Argentina Looks to Eccentric Outlier For an Economic Fix

A far-Right libertarian candidate has burst from nowhere to claim centre stage in Argentina’s election race.

Javier Milei, a 52-year-old, self-described “anarcho-capitalist”, wants to shutter Argentina’s inept central bank, replace the long-suffering peso with the US dollar, abolish all but a handful of government ministries, ditch nearly all social programmes, and privatise most of what’s left.

Milei recently cruised to victory in the open presidential primary election, securing 30 percent of the vote. The upset caught pollsters, pundits, and nearly everyone else by surprise. Analysts had predicted that voters would be put off by Milei’s crackpot ideas and “colourful” character.

Sporting a smart leather jacket, luxuriant sideburns and a bushy crop of hair — it hasn’t seen a comb for almost 40 years, by his own admission — Milei cuts a remarkable, and eccentric, figure. He owns four English mastiffs named after liberal economists: Milton (Friedman), Murray (Newton Rothbard), Robert (Patrick Murphy), and (Robert Emerson) Lucas. Through a medium, he allegedly remains in touch with Conan, their deceased progenitor.

The former “tantric sex professor” and TV pundit became a fixture of the talk show circuit for his baffling honesty and bombastic demeanour. Milei promotes an ultra-individualistic agenda that, he says, will empower citizens and free them from stifling state rules and regulations that inhibit free enterprise and enable corruption. He campaigns like a rock star, and has built a strong following with young voters frustrated by Argentina’s crisis-as-usual establishment.

Milei blames a “depraved caste” of politicians, administrators, and assorted rentiers of bleeding the country dry, appropriating its natural resources for personal gain, and perpetuating its economic and social decline. On contemporary global issues, he is no less outspoken. He calls China an “assassin state,” opposes the “cultural Marxism” of feminism, the LGBTIQA+ movement and minority rights, and expresses an admiration for Donald Trump and far-Right former Brazilian president Jair Bolsonaro. He also holds the late Margaret Thatcher in high esteem.

In the 2021 legislative election, Milei landed a seat in the lower house of congress. He promptly laid siege to the Kirchnerists, an offshoot of the Peronist Party that had dominated Argentine politics for 20-odd years with a peculiar mix of clientelism, corporatism, and populism.

Milei bombarded the Kirchnerists with a suite of seemingly outlandish proposals: ending compulsory education, outlawing abortion, slashing taxes, and axing state expenditure. He assured voters that his “chainsaw plan” would cut through whatever austerity the International Monetary Fund (IMF) sought to impose. He promises to eliminate the budget deficit —4.5 percent of GDP — “within months” of getting elected.

But he is no admirer of the IMF; he says he won’t sign any deals with the fund, nor accept any of its money. “The IMF is just a bunch of bureaucrats who know that a bank’s business is to charge interest,” he said. “If I’m elected, it will be to solve Argentina’s problems.” He said that after 22 bailout packages, it had become clear that the IMF was “clueless” when it came to fixing Argentina’s economy — and an “enabler” of graft.

Former IMF Western Hemisphere director Alejandro Werner is particularly concerned about Milei’s dollarization plan. “The Argentine economy is not closely linked to (that of) the US,” he said. “This means that monetary policy decisions made in Washington will often not be appropriate for Argentina.”

Some analysts fear that Milei’s libertarian ambitions may clash — possibly violently — with the dismal social and economic reality of Argentina in 2023. Around 40 percent of the population — 46 million people — live in poverty; net forex reserves are estimated to be $7bn in the red. “To dollarize an economy that has no dollars is a problem,” says Darío Epstein, who leads the candidate’s planning team, “but we’re working on that.”

Among Milei’s more outlandish views are his dismissal of climate change as a “socialist hoax” and a proposal to legalise the harvesting and sale of human organs. He did, on reflection, dismiss the latter idea: “It was just an impromptu answer to a reporter’s question.”

Nutty Professor?

It could be a mistake to dismiss the maverick libertarian as an oddball shooting nonsense from the hip. Milei obtained a double PhD in Economics from the Universities of Belgrano and Torcuato de Tella. For two decades, he lectured in Argentina and abroad on monetary theory, macro-economics, and econometrics. He developed a deep appreciation for the Austrian School of Economics — which rejects the classical view of capital — and its most revered exponent, Friedrich Hayek (1899-1992).

Hayek, recipient of the 1974 Nobel Memorial Prize of Economic Sciences, inspired neocons like Margaret Thatcher and Ronald Reagan with his teachings, writings, and critiques (The Road to Serfdom) emphasising individualism and classic liberalism. Even the former Argentine president, Carlos Menem, who died in 2021, was a Hayek convert. In 1991, he bolted the national currency to the US dollar, causing a brief interlude of strong growth and relative prosperity. It ended in debt, deficits, default, and tears 10 years later.

Milei thinks he can do better, and expects the same policy to deliver a different outcome. He looks to Ireland for a model: “They did the reforms, and their per-capita GDP has more than sextupled in the last 30 years. I want Argentina to be like Ireland.”

To achieve that, Milei wants to reduce the number of government ministries from 18 to eight, replace the public healthcare system with one based on vouchers, “blow up” the central bank, and privatise the nation’s flagship carrier, Aerolineas Argentinas, and the state oil company, Yacimientos Petrolíferos Fiscales.

Market Upset

Markets reacted as if stung by bees when Milei pulled off his surprise victory in the primary election. After the parallel (blue) market dollar rate widened the official exchange rate gap to almost 100 percent, the central bank was forced to devalue the peso by 18 percent, and raise its benchmark interest rate to 118.

The Milei upset immediately hit voters in the wallet: overnight, prices of imported goods rose by double digits. The government announced restrictions on beef exports to keep domestic prices in check, only to rescind the policy hours later in a sign of increasing desperation. Inflation in Argentina runs at about 100 percent annually. On this grim measure, it is “beaten” only by Lebanon (269 percent), Venezuela (120-200 percent), and Zimbabwe (104 percent).

Economy minister Sergio Massa, the Peronist candidate in the October presidential election, came in second in the primary, with 21 percent of the vote. He was trailed by Patricia Bullrich of the Together for Change (Juntos por el Cambio) coalition, a moderate conservative platform, who secured 17 percent.

Though ostensibly a free-marketeer, Massa has been unable to deliver on promised reforms. He’s steering a perilous course through a minefield of Peronist politics. Curiously, his campaign promises more of the same: “We have a vision for this country, and we will win again at the polls… despite everything we may not have accomplished throughout these years.”

Cunning Plan

Massa, cunning and hungry for power, tends towards frequent changes of tack. He ran for president in 2015, promising to send the outgoing Cristina Fernández Kirchner — the current vice-president — to prison, along with her “corrupt” cabal. He went on to become her anointed candidate for the upcoming vote. Massa’s unenviable job is to avoid the collapse of the economy before then.

He has weaved a patchwork of short-term policies, aimed mainly at pleasing the IMF. He ponders the disbursement of the next $7.5bn tranche of its record-shattering $44.5bn bailout package, and nursing whatever forex is left. A prolonged drought and crop failures have cost the country an estimated $20bn in lost exports, compounding its woes.

But on the IMF front, major issues are not expected — if only because Argentina is, by a considerable margin, its largest debtor. It evokes the old cliché: “If you owe the bank a million dollars, you have a problem; if you owe it $44bn, the bank has a problem.”

Massa hopes that Javier Milei’s sudden surge in popularity may be nothing more than a momentary expression of national discontent. Voters, he believes, are likely to see the error of their ways once the economy stabilises, and they learn more about Milei’s true character.

But the result signals that voters are willing to contemplate a break with the past — and are prepared to look to the Right for radical change.

By Wim Romeijn