Eurasia Business News: What does the victory of libertarian Javier Milei mean for Argentina?

- Nov 20 By Anthony Marcus, geopolitical consultant - This libertarian economist and politician promises to break with the BRICS, to carry out dollarization and massive privatizations to revive the Argentine economy. Photo: On November 19, 2023, Javier Milei leaves the polling station. In the evening, he will be declared the winner of the election.

Javier Milei, the libertarian economist and populist, won the second round of Argentina's presidential election on November 19. After processing 99.3% of the votes, the electoral commission announced that candidate Milei had won 55.7% of the votes. Milei's opponent, Economy Minister Sergio Massa, candidate of the ruling center-left Peronist coalition, the Alliance for the Fatherland, received 44.3% of the vote. Sergio Massa publicly recognized his competitor's victory.

“ Today, Argentina’s recovery begins. Today is the beginning of the end of Argentina's decline ,” commented Javier Milei when his victory was announced. The new libertarian president pledged to “ work side by side with all the countries of the free world ” to build “ a better world of democracy and free trade .”

Shock therapy.

In domestic politics, in accordance with the libertarian thought of the Austrian School, Javier Milei advocates minimal government intervention, wants to abolish the country's central bank and proposes replacing the national currency, the peso, with the American dollar, in order to put an end to inflation. To solve economic problems, the new president, who chose the chainsaw as his symbol, intends to seriously reduce budgetary expenditures in education, health, culture, environmental protection. Javier Milei's victory came against a backdrop of abnormally high inflation in Argentina. In October, according to the country's statistical office, annual inflation reached 142.7%, the highest level since 1991. It was 42% in 2020 and 54% in 2019. Suffice to say that the power of purchasing by the working and middle classes has fallen sharply over the last five years.

However, Milei's proposals have sparked debate and concern. Critics argue that his dollarization plan and deep cuts in public spending could have significant economic and social repercussions, and that his policies could be unpopular, particularly among low-income Argentines.

Last August, the Argentine government forcibly reduced exports of a number of food products, particularly meat, in order to contain rising food prices. At the end of October, Economy Minister Sergio Massa threatened to ban oil companies from exporting oil if they did not sell more fuel on the domestic market, where there was a shortage. This shortage was de facto reinforced by measures taken by the government, which froze fuel prices, making exports more profitable than supplying the domestic market.

Looking at the Argentine situation, it becomes clear that Milei's victory in the elections was ensured by the economic crisis and the population's weariness with the ruling Peronists [heirs of the most famous Argentine president of the 20th century, Juan Perón]. However, it is too early to judge whether the president-elect will fully implement his policy.

Abandoning the peso, dollarization, abolishing the central bank – all these things can happen, but Milei will face serious oversight from Congress. Let's not forget "street" democracy: the Peronists can bring hundreds of thousands of workers and activists into the streets. All this can slow Milei down.

However, it is unlikely that Javier Milei will succeed in liquidating the country's Central Bank, because the bank is a link to the global financial system and international economic organizations. The most likely scenario could be a massive sale of state assets, including agricultural land, and their purchase by transnational corporations (such as the American multinational Monsanto) and a new default on government bonds.

Break with BRICS?

One of the new president's first moves could be to withdraw his application for membership in BRICS, which the country planned to join on January 1, 2024, confirmed Diana Mondino, advisor to Argentina's president-elect and the most likely candidate as Minister of Foreign Affairs.

Diana Mondino also announced the new president's intention to stop interacting with the governments of China and Brazil. Javier Milei himself spoke about this, emphasizing that he was not going to " move forward with the communists ", but that he intended to strengthen ties with the United States and Israel.

Milei also advocated reducing ties with Russia. On November 20, Russian Ambassador Dmitry Feoktistov congratulated the new president on his victory and said that Moscow was ready to continue cooperation with Argentina, regardless of the political situation. It is not certain that the new libertarian president, declaring himself close to the United States and Israel, is pursuing a policy of rapprochement with Moscow, quite the contrary.

His idol, former US President Donald Trump, has already reacted to Milei's victory. He said Javier Milei would make the country “great again”.

Paraguayan President Santiago Pe?a extended a “ cordial and fraternal hand ” to his country to strengthen relations. The presidents of Peru, Dina Boluarte, and Bolivia, Luis Arce Catacora, reacted positively to the election results in Argentina.

At the same time, Colombian leader Gustavo Petro called the victory of the libertarian Miliei sad news for the region, " because right-wing ideology cannot respond to the challenges that Latin America faces ." Brazilian President Luiz Inácio Lula da Silva wished good luck to the new government of Argentina, although Javier Milei does not intend to maintain relations with the Brazilian president, as he belongs to the political left.

Moving away from China.

In the area of foreign policy, we should expect a rapprochement between Argentina and the United States. At the same time, a cooling of relations with China, Brazil and Russia is possible. Buenos Aires' ties with China and Brazil will also be affected by ideological differences. The announced suspension of Argentina's accession process to the BRICS, or even its abandonment, is entirely probable.

Javier Milei's stated policy of reducing political and economic ties with China, however, appears to be nothing more than a populist announcement. It is not reasonable from an economic point of view. A significant share of investment in Argentina's agricultural export sector comes from China. If there is a large outflow of these products, as well as a drop in Chinese purchases of export goods, the Argentine economy will suffer. Unless Chinese investors are replaced by American investors.

Who is Javier Milei?

Javier Gerardo Milei is an Argentine politician, economist and author who was elected President of Argentina in the second round on November 19, 2023. He is known for his experience as an economist, author of several books on economics and columnist of TV. Javier Milei is a staunch defender of the Austrian School of Economics and advocates a massive reduction in public spending. He is a member of the Libertarian Party and ran for president as part of his La Libertad Avanza party, with lawyer Victoria Villarruel as his running mate. Milei's aggressive and theatrical style, including brandishing a chainsaw to symbolize his plans to reduce the size of the state, has earned him comparisons to the likes of Donald Trump and Jair Bolsonaro.

His victory in Argentina's 2023 primary elections sent shockwaves through the country's political establishment, and he gained support, particularly among the middle class pushed down by 100% annual inflation and young people, thanks to to his fierce critiques of elite corruption, his antics and his colorful quotes. Javier Milei denounced during the electoral campaign what he considers to be a political caste, which he describes as being made up of " useless and parasitic politicians who have never worked .