The absent leader strategy and Mr ‘Knee Head’

There’s an unwritten rule in Argentina’s politics that sometimes the leader has to remain absent. It happened with Cristina Fernández de Kirchner during the campaign for the 2017 midterm elections, when she was ultimately defeated by Mauricio Macri’s then-unknown candidate, Esteban Bullrich, but still secured her Senate seat. And in 2019, when the ex-president ousted her historical nemesis from the Casa Rosada by deciding to take the second spot in the ticket, picking Alberto Fernández as presidential candidate. Every time she spoke, her polling figures dropped.

Javier Milei and some of his top-level officials appear to have taken a page from that playbook. After a hard-fought victory in national midterms last month, for the first week President Milei and Economy Minister Luis ‘Toto’ Caputo did the rounds in a series of friendly television interviews, along with a few public appearances, before moving into the background. Ecstatic from their spectacular electoral victory and from having pleased Uncle Sam and receiving an emergency bailout from US President Donald Trump in Washington, they seem to benefit more from seeing their dishevelled opponents tearing each other at the seams, rather than muddying themselves in the vicissitudes of day-to-day political skirmishes Of course, they occasionally come to the fore to boast, highlighting how great a deal they agreed with US Treasury Secretary Scott Bessent and how important the direct support of Trump is, but in general they remain on the sidelines.

It’s a reasonable strategy. The libertarians have to wait until December 10 for their newly minted national deputies and senators to be sworn in and only then will they have the chance to pursue their ambitious reform agenda. Until then, they’ve tasked newly minted Interior Minister Diego ‘Colo’ Santilli (aka. “Ginger”) to lead negotiations with provincial governors in order to shore up support for Milei’s package of “second-generation” reforms. Santilli is accompanied by Manuel Adorni, technically his boss as Cabinet Chief but acting more as a censor on behalf of Presidential Chief-of-Staff Karina Milei, Javier’s sister and the most powerful person in the government. They have slowly been chipping away at the Peronist caucus, the largest single minority in the lower house, as governors barter votes for funds.Milei and Caputo need to finally pass a budget in order to comply with the International Monetary Fund’s demands and to continue to please Trump and Bessent, exhibiting governing capacity through consensus building. Said in simple terms, doing politics the traditional way, which means paying up.

This means President Mieli is better off keeping his mouth shut, avoiding falling prey to the temptation of accusing the rest of the political ecosystem of being rats, worse than scum, social parasites that live off of the teat of the state. The same goes for ‘Toto’ Caputo, who can’t hold himself back from responding whenever his judgment is questioned, giving us beautiful moments such as when he provoked the market telling investors they would get burnt if they sought peso-protection in the dollar. “Buy ‘em up, champ,” he said (“comprá campeón”) only to see the peso-dollar exchange rate tank, quickly becoming ‘memefied’ into one of the iconic moments of the Milei administration. They were saved by a US bailout and they now brag that the US Treasury made money on the trade too, which isn’t exactly the best thing to say to a domestic crowd that is struggling to make ends meet.

The risk, of course, is ceding the initiative, which these days means being embroiled in corruption scandals. The Milei siblings cannot shake off the ‘$LIBRA’ crypto-scandal, which has become the gift that keeps on giving for the opposition, particularly in Congress. Even more explicit is the graft at the ANDIS national disability agency, with the President’s former personal lawyer Diego Spagnuolo taking centre-stage. Initial audio leaks suggesting Karina Milei took a three-percent cut from orchestrated medication purchases that included massive over-pricing also instantly became memefied, entering the popular imagination.

A recent trove of personal communications among those involved in the ANDIS scandal revealed even more fascinating insider details about corruption in Argentina. Miguel Ángel Calvete has emerged as a new “star” of the scheme, apparently controlling public officials and leading a collection scheme that defrauded the state of millions of dollars destined for the purchases of medicine for the disabled. Calvete, a sort of lobbyist for the pharma companies, is at the centre of the operation, as revealed by multiple private messages with other conspirators, including his wife and daughter, Ornella Calvete, who had a post at the Economy Ministry and was found with US$700,000 in undeclared funds at her home. At one point, she texts her Dad in a message: “There’s 15 cops down here, I’m not sure if it’s because of knee head or what,” referring to Spagnuolo, who is bald. “Play stupid,” responds Miguel Ángel. In another exchange, Ornella tells Dad she’ll buy him “something nice if [the operation goes through], like a lambo [Lambourghini], a farm, whatever,” to which Calvete responds: “no need, 3% for KM is perfect enough.” Chatting with Guadalupe Muñoz, his wife, Calvete asks for five millions pesos and justifies it by typing: “the bald dumbass [i.e. ‘boludo’] is flying to Israel and has no cash.”

These caricaturesque scenes would perfectly fit in a ridiculous comedy about corruption in a Latin American country, but they also reflect a certain state of lawlessness that is almost impossible to eradicate. The prosecutor’s filing shows Calvete kept handwritten notes, much like chauffeur Oscar Centeno, the lead role in the infamous ‘Cuadernos’ corruption notebooks case that is currently being probed in a court trial. At the centre of the accusation is none other than Cristina Fernández de Kirchner, who was recently found guilty of corruption in the ‘Vialidad’ public works case and who continues to cry lawfare. Centeno’s notebooks revealed a collection scheme by which construction companies colluded with government officials to distribute public works contracts via pre-arranged biding processes in which everyone took their cut. Supposedly, it was to finance the political machine. Cristina claims there isn’t a single piece of evidence that links her directly to the participants. The modus operandi appears to be quite similar to the one mentioned above at ANDIS. Luckily for the conspirators, smartphones and messaging applications weren’t as widespread back then.

All of this is amusing to the media and part of the “círculo rojo” group of key decision-makers made up of business and opinion leaders throughout the country, but it doesn’t directly impact the day-to-day economy of a majority of Argentines. Milei’s electoral victory appears to have proved that even in the heat of “chainsaw austerity” and as a recession was materialising, a substantial portion of the electorate lent the President their support, giving him a second chance. Opinion polls indicate Milei has recovered momentum on the back of the electoral victory, even as the economic recovery he promises fails to materialise. In part, it’s thanks to having tamed inflation, even if price hikes remain. Yet, economic activity remains stuck at similar rates to 2023, according to the INDEC national statistics bureau’s EMEA monthly indicator, while salaries continue to lag behind in purchasing power.

As mentioned previously, Milei has a golden opportunity after delivering a potent and unexpected win in national midterms. With the full backstop of the US government, he should be able to guarantee he won’t suffer a run on the peso all the way to the end of his term, but he must adjust his economic policy path. Pursuing a strong peso strategy will once again lead to macroeconomic imbalances and derail any attempt at a recovery. From a political standpoint, stronger numbers in Congress don’t put him anywhere near a majority, but give him the chance to build circumstantial majorities to pass much-needed reform. This requires an honest budget and negotiations with governors and other political sectors. Picking fights with potential allies, and everyone almost at the same time for that matter, will result in gridlock. It doesn’t just depend on Milei, as the fractured Peronist opposition together with the balkanised moderates that used to follow Macri have to play their part as well. Unfortunately, most of all of these have proven time and time again that they can’t get it together. At least we’ll get our kicks from the Spagnuolo affair, unless they prove us wrong.