Is inflation abating enough to save Javier Milei?

In Wild Tales, one of the most famous Argentine films of recent years, the character played by the actor Ricardo Darin decries the cost of a birthday cake he is buying for his daughter. “Is it imported?” he asks the women behind the counter, a nod towards the eye-wateringly high cost of imported goods in Argentina.

At the end of May, in a case of life-imitating-art, Darin inadvertently sparked a row with Javier Milei’s government over the cost of another staple foodstuff: the empanada. Appearing on La Noche de Mirtha, a cozy evening talk show, Ricardo Darin decried their cost, saying a dozen empanadas can now easily cost 48,000 pesos – roughly equivalent to $40. This off-the-cuff statement prompted a rebuke from the country’s economy minister and a slather of abuse from online libertarians.

It was a rare intervention from someone who – unusual as this is for an Argentine – has always kept his cards close to his chest politically. Darin is undoubtedly one of Argentina’s most successful actors, starring in the Oscar-winning The Secret in Their Eyes, which was subject to a disappointing English-language remake starring Julia Roberts and Nicole Kidman, and he is currently helming the Netflix series El Eternauta. That even he put his head above the parapet is perhaps a sign of patience with Milei’s government wearing thin among some sections of society. 

Empanadas, meant to be a cheap and affordable snack, are a good barometer for how much prices have risen. Darin’s comments came during a discussion about Milei’s latest attempt to get Argentines’ dollars out of their mattresses and into the country’s banks. “Who are they talking about? A dozen empanadas costs 48,000 pesos, so I don’t understand what they’re talking about, there are a lot of people who are having a very hard time,” Darin said.

A key pledge of Milei’s campaign was dollarization of the economy: the abolishment of the peso and adoption of the US dollar. These plans appear to have been put on ice. For now, Argentina lacks sufficient reserves of foreign currency to turn them into reality. This is part of the reason for Milei’s latest gambit to get the informal dollars held by Argentines into the system. Official estimates suggest Argentines own around $270 billion outside of the formal system. While much of this is held in foreign bank accounts, a good deal is estimated to be kept in cash. Distrustful of domestic banks since the 2001 economic crisis in which the public was blocked from withdrawing their savings before the peso was devalued, this has been the saving method of choice for most Argentines since.

Milei hopes to coax this money back into the system. A tax amnesty last year gave the economy an $18 billion boost, but now he plans to go further. Anyone paying dollars into the system will not be required to account for where they got the cash. Unsurprisingly, this has been described as a money launderer’s dream by several analysts.

Inflation seems to be abating

While the empanada row with Darin might suggest a frustration with regression of living standards under Milei, there is evidence that the libertarian president has some rope left. In regional elections earlier in May, his party won its first salvo in its bid to crush the center right. Manuel Adorni, Milei’s official spokesman, won the regional elections in Buenos Aires, traditionally a center-right stronghold. Milei’s La Libertad Avanza party doubled its vote count compared to the previous elections in 2023. Inflation, too, seems to be abating. Monthly inflation slowed to its lowest level in more than five years in May: 1.5 percent. Wholesale prices even fell 0.3 percent.

Argentina is preparing for midterm elections in October this year. These are crucial for Milei. Will he solidify his position and cast off the need for compromise? Or will voters who are feeling the pinch choose to punish him?