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OPINION AND ANALYSIS | 25-11-2023 14:22

Living in Milei’s world

These initial steps are positive in maintaining the situation from blowing up but they are insufficient in and of themselves. Not only would this cordiality and cooperation have to be maintained over time, Milei’s strategy would actually have to work.

Having finally put the election behind us, Argentina is quickly shedding its skin, like a snake, becoming something new in plain sight. Ultra-libertarian economist Javier Milei has emerged victorious and he is wasting no time in trying to take charge of things as the whole socio-political ecosystem watches on, trying to adapt to a novel situation anything but certain. Sergio Massa, the omnipresent and unsuccessful candidate, who is also the Economy minister, has quietly receded from the public spotlight, leaving Milei to figure out the transition with none other than Alberto Fernández, the absent president who is enjoying the final trappings and luxuries of holding the first magistracy, including the five-star service at the Olivos presidential residence where he had an enjoyable meeting with the president-elect extending for more than two hours. The president unleashed his secret weapon on his successor – Dylan, his beautiful collie, who apparently had a delightful time playing with the dog-loving Milei, who has already revealed that he will be working from Olivos for the foreseeable future, leaving the Casa Rosada for protocol visits and thus literally changing the seat of power from Buenos Aires City to Province. He’s expected to move his beloved “children with four feet” — four massive English Mastiffs who’ve been kept at a keepers’ during the campaign — in with him (if First Lady Fátima Florez will move too is unconfirmed) on December 10. Oh, and it wasn’t just Alberto who cordially received his replacement – Cristina Fernández de Kirchner also had a constructive meeting with Victoria Villaruel at the Senate. The “Iron Lady” of Kirchnerism hadn’t been too fond of presidential transitions in the past and was expected to make things hard for her successor by immediately jetting to Italy after the election, but she came around, cancelling her trip and making her way to the capital from her beloved city of Calafate in Patagonia to have a professional encounter with a dictatorship denier. Still, she did deny her the photo opportunity. 

And, we’re off. The war of words and ideologies in the interminable electoral campaign is no more, meaning actions speak louder than words at this stage. Milei, a talking head on TV panels only two years ago, is now president-elect and his team must now lead a transition at a moment of absolute crisis, at least in macroeconomic terms. Inflation is running well into the triple digits while Central Bank reserves are deeply negative. Output is stagnant at best, if not in frank decline, and the parallel peso-dollar exchange rates are under heavy pressure. Fortunately for Milei and his La Libertad Avanza coalition of libertarians, right-wingers and others, the markets seemed to have reacted favourably to his victory over Massa and the pan-Peronist front, Unión por la Patria. The day after the election was a holiday in Argentina, but Argentine stocks trading in US markets (ADRs) rallied aggressively, as did dollar-denominated bonds. The market gave an unequivocal demonstration of optimism in the face of Milei’s victory/Massa’s defeat, both in equities and bonds, suggesting the ultra-libertarian may have reset some market expectations on the back of his aggressive economic plan. At the same, the president-elect confirmed he plans to close the Central Bank and dollarise the economy, which puts pressure on the peso-dollar exchange rate and inevitably feeds into inflation.

The night of the election, both Milei and Massa said the other was responsible for guaranteeing stability, suggesting a potentially dangerous face-off lay ahead, including an early leave of absence for the Peronist candidate. The meeting between Milei and President Fernández was scheduled for Monday but was pushed back, stoking fears that the transition could be contentious. In between phone calls with world leaders including Pope Francis, the president-elect and the current inhabitant of the Olivos residence matched agendas and confirmed their meeting, while Fernández de Kirchner agreed to meet Villaruel. Both of these are signs of rationality which have helped to reduce instability in a context of fragility. At the same time, Milei and his team have continued to slowly name the team to accompany him in the administration as his ministers, while opening an account on social media platform X to inform the public of the president-elect’s every step (and offer an early assessment of their spelling, grammar and accuracy). Wild Milei and his ragtag coalition appear to be progressively professionalising their team and communications strategy.

All of these factors will contribute to efforts to try and create a sensation of normalcy, in the same way as the alliance with Mauricio Macri and the hardliners within the PRO party helped Milei convince a portion of the electorate that either he was a rational actor (or at least he had “adults” in his corner helping him to do the right thing). It worked, infusing La Libertad Avanza with enough legitimacy to absorb a large portion of Juntos por el Cambio’s vote. Now, Macri and his PRO party hardliners are trying to push their way into Milei’s Cabinet and top posts. It remains to be seen how successful they’ll be.

Even though these initial steps are positive in maintaining the situation from blowing up, they are obviously insufficient in and of themselves. Not only would this cordiality and cooperation have to be maintained over time, Milei’s strategy would actually have to work. Already he’s noted that if the state has insufficient funds, it won’t rely on money-printing or any other methodology to meet its payment obligations, putting into question whether government salaries will be paid in full this year. Milei would seem to be taking a page from Néstor Kirchner’s playbook, who upon taking office skipped several salary payments for government workers, given insufficient funds. Milei’s “chainsaw” plan of austerity will hit people’s pockets, it is by definition recessive, as the president-elect’s former associate Diego Giacomini explained. One example is public works projects, which Milei has already explained will receive zero funding from his administration, becoming fully private-sector-led. Asked who will build sewage systems in small towns, for example, the president-elect said that’s not his problem. Whoever made it to the Casa Rosada and implemented some level of reforms was expected to meet the resistance of part of society, especially the social movements. With Milei in office, it’s an invitation to the more extreme elements to take the streets permanently, to which the ultra libertarian has already promised to impose the full strength of the law, and the police, to repeal.

How long will the good-mannered Milei be able to keep things on track? How will he face the resistance of affected sectors during his “chainsaw” austerity plan? And, if he manages to push forth, will it work in unleashing the restrained economic forces? It’s too early to tell.

Agustino Fontevecchia

Agustino Fontevecchia

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