Argentina’s Deregulation Minister takes the chainsaw to laws and government ministries

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The first object you see when you enter the vast offices of Federico Sturzenegger, Argentina’s Minister of Deregulation and State Transformation – better known as the “chainsaw” minister – is a biography of Elon Musk, one of his heroes.

The second one you see is a wall-mounted calendar that displays the number of days remaining – 175, when I saw him in mid-January – for him and his boss, Argentine President Javier Milei, to use decrees to kill or change hundreds of laws that they consider useless, antiquated, anti-freedom, anti-business, moronic or just plain ridiculous, like the one governing carrier-pigeon races.

The third is the two enormously thick piles of white papers on the table next to Mr. Sturzenegger’s desk. The higher pile is the laws awaiting annihilation; the shorter one is those that might survive in modified form.

The fourth object, on the window ledge overlooking central Buenos Aires, is a figurine of Mr. Milei wielding a chainsaw with “Viva La Libertad Carajo!” inscribed on the blade. A polite translation would be “Long Live Freedom Damn It!”

Welcome to the Milei revolution, the boldest experiment in economic shock therapy in the Americas, maybe the world. The rapid effort, in good part carried out by Mr. Sturzenegger, has evidently inspired Donald Trump, who entered the White House on Jan. 20.

Mr. Milei was among the few head-of-government guests at the presidential inauguration, along with Italy’s Giorgia Meloni, another hard-right conservative leader with a taste for populism and daring behaviour. Mr. Milei was the first foreign leader to meet Mr. Trump after he won the U.S. election in November. They held a love-in at Trump’s Mar-a-Lago mansion in Florida, where Mr. Trump told him: “The job you’ve done is incredible. Make Argentina Great Again, you know, MAGA.”

Mr. Milei created the deregulation office to disembowel government ministries and their bureaucrats and overhaul the functions of whatever and whoever survived the attacks to try to make the economy more competitive. In the United States, Mr. Musk, the Tesla and SpaceX chief who is the world’s richest man, has a similar role as head of the Trump-inspired “Department of Government Efficiency” (DOGE). When Mr. Milei learned about Mr. Musk’s appointment, he declared “We are exporting our chainsaw deregulation model around the world.”

The difference is that Mr. Sturzenegger is a proper cabinet minister with a proper budget, theoretically giving him a lot more power, relatively speaking, than Mr. Musk. He also has plenty of experience in government; Mr. Musk has none.

Mr. Sturzenegger is an MIT-trained economist and academic. He served as economics policy secretary under the chaotic regime of Fernando de la Rúa, who was Argentina’s president from 1999 to 2001 and who fled Buenos Aires in a helicopter when convertibilidad, the system that pegged the peso to the dollar, collapsed. Financial mayhem ensued.

He was appointed president of the central bank in 2015 and resigned in mid-2018, two months after a galloping run on the peso triggered an emergency loan from the International Monetary Fund, making his position untenable. He was also an elected member of the Chamber of Deputies, the lower house of the Argentine Congress, for two years until 2015.

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In other words, Mr. Sturzenegger knows how governments and bureaucracies work, and how crises wind up and wind down, and he doesn’t like what he sees in Argentina, the only developed – that is, wealthy – country to get downgraded to developing status. A century ago, Argentina was one of the 10 wealthiest countries, on par with the United States on some measures. It was blessed with ample natural resources, a thriving agriculture industry, and industrious emigrants from Italy and Spain and elsewhere in Europe who were eager to build better lives. For the most part they did.

Along the way, the country produced a vibrant culture and some world-famous figures, among them Che Guevara, Pérez Esquivel, Diego Maradona, Lionel Messi and Pope Francis.

Today, Argentina is a basket-case economy, and has been for decades. Mr. Sturzenegger told me that his job, in short, is to “remove geological layers of garbage” from bloated ministries that he sees as part of the economic problem, not the solution, and to cut government spending relentlessly.

Mr. Sturzenegger is tall and bald and has an easy smile. When I met him on a warm day at the height of the Argentine summer in mid-January, he was casually dressed and seemed relaxed for a man who gives few interviews. He is fairly soft-spoken and his English is near-perfect, since it has to be. He spent years on his feet in the classroom, teaching economics at UCLA and Harvard.

He is 58. He and his wife, Josefina Rouillet, love Hollywood movies. His office at the central bank was decorated with Star Wars figurines and life-size helmets and gear of the film’s characters, according to a recent article in the Buenos Aires Herald. He writes poetry and is the co-author of several scholarly books on the Argentina economy and the sovereign debt crises of Russia, Ukraine, Argentina and other clapped-out countries.

After Mr. Milei’s unlikely election as president on Nov. 19, 2023 – unlikely, because he was an outsider backed by a near-nothing party, and describes himself as an “anarcho-capitalist” – he set out his agenda in a remarkably blunt speech that was reminiscent of Trump’s “American carnage” address at his first inauguration, in January, 2017.

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Mr. Milei’s opening words were “Today begins a new era in Argentina” and he then launched into a diatribe into the inept, ignorant or corrupt leaders who ruined Argentina’s once-wealthy economy. “For more than 100 years, politicians have insisted on defending a model that only generates poverty, stagnation, and misery,” he said.

He went into specifics: A budget deficit of 17 per cent of GDP; hyperinflation (which was more than 200 per cent in 2023 and had, at times, been as high as 1 per cent a day); money-printing gone mad; a debt time bomb; a soaring poverty rate (then about 45 per cent); an economy that had not grown since 2011 and was in recession; and a fall since that year in real GDP per capita of 15 per cent.

There is “no money,” he said – and keeps saying today, to the point it has become his trademark phrase. “A hundred years of failure will not be undone in one day, but it can be started on one day, and today is that day,” Mr. Milei said.

His direct assessment of the economy and his plan to fix it captured the imaginations of many Argentines, also a few mass protests as the spending cuts began. “It was impossible for anyone to think that, two years ago, Mr. Milei would be president,” said Marina Dal Poggetto, executive director of Eco Go, a business and economic consultancy in Buenos Aires. “He won because he had a simple message on the economy. He became a rock star.”

The Milei revolution was under way and Mr. Sturzenegger became the President’s deregulation whisperer. Seven months later, Mr. Sturzenegger was sworn into cabinet and pulled out his knife. “This is like peeling an onion,” he said. “You end up crying because you can’t believe what you find.”

Mr. Milei cut the budget deficit to zero in his first month by ending capital spending, raising government pensions and salaries by far less than the inflation rate, and putting Mr. Sturzenegger on a mission to gut the public sector.

He says the bureaucracy head count went from 210,000 to 175,000, a fall of 15 per cent, while overall government spending dropped 30 per cent. The number of ministries was cut to eight from 18 (though some exist in shrunken form as secretariats). The side benefit was that some of these ministries were led by ministers from other parties in Argentina’s messy Congress, allowing Mr. Milei and his Libertad Avanza party to reduce power sharing somewhat.

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The Milei-Sturzenegger agenda did not stop with wholesale spending cuts and job reductions. Aiming to reduce consumer prices and inflation, the government recently cut import duties and other protectionist tariffs that had, for instance, ensured that the price of an iPhone was two or three times higher than the same device in the United States. The blanket tax of 7.5 per cent on all imported goods and the 30 per cent tax on Argentines’ overseas card purchases vanished.

The deregulation campaign – Mr. Sturzenegger’s specialty – has a lot longer to run. “The second year of the deep chainsaw is starting,” he says.

Already, he says, 20 per cent of Argentina’s laws have been killed or modified. The goal is to take the slash-and-burn campaign to 70 per cent. One of the laws that made “no sense,” a leftover of the Peronist regime that ruled Argentina for most of the 42 years since the country returned to Democracy in 1983, required representatives of Argentine manufacturers, like shoemakers, to approve the imports of their foreign competitors. To no one’s surprise, most said no, since they would have to drop their own prices to compete. The upshot was high prices and low quality. “When you deregulate, prices tend to fall by 30 per cent,” Mr. Sturzenegger claimed.

The deregulation has seen food and rental price controls lifted. The campaign will see a series of privatizations, including the sale by decree of flag carrier Aerolineas Argentinas. “We should not do what the private sector can do better,” he said. Efforts are under way to crunch some of the powers of the unions, a battle that could meet a lot of resistance.

The results so far, have been mixed, though the man and woman on the street, and some economists, say it appears that the worst is over for the Argentine economy. The lifting of price controls, combined with the devaluation of the peso, raised consumer prices by an alarming rate at first, making Argentina one of the most expensive countries in Latin America. The recession deepened and the poverty rate rose. But the Milei government says that prices are now moderating as competition sets in, and that the poverty rate is falling.

There is no doubt the dramatic fall in inflation was the headline-making winner. In November, the rate was 2.4 per cent a month. That’s still outrageously high by North American and European standards but was a four-year low. “The trade-off to fight inflation was deepening recession,” said economist Juan Ignacio Carranza, an independent political risk analyst. “But now the economy is recovering.”

Argentina emerged from recession, which started in late 2023, in the third quarter of last year, with GDP up by 3.9 per cent on a seasonally adjusted basis compared with the previous quarter. Between the rising economy and falling inflation, businesses are ever-so-cautiously shedding their pessimism.

Arnaldo Miño, 40, owner of Chipa Coronel Bogado, a bakery and street-food shop in the rough streets behind Buenos Airies’s main train station, said that, for the first time in years, he can plan beyond a few days and not panic about the prices of flour and cooking oil jumping in price from one week to the next. “I can plan my production three to six months out because prices aren’t going crazy any more,” he said. “And I am not afraid to go to the bank and get credit, since interest rates are lower.”

Some economists say they don’t see a vision yet from Mr. Milei or Mr. Sturzenegger of what the Argentine economy and society might look like in a few years. So far, the story has been cut, cut, cut, a strategy that potentially could create as many losers as winners if it is done too harshly, quickly or unfairly, as it was during the painful austerity years which effectively bankrupted Greece a dozen years ago. “There does not appear to be any long-term agenda,” Ms. Dal Poggetto said.

Mr. Sturzenegger disagrees. He says that prying open a blocked, protected economy that has impoverished millions for decades is goal enough. “Argentina will be a free society and freedom brings prosperity,” he said. “This is more than MAGA. It should be Make Argentina Prosperous Again.”

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