A chain of recent events seem to have thrown the Javier Milei administration off its course lately. Just when it seemed that the government was about to consolidate its socio-political hegemony on the back of a marked reduction in inflation, Donald Trump won the US presidency and took possession of the White House. Milei was ecstatic and has since made his way several times to the United States, where he’s become a house staple, a buddy to Elon Musk and one of the few global leaders who receives praise from the billionaire in charge of the world’s most powerful country. Since then, Milei has utilised global platforms (like the World Economic Forum at Davos) to deride “woke” culture, turned his back on Ukrainian president Volodomyr Zelenskyy (earning the approval of Russian premier Vladimir Putin) and been engaged in a crypto “rug pull” operation via the memecoin ‘$LIBRA’ and a series of shady characters that were also involved in launching US First Lady Melania Trump’s ‘$MELANIA’ token. These three issues, which have further ramifications, have all been negative for Argentina’s president. And there’s also a common thread between them: Milei’s decision to blindly follow Trump. While the political affinity is undeniable, despite deep ideological contradictions between the two, there may be a palpable objective behind Milei’s extreme pragmatism: securing a deal with the International Monetary Fund that becomes the pillar of a potent victory in this year’s midterm elections.
Milei and Economy Minister Luis ‘Toto’ Caputo have repeatedly promised that the deal is close. The latest major announcement came at his controversial address to the Legislative Assembly kicking the congressional term. Following the lead of the United States, Milei attempted to make it a “State of the Union” address, changing the time of his speech from the traditional mid-morning to nighttime, which is prime time for television. He also decided to hold the event on a Saturday in the middle of an “extra long” weekend, with two bank holidays for carnival. TV ratings were quite poor, oscillating between 13 and 17 rating points, compared to peaks of 50 points during last year’s visit to Congress. And while he made the big announcement, it was another issue that attracted the public attention: the public showdown between his star political advisor, freelancer Santiago Caputo, and national deputy Facundo Manes. While a major part of the opposition declined the president’s invitation to participate, including the Unión Cívica Radical (UCR), Manes attended the Assembly and spent a significant portion of time responding to Milei’s speech by yelling from his seat while exhibiting an issue of the Constitution. This won him the ire of Caputo, who was already under fire for some recent missteps. The “Kremlin Magician,” as he’s come to be known, later faced off with Manes in the halls of Congress. In front of several smartphone cameras, he gave him a couple of taps on the chest after touching his face in a patronising, semi-threatening manner. Manes later said he had been physically threatened by “Argentina’s most powerful person.”
Whether Manes, who is a famous neuroscientist and author, purposefully sought to lure Milei and Caputo into a trap, or whether he was truly protesting the president’s speech is unimportant. It’s a challenge to the president’s political centrality that drew from a message which sought to build fortitude by announcing a deal that would help the libertarians win the midterm elections. And it’s one more challenge, or error, from the three vertices of the “iron triangle” that run the show: Caputo, Presidential Chief-of-Staff Karina Milei and the President himself.
Another such challenge came from Grupo Clarín, the country’s largest and most powerful media group, which pulled a rabbit out of a hat in the form of the acquisition of the Argentine assets of Spanish telecoms giant Telefónica. From its media outlets, Grupo Clarín had proven a circumstantial ally of the Milei administration, with some of its prime-time stars being amongst the select group that is allowed on the record access to the President, including journalist Jonatan Viale. Progressively, though, it started to toughen its stance, in tandem with the acceleration of the operation to acquire Telefónica Argentina through Telecom, potentially generating a 70-percent concentration in the telecommunications sector that would undoubtedly raise objections, particularly from regulator ENACOM. From one day to the next, Telecom — which is owned by Grupo Clarín and Mexican investor David Martínez — announced the deal was closed for US$1.245 billion, that the funds had already been deposited and that possession would be taken the following day. It caught the government off-guard, forcing Milei to put out a press release indicating the monopolistic tendencies in the telecommunications market would be reviewed. He then took to social media and public appearances to go on the offensive against Grupo Clarín, noting that it had always inked shady deals with different governments at the expense of the people. He effectively declared war on Clarín.
Interestingly, Milei seemed to be contradicting his recent economic argument against the concept of market failure and in favour of monopolies. One that he continues to defend when it comes to the $LIBRA crypto scandal, where Milei shows no remorse for the hundreds of millions of dollars that were siphoned-off by Hayden Davis and his associates via sniping and insider trading that he enabled. Market failure only exists when it is in the government’s benefit, it seems. Yet, it remains unclear why Clarín and Milei have decided to clash head on. For the media juggernaut, it must know something everyone else doesn’t – it seems to be betting on confrontation with the government in order to push through a controversial merger that requires regulatory approval. From Milei’s standpoint, he generally takes aim at specific journalists that criticise him, but in general avoids picking fights with media groups and their owners (with the notable exception of Editorial Perfil). Now, he’s locked horns with the toughest adversary in the space, following in the footsteps of none other than former president Cristina Fernández de Kirchner. Risky business.
Back to the IMF deal, there’s talk of fresh funds and a loan worth US$10 billion to US$20 billion. As Carlos Burgueño explained last week in Perfil, Argentina needs at least US$10 billion this year to face debt with multilateral institutions, including the IMF. Milei and Caputo have indicated that the deal would allow them to strengthen the Central Bank’s balance sheet and allow them to lift currency controls (known locally as the “cepo”), yet that would generate the risk of a market-imposed devaluation. Indeed, the Milei administration has been forced to come out publicly to deny that the IMF is pushing for a devaluation, given the strength of the peso. According to Burgueño, they are trying to convince the IMF board that Argentina is “pricey in dollars” given excessive regulation, high taxes, and other “monetary overhang” as opposed to an artificially overvalued peso. The technical staff at the IMF has made it clear that they do not want to finance capital flight in the form of carry trade, as happened last time when they lent Mauricio Macri US$44.5 billion, with Caputo and Federico Sturzenegger also in the scene. It was an extraordinary situation given the haste with which a record-setting sum was approved, and there was also something else in common then: Trump.
The Donald, therefore, holds the keys to Milei’s future.
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