Why Argentina's shock measures may be the best hope for its ailing economy

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The painful economic steps that Argentina’s new president, Javier Milei, announced this week sound draconian: Slashing the currency’s value in half

WASHINGTON — The painful economic steps that Argentina's new president, Javier Milei, announced this week sound draconian: Slashing the currency's value in half. Reducing aid to provincial governments. Suspending public works. Cutting subsidies for gas and electricity. Raising some taxes.

Yet the South American country's economy is such a basket case — and has been for so long — that many analysts believe that only such radical measures offer a realistic opportunity to rescue the economy.

“It was a good start,’’ said Ivan Werning, an economist at the Massachusetts Institute of Technology. “If the economy were a house, it is already burning.’’

Inflation in Argentina has hit 161%. Its economy is shrinking, in part because of a ruinous drought. In the past five years, its currency has lost about 90% of its value against the U.S. dollar. Its debts, including $45 billion that it owes the International Monetary Fund, are suffocating. One in four Argentinians lives in poverty.

Whether Milei succeeds will depend partly on details that have yet to be worked out and compromises that need to be made to win political support for his program. He commands a fragile base in the Argentine Congress, with his party ranking a distant third in the number of seats it holds.

But the critical question, economists say, is this: Will the Argentinian people – who gave Milei, a libertarian economist, nearly 56% of the vote in a runoff election last month – continue to back his plan once real economic pain inevitably sets in?

“They appear to have the sense that the population has given them a mandate