Argentines voted for Javier Milei on two assumptions. One, that he could sort out the economy, which had been in a slow-motion hyperinflation for half a decade. Two, that he was different from its “caste” of corrupt politicians.
Gradually, the public may be reaching the conclusion that assumption two was a misconception. The scandal over alleged graft with disability benefits is the latest in a succession of events that question the transparency of the Milei administration. The list includes other major cases such as the allegations that a multimillion tender for the Paraná River waterway was directed to benefit one company and the ‘$LIBRA’ crypto scandal that involved the President personally.
Argentines might also come to terms with the idea that corruption is not so bad if a government delivers results. It has happened in the past. In the 1990s under Carlos Menem and in the mid-2000s under Néstor Kirchner and Cristina Fernández de Kirchner, allegations of corruption were rampant by the time these leaders won reelections by landslides: Menem got 50 percent of the vote in 1995 and Fernández de Kirchner 54 percent in 2011. Corruption would only haunt them years later, when the benefits of their initial economic programmes wore out.
This means that a handful of cases of corruption should not be the end of the world for Milei, provided his economic programme manages to deliver the benefits Argentines expect.
So far, so good, but it soon won’t be enough. Milei has managed to slow down inflation without major traumas. Argentines feel relief when they go to the supermarket: prices are more stable, even if for many people still beating salary increases.
But the minute the midterm elections are over, the public’s demand on the Milei administration will change – and intensify. The larger public does not see that the government is using patch after patch after patch of economic policy to keep inflation at bay – and barely making it. Prices have subtly accelerated over the last three months, from 1.5 percent monthly in May to 1.6 percent in June and 1.9 percent in July. Estimates hint at two percent or just above in August. This is all happening with the government hiking interest rates to more than double the level of annual inflation to dissuade investors from betting against the peso.
This makeshift, short-term programme has an expiry date: October 27, the day after the vote. One way or another, the government will have to correct it, at least if it wants to make it more sustainable. But this would happen just as the public will demand more rather than less from the administration. Inflation reduction will be a given and the next level of delivery should be economic growth and jobs.
It is not certain the Milei government will be able to deliver on that. It is certain it will have to change some of its ways if it wants to seriously try. For almost a year now, the administration’s agenda has been more defensive than offensive: avoiding a currency crisis, which to the larger public would mean a sharp devaluation of the peso.
But the government needs more. This month, the Universidad Di Tella index that measures trust in the government fell 13.6 percent versus July, hitting the lowest since Milei became President. If the public’s epiphany settles that the head of state is not much different from the rest of the corrupt political class, the pressure for the economy to work (and work very well) will grow exponentially. While under pressure, of course, it is easier to make mistakes.
Something similar is on investors’ minds. They are now less interested in what may happen in October than in what the government does in the weeks after the vote. Like Argentines with inflation, investors are taking for granted that Milei’s candidates will win the midterms, the only question mark being by how much. Anything less than that would cause serious concern.
Be it from the public or the markets, after October Milei will not have the benefit of the doubt anymore. Expectations will be higher, just as reality might get tougher. The maverick outsider will have to become the statesman and he will be measured exclusively by tangible results rather than inflated expectations.
Comments