Milei’s Macri mirror

For the fifth consecutive month, the public’s trust in President Javier Milei's administration has fallen. The index published by Di Tella University since November 2001 is one of the most consistent approval rating polls in the country: almost a year-and-a-half into office, Milei scored 2.33 points out of 5 in April – better than his predecessor Alberto Fernández at the same stage (2.26) but worse than Mauricio Macri (2.51).

The comparison with Macri is one of the key questions being asked abroad about the future of Milei and there are obvious parallels. Like the current head of state, the PRO was a rising centre-right leader who beat the Peronists at the ballot-box to inaugurate a new economic era in Argentina. But Macri’s economic programme failed, burdened by massive debt (with the private sector first, with the International Monetary Fund later) and his inability to lower inflation and poverty. Macri won the 2017 midterms but lost his re-election bid to Alberto Fernández and Cristina Fernández de Kirchner in 2019.

Milei is following a similar path, with some caveats. He has taken on new debt (with the IMF) to strengthen Central Bank reserves and make it to the midterms in October with a stable economy and declining inflation. Unlike Macri, he does not have a fiscal deficit, but like the PRO co-founder, he is over-appreciating the peso to anchor his anti-inflation policy. The result in both cases is a current account deficit – i.e., the country spends more US dollars than it earns. Macri did not correct it on time – Milei still has time to correct it.

Milei and his economic chief Luis Caputo want the economy to be booming when the country goes to vote in October. The question is how much it will cost them – and the country. The numbers to follow are the Central Bank reserves and current account figures. the IMF surely will surely be monitoring them too.

In March, the flow of foreign currency was US$1.67 billion negative for the Central Bank. It was the 10th consecutive monthly deficit. It now accumulates a loss of US$11.4 billion since June 2024. It is an inflection point for Milei’s Central Bank, which had accumulated a current account surplus of US$12.1 billion in the first six months of the administration, right after the shock 54-percent devaluation, introduced shortly after taking office in December 2023.

The IMF agreement was meant to turn this trend around – or at least balance it out. After the government announced that the ‘cepo’ capital controls are gone, investors will be watching whether the promise is real: for now, it is just a reality for Argentines turning their pesos into dollars through their home banking, but not for companies, which hold the lion’s share of the cash that would exit the country if it could – that would only happen next year, when they wrap their 2025 balance sheets.

Caputo’s team is giving out all the signals they have available to indicate that the peso will continue to be overvalued, at least until after the elections. Their rationale is that a strong peso will keep many Argentines happy until they vote. Macri also did that – even after he won the midterm elections, he kept the peso appreciated, which invited tens of thousands of Argentines to purchase trips to Russia to watch the Football World Cup in 2018. 

Win or lose, Milei will have to decide after the midterm elections this year: giving the peso a more reasonable price would hit middle-class Argentines just as they would start to buy packages for what will likely be Lionel Messi’s farewell World Cup in 2026 in North America.

The Di Tella opinion poll shows that the typical Milei supporter right now is a man under 30, mostly from the country’s interior and with a level of higher education: a quintessential World Cup attendee. Milei, also a football fan, would not mind keeping the peso strong throughout his Presidency, but for that, he would need an influx of US dollars like the one Macri got from international voluntary debt markets in 2016–2017. Not impossible but not extremely probable, however, highly undesirable given the country’s track record.

The one reply from the poll that should most concern Milei is the category that scored worst this month, with almost a 10-percent decline: concern about the public’s general interest. If most Argentines opine that Milei and his team are disconnected from their interests, the economic hardships that may (and will) come will have a deeper and immediate political impact. 

Milei’s public appearances, be they on TV or social media, continue to focus on slamming his critics, most of the time in the form of insults. Somebody should tell him: the story of his Presidency is not about being right, but about Argentines believing he has served them correctly.