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f President Javier Milei hit the ground running upon taking office two years ago, the current lame duck Congress seems almost to be leading to a lame duck government now that he has finally clinched a significant parliamentary presence – virtually everything seems on hold in a silent spring. It now remains to be seen how the second half of his presidential term compares with the first now that he has received a midterm mandate not vouchsafed many administrations. Much depends on how Milei compares the mandates – will he see last month’s 41 percent as a major advance on his 30 percent in all pre-run-off voting in 2023 or well below his run-off landslide of almost 56 percent?
Thus far the signs have been conflicting. On the one hand, Milei summoned the provincial governors to a cordial meeting in the same week of his victory (while excluding a quartet representing the most intransigent opposition) but his Cabinet changes have served to narrow rather than broaden his political base by concentrating decision-making on his sister’s inner circle and evicting his leading dove Guillermo Francos. In order to replace Francos in negotiations with those governors, a veteran member of the “caste” incarnate has been entrusted with the Interior Ministry in the form of PRO deputy Diego Santilli (perhaps it might have been otherwise without the latter’s stunning victory in Buenos Aires Province) but at the same time his wings have been clipped.
Rightly or wrongly, Presidential Chief-of-Staff Karina Milei has been given all the credit for the victory (which might have been much closer to the landslide by default expected at the start of the year without her uncompromising “purple or nothing” approach to electoral alliances) and much has been written about where this leaves the star spin doctor Santiago Caputo, the “Kremlin wizard,” but perhaps more attention should be paid to the other Caputo – Luis heading the Economy Ministry. The latter managed to place his Finance Secretary Pablo Quirno, an economist with zero diplomatic experience, in the Foreign Ministry (considered by coalition governments elsewhere in the world an ideal post for minor parties) – inexplicable were it not for the Milei administration’s lack of any foreign policy beyond alignment with the Donald Trump administration in Washington, to whom it owes a bailout saving it from economic and hence electoral collapse.
Unlike the other Caputo, the economic czar has advanced since the midterms with the negative volatility of the markets transformed into positive exuberance and country risk halved. But this enhanced prestige also leaves the door wide open for a capacity to assume debt denied during the long years of Kirchnerism, also carrying its dangers. The previous absence of Argentina from international debt markets led to overspending being fed by deficit financed by printing money and hence inflation – Caputo’s dogged preservation of a fiscal surplus since taking office has changed this syndrome but now debt looms to replace deficit. Not that debt does not already bulk large – quite apart from the US$20-billion currency swap with the United States Treasury (with every sign of already being activated) and talk of another US$20 billion further down the road, there was yet another US$20-billion loan from the International Monetary Fund (IMF) last April with US$12 billion almost immediately disbursed.
Ever since the petrodollars gobbled up by the 1976-1983 military dictatorship, the grim sequence of debt, default and debacle has been an all too central part of Argentina’s decline. If the government is assuming debt to honour its inherited liabilities as the only way to avoid increasing the tax burden to service it instead of its professed aim of lower taxation, this would not be unreasonable but increasing net debt would be another story.
Nothing seems likely to happen any time soon, whether the potentially endless ‘Cuadernos’ corruption notebooks trial now starting or anything else. Whether tax or labour reforms or Supreme Court nominations, the government’s objectives face lengthy negotiations with no market volatility to inject any sense of urgency. Will Milei’s original constituency celebrating the “chainsaw” of the first half of his term accept gradualism in the second half with the aim of co-opting rather than obliterating the “caste”? Still almost a month to wait before we can see whether the new Congress will lead to parliamentary democracy being given a chance for almost the first time in Argentina. Decembers have tended to end with more of a bang than a whimper but perhaps the government and the people as a whole could do with a rest.
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