Monday, June 24, 2024

OPINION AND ANALYSIS | 20-04-2024 06:45

Is Milei feeling the fear?

Milei’s government needs to pass legislation, something it has not been able to do in its first four-and-a-half months in office. Congressional approval would be an indication to Argentines and foreign observers alike that he means business.

A series of events over the past week show that President Javier Milei, who was a goalkeeper in his youth, is now in position to shoot for goal. But will he?

There are things the President does not control. The unexpected escalation of events in the Middle East might affect markets and put pressure on the government’s main achievements so far, namely foreign exchange market stability. Also worth noting, the price of soy at the start of the high season for farming exports remains at its lowest in three years.

But there are other factors – many, in fact – that he does control. 

This quarter Milei’s government needs to pass legislation through Congress, something it has not been able to do in its first four-and-a-half months in office – an unprecedented length of time for any elected government in recent history. Congressional approval – for any bill at this point – would be an indication to Argentines and foreign observers alike that Milei means business in governing the country’s politics.

Some ducks seem to be aligning that may allow this to finally happen. 

This week Interior Minister Guillermo Francos, the government’s chief negotiator, heard from the governors of Córdoba, Santa Fe and Entre Ríos that they are willing to give Milei “the tools” he needs to govern. Cumulatively, this region is home to 20 percent of the country’s population, 24 percent of its GDP and creates 40 percent of the nation’s exports. After a first failed attempt during the summer, Francos is going for a second chance with a trimmed version of the ‘Ley de Bases’/’Omnibus’ mega-reform bill and accompanying fiscal package. 

The latter is crucial for the Milei administration if it is to make its fiscal ends meet in a more sustainable way than simply freezing and stepping on due payments. Francos told the governors “not to expect anything” from the federal government because, as Milei repeats, “there is no money,” but he did promise that the second half of the year (segundo semestre) would be different. Universities, who are demonstrating against the government’s budget cuts, are also hoping for some cash later on in the year.

But overall, it seems that often nothing major stands in Milei’s way more than Milei himself. 

The Supreme Court, for instance, decided this week to throw out the first objections filed against the President's mega-emergency decree, signed 10 days after the new government took office. The nation’s highest tribunal waved a white flag just as Milei sent to the Senate the nominations of two new candidates for Supreme Court justices.

Meanwhile, the CGT General Labour Confederation, the traditionally Peronist union umbrella group, has called a general strike for May 9. It seems to be pleading with the government to negotiate terms (open to some type of labour reform) and give it a reason to call it off. The Camioneros teamsters’ union recently threatened to “paralyse the entire country” before agreeing to tweak the way wage agreements were presented to the public to comply with the government’s need to tame inflation expectations. 

Last week’s confirmation by the INDEC national statistics bureau that inflation slowed to 11 percent in March has left the government confident that it may only see single digits from now on. Suddenly, the Milei administration has resorted to old-school unorthodox pragmatism, accusing private health companies of being “a cartel” and ordering them to reset their prices back to December levels, when its mega-deregulation decree (that paved the way for the hikes) kicked in. 

So much for Milei’s speech in Davos back in January, when he preached to an audience of ultra-rich capitalists that “market failures do not exist” and that, if they happen, then the State is to blame.

Milei’s next reality check will be the bid to secure congressional votes from part of the “political caste” – or at least the part willing to help him. If he scores, it would be easier for Economy Minister Luis Caputo to convince the International Monetary Fund that the government is serious about reform and, eventually, to beg for some extra cash to lift the ‘cepo’ foreign exchange market restrictions sometime before the end of the year. 

Unless, of course, the government doesn’t want to get on the scoreboard so quickly. How a few months of foreign exchange stability – meaning the dollar bill is not in the headlines – calms down the greenback minds of Argentines cannot not be underestimated. Milei is profiting from this, as his stubbornly solid opinion poll scores show despite the recession, thanks to an exchange market that is still plagued with regulations to keep the price at bay. 

Has Milei walked away from his anarcho-capitalist dogma? And if so, what is he walking into?

The President, of course, risks turning caution into comfort. In an interview with US conservative political commentator Ben Shapiro last weekend, he said that his experience as a goalkeeper had taught him to be careful about mistakes. “Unlike the rest of the players in the team, when the goalkeeper makes a mistake, you suffer an own goal,” he explained. Goalies, Milei noted, also train alone and dress differently from the rest of their teammates. 

The one thing Milei did not mention is that goalies only very rarely score a goal – and that it looks awkward when they do. Going on the offensive, in a constructive rather than destructive manner, will require an entire new mindset for the President. 

* Marcelo J. García is a political analyst and Director for the Americas for the Horizon Engage risk consultancy firm.

Marcelo J. Garcia

Marcelo J. Garcia

Political analyst and Director for the Americas for the Horizon Engage political risk consultancy firm.


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