There is a lot riding on the outcome of the upcoming general elections, not just economically but geopolitically, and not just for Argentina but across Latin America and perhaps even the globe.
Amid its worst economic crisis since the the depression of 1998 to 2002, Argentinians went to the polls this past weekend for primary elections, just two months before the generals. The results were, to put it mildly, a shock. Javier Milei, an avowed libertarian with big hair and far-right sympathies who is on a mission to rid Argentina of its political caste, won 30% of votes, more than both the main conservative “Macrista” bloc (28%) and the ruling Peronist coalition (27%).
In a stunning rejection of the two main political blocs that have governed Argentina for the past two decades, voters opted for an unknown quantity. Once again, the opinion polls got the outcome completely wrong.
A Dress Rehearsal
Voting in the primaries is obligatory for most Argentine adults, each of whom gets one vote. As Al Jazeera notes, this effectively makes it a dress rehearsal for the October 22 general election, giving a clear indication of the favourite to win the presidency. And that favourite this time round is Javier “the Wig” Milei, until recently a virtual nobody who can now more or less rest assured that he will at least make it to the second ballot (like France, Argentina has a two-round system of voting for its presidential election.
The two other main candidates are Sergio Massa, the current economy minister who is closely tied to the Clintonite core of the US Democratic Party but is likely to continue to pursue BRICS membership, dedollarisation and the expansion of bilateral trade with both China and Brazil, its two largest trading partners; and Patricia Bullrich, of Together for Change, a pro-US liberal-conservative bloc that helped propel Mauricio Macri to the presidency in 2015. Bullrich was minister of labour, employment and human resources during the disastrous de la Rúa government (2000-01) and in a recent speech in Miami called for the creation of a “NATO of the South” to combat organised crime in Latin America.
Milei’s political party, La Libertad Avanca (Freedom Advances), is only two years old but it could be on the verge of taking power, either on its own or as part of a coalition, presumably with the Macristas. If that happens and Milei is able to form a government and actually honours many of his main campaign pledges and is able to build broad enough support in Congress to enact his reforms (probably the biggest “IF” of all), it will have repercussions not only in Argentina but across Latin America and perhaps even globally.
But before we discuss Milei’s campaign pledges and their broader potential ramifications, let’s first take a look at who he is. What are his political ideas and principles? Does he actually have any? Where did he suddenly sprout from? How did he get from being a political nobody to becoming the presidential front runner in just seven years?
”Politics is the means by which men without principles lead men without memory.” Voltaire (allegedly).
Whether the above quote is Voltaire’s or not, it nicely sums up Milei’s rise to prominence. Not only does he appear to be a man without principle but many of his followers appear to have completely forgotten what happened to Argentina the last time someone made similar promises. Spoiler alert: it didn’t end well (more on that later).
Until seven years ago, Milei made his living as an economist working for and with different organisations, some of which one might think would clash with the libertarian principles he espouses (disclaimer: I myself am not a libertarian). For example, Milei is a member of the World Economic Forum, which serves the global plutocrat class, proudly describes itself as the “international organisation for public-private partnerships” ( i.e, corporatism), and is one of the biggest proponents of centralised, technocratic, top-down governance on the planet.
Milei has also worked as senior economist at the Argentinian subsidiary of HSBC as well as head economist for Corporación America, a conglomerate belonging to Eduardo Eurnekián, one of Argentina’s richest men. The company has virtual monopoly control over the airports of Argentina and other LatAm countries. Again, any genuine, self-respecting libertarian would oppose, with every sinew of their being, the very existence of monopolies and monopolists, let alone work for one for over ten years.
Milei also owes his political career to Eurnekián, who also owns part of Grupo América, one of Latin America’s biggest media conglomerates. When Eurnekián realised that Milei had a certain gift of the gab, Grupo América began inviting Milei on its news and chat programs, where he would rip into Argentina’s then-President Mauricio Macri, with whom Eurnekián had a history of beefs. In effect, Eurnekián and his partners gave Milei an enormous soapbox from which to project his views, which is how he became a media sensation, then an MP and now a presidential candidate with a real chance of becoming president.
Perhaps worst of all, Milei worked for Antonio Bussi, a military general who tortured and killed untold numbers of people during the dictatorship, including a 16-year old girl. After the transition to democracy, in the mid-’80s, all indictments against Bussi were dropped as part of the “full-stop” law (though the charges would be reinstated decades later, leading to a sentence of life imprisonment). A free man in a new world, Bussi ran for governorship of the state of Tucaman and won, becoming the only senior figure of the previous dictatorship to be elected to public office in the democracy that replaced it.
In the mid-’90s, by which time Bussi’s grisly crimes were common knowledge, Milei worked on two contracts for the governor. Asked about it in an interview, Milei said: “I did my work, it came to an end and I left.”
Milei also has ties to the US-based, Koch-funded Atlas Network, which since its inception in 1981 has forged loose partnerships with more than 450 “free-market” think tanks around the world, including many in Latin America. As Lee Fang reported for The Intercept in 2017, the network has operated “as a quiet extension of U.S. foreign policy, with Atlas-associated think tanks receiving quiet funding from the State Department and the National Endowment for Democracy, a critical arm of American soft power.”
A Blast from the Past
Milei’s campaign proposals range from classic neoliberal fare (charging poor people for public healthcare, cutting retirements and pensions, removing currency controls and “taking a chainsaw to public spending”) to more radical proposals such as “blowing up” the central bank (which I suppose is one way of forestalling central bank digital currencies); selling off all public assets; abolishing the Argentine peso and adopting the US dollar as the official currency; to the outright macabre, such as legalising human organs sales.
“If you want to end the scam of monetary emission to cover for the treasury and end inflation, given that Argentine politicians are thieves, the only way is to close down the Central Bank and, at least at the beginning, dollarise [the economy],” Milei tweeted a few months ago.
By contrast, the outgoing Alberto Fernández government, like many governments not fully aligned with the US, has been trying to reduce its dependence on the dollar by dedollarising Argentina’s trade with China and Brazil, its two largest trading partners. But Milei wants to take the country in the exact opposite direction, with potentially disastrous consequences, as I noted in my May 23 article, Could Argentina Become the Next Latin American Country to Dollarise Its Economy?:
Currently, 11 foreign nations and non-US overseas territories use the dollar as their official currency of exchange. Six of them are in Latin America and the Caribbean: Ecuador, Panama, El Salvador, the British Virgin Islands, Turks and Caicos, and Bonaire. Milei would like Argentina to be the next.
The idea enjoys support among certain US economists [but is]… opposed by roughly 60% of voters, but has gained traction among a certain segment of the population as Argentina’s currency crisis deepens….
Argentina’s economy is already heavily dollarised given the Argentine peso’s more-or-less uninterrupted fall in value over the past 23 years. At the beginning of the century it was fixed by law at parity with the dollar but is now worth less than half a cent in US dollar terms. As El País puts it, “Argentina is a country with two currencies that keeps whatever dollars it can get under the mattress.” Not only are savings kept in dollars; many real estate transactions are conducted in the US currency. Even rentals and smaller transactions often require greenbacks.
But there is a huge difference between having a dual-currency regime — as is the case with many emerging market economies with weak local currencies — and abandoning your national currency altogether. Many see dollarisation as a quick fix to resolving Argentina’s chronic financial and economic troubles, pointing to Ecuador’s history of relatively low inflation since adopting the dollar in 2000. But many other countries in Latin America, including Mexico, Brazil, Peru, Paraguay and Bolivia, have also managed to keep inflation in check without having to eliminate their currency and adopt the dollar. In fact, both Brazil and Mexico’s inflation rates are currently below the EU average.
“Argentina is not in a position to undertake dollarization because this requires Central Bank dollar reserves it doesn’t have,” said economist Julián Zícari, who wrote a book on the history of Argentina’s economic crises, adding that “trying to [dollarize] would cause a complete evaporation of wages and pensions.”
It would also mean the end of any semblance of Argentinean sovereignty, as the South Korean economist Ha-Joon Chang warned during a recent visit to the country:
If you want to adopt dollars as your official currency you should apply to become a colony of the United States of America because that’s what it makes you. This means your macroeconomic policies will be written in Washington DC…
This is a lesson that Ecuador is learning the hard way. Since adopting the USD as its official currency, Ecuador has suffered periodic social and economic crises that have come to a head since 2019. To what extent this is due to dollarisation is impossible to gauge, but one thing that is clear is that it significantly hampers any crisis response. When a crisis begins, the State’s hands are almost completely tied. It cannot distribute income and has limited capacity to protect or promote domestic industries. What’s more, the decision to tie oneself to the dollar, once made and acted upon, is difficult to reverse.
“They forget that any medicine has side effects that can be much more serious than the primary problem. Such is dollarization,” former Ecuadorian President Rafael Correa said in a recent interview with the Argentine publication Perfil. “Dollarisation controls inflation and nothing else. But there are other problems, such as unemployment and industrialisation. It solves one imbalance, in this case inflation, but it generates others, such as (limiting our ability) to fight unemployment or industrialise, which are basic for development, which should be our long term goal.”
Adopting the dollar also implies tying Argentina’s fate to that of the US, just as the decline of US hegemony is accelerating. It also bears striking echoes of the steps taken by former President Carlos Menem (1989-1999) to fix the Argentine peso at a wholly artificial and unsustainable value of one U.S. dollar. This gave the country a false illusion of prosperity while making the economy uncompetitive and depriving the state of having an independent monetary policy. It ultimately paved the way to the financial crisis and currency devaluation of 2001, from which Argentina’s economy has never properly recovered.
Milei himself describes Menem as Argentina’s best ever president. He has also described Menem’s economy minister, Domingo Cavallo, as “the best economy minister in all of Argentina’s history.” Cavallo not only implemented the one-to-one currency peg that would end up destroying the economy; in his second stint as economy minister during the resulting crisis (2000-1), he oversaw one of the biggest tax rises in Argentina’s history, largely at the behest of the IMF, as well as the outright theft of the savings of millions of Argentinians in the so-called “Corralito“.
Potential Geopolitical Implications of a Milei Presidency
A Milei government would also probably try to take Argentina in a very different direction geopolitically, also probably with major repercussions. In an interview a few months ago with Andres Oppenheimer, the US-Argentine editor and syndicated foreign affairs columnist with The Miami Herald, Milei announced that his “strategic partners” in “opening up” the Argentine economy would be the West, specifically the US and Israel.
He also said that a Milei government would endorse and apply the Collective West’s sanctions against Russia, adding: “I would never support an autocratic government like Russia’s.”
As readers well know, most governments in Latin America may have condemned Russia’s invasion of Ukraine in the UN but they have steadfastly refused to endorse US or EU sanctions against Russia. Just last month, a majority of Latin American leaders refused to condemn Russia’s actions in the final declaration of the EU-CELAC Summit. Even Brazil’s right-wing populist Jair Bolsonaro refused to endorse sanctions during his presidency.
As such, if Milei were to endorse and apply the US-EU sanctions, it would represent a major shift in policy in the region that would no doubt be celebrated in Kiev, Washington and Brussels.
Milei also said he would “never” pursue any agreements with communist countries where there is no freedom, including, of course, China. Again, this could have major repercussions.
Argentina is one of 21 countries that have formally applied to join the BRICS alliance. Its application has apparently already received Beijing’s blessing and its membership may be officially confirmed at the coming BRICS Leaders’ Summit this weekend. On the economic front, the Alberto Fernández government is also looking eastward. In April, it unveiled plans to start paying for Chinese imports in yuan rather than dollars. In the same month, it renewed an $18.2 billion currency swap arrangement with Beijing, which enables the Central Bank of the Argentine Republic (BCRA) to receive yuan from the PBOC in exchange for an equivalent amount of (rapidly devaluing) Argentine pesos.
These funds have enabled Argentina to continue servicing its $44 billion loan package from the IMF, thus avoiding yet another default, as it grapples with an acute dollar shortage after a historic drought caused total agricultural losses of €17.6 billion, or 3% of Argentine GDP.
In June, Argentine Economy Minister Sergio Massa and Central Bank Governor Miguel Pesce visited Beijing, where they signed a cooperation plan to jointly promote the construction of the Belt and Road Initiative, in yet another sign of deepening bilateral economic and trade cooperation between the two countries. Massa was also informed by New Development Bank President Dilma Rousseff that the road was clear for Argentina to join the entity and thus be able to obtain financial backing in the near future.
A Milei government, of course, could jeopardise all of that. But he still needs to win the election first, which is far from guaranteed. Even if he does, there are serious doubts about whether he he will be able to take such sweeping actions. For a start, his political grouping is unlikely to secure anything like majority control of congress or the necessary broad-based political support to enact such reforms. Plus, if Milei were to walk away from all the agreements and deals the current government has signed with China, how would his own government be able to pay back the debt Argentina owes Beijing? After all, the US and Europe are unlikely to be such generous paymasters as China has been in recent years.