past Argentine presidents by taking an unconventional path to the presidency.
A corporate economist most of his life, he became a TV celebrity by 2018, appearing on debate shows and cross-fire segments. He gained the national spotlight with an angry rhetoric and drain-the-swap message against the established political class, serving just one term as a congress representative before being catapulted into the nation’s highest office.
The straightforward style he developed in those debates was also on display during his inauguration speech.
“I prefer to tell you an uncomfortable truth than soothing lie,” he told his audience. “It’ll be difficult, but we will be successful.”
(Updates with quotes from Milei’s inauguration speech in third and final paragraphs)
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