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"El Loco" In Charge.
Things will not be the same.
Our friend Marcela Berland, CEO of Latin Insights, has been conducting survey research in Latin America for much of her adult life. She’s worked on 11 presidential campaigns in the region. As luck would have it, she was in Buenos Aires over the weekend. She filed this report early Monday morning after Javier Milei was declared the winner of Argentina’s presidential election.
In a surprising turn of events, Argentineans have chosen economist Javier Milei as their new President, signaling a momentous shift in the country’s political landscape and echoing the global rise of populist movements.
Heading into Election Day, polls pointed to a close finish. It was anything but. Mr. Milei won 56% of the vote, Sergio Massa garnered 44%……a landslide by any measure.
The election presented Argentineans with a stark contrast: Massa, promising economic revival yet representing continuity, and Milei, embodying a compelling but uncertain departure from established norms.
Milei’s victory epitomizes a prevailing trend in the region, a widespread and palpable discontent with “establishment politics.” This was evident in the distribution of the vote in Argentina. Massa won Buenos Aires, a Peronist stronghold, but was overwhelmed by Milei’s strength everywhere else.
Milei harnessed public frustration by vehemently condemning entrenched political elites as corrupt and ineffectual, striking a chord with diverse segments of the electorate, even those not fully aligned with his libertarian ideology.
Milei’s road ahead is laden with challenges. Inheriting a country grappling with seemingly impossible challenges, he lacks a congressional majority and faces formidable opposition from the Peronist establishment he has, for the moment, vanquished.
Can Milei fulfill his promises of transformative change—closing the Central Bank, dollarizing the economy, curbing inflation, eliminating subsidies, enhancing job prospects, combating corruption, and reducing the state’s role?
It seems unlikely. Getting one’s agenda enacted is fiendishly difficult. Milei is an inexperienced and largely untested politician. But what he has earned is a mandate for change, which can sustain him through the first wave of political battles.
Underestimating him is a mistake his opponents won’t repeat. Fifty-six percent is a statistic they won’t forget.
Because Argentina’s economy is in ruins, there was (and is) keen interest in how markets would react to Sunday’s results. This from the Financial Times:
Investors have cheered the victory of radical libertarian Javier Milei in Argentina’s presidential election despite worries about a rocky government transition and huge economic challenges ahead.
Argentine stocks and bonds rose in trading outside the country after the television economist, whose insurgent campaign strategy borrowed from Donald Trump and Jair Bolsonaro, outperformed expectations by winning 56 per cent of the vote in Sunday’s election.
But Milei fell far short of a majority in October’s congressional election and faces 143 per cent a year inflation, crushing levels of domestic and foreign debt and an empty treasury.
Everything points to this being the roughest [presidential] transition in at least a decade,” said Fabio Rodríguez, associate director at M&R Asociados consultancy in Buenos Aires. “There are many, many problems, and all of them are urgent.”
Milei’s pledges to take a chainsaw to the Argentine state, privatise wherever he can and enact economic shock therapy have delighted investors and businesspeople who have despaired of the country’s inability to capitalise on its vast natural resources.
Before Sunday’s second round vote, Milei retreated on some contentious ideas — such as legalising the sale of human organs. But he declared in his victory speech that there was “no room for gradualism”.
He has previously promised to scrap the peso for the US dollar, abolish the central bank and shrink the number of government ministries from 18 to just eight. Milei has also called for reductions to government spending, currently around 38 per cent of gross domestic product, by up to 15 percentage points of GDP.
Argentina’s dollar bonds rose by around 5 per cent in early trading on Monday to their highest level since September, although they remained far below their face value. Bonds due in 2030 were still only trading at 32.2 cents on the dollar.
The Buenos Aires stock market was closed for a public holiday, but US-listed shares in state-controlled energy company YPF SA — which Milei has promised to privatise fully — rose 38 per cent in early trading. US-listed shares in banks Banco Macro SA and Grupo Financiero Galicia SA both rose more than 20 per cent. (Source: ft.com)
So, you might ask, who is this guy? This from The Times of London:
Born in Buenos Aires in 1970 to parents of Italian descent, Milei once looked set on pursuing a career in football. In his teens he was goalkeeper for the Chacarita Juniors club in the capital. He also sang in a Rolling Stones cover band, taking the opportunity to grow out his distinctive, grizzled sideburns. But by his early twenties he was becoming more interested in economics. He earned two master’s degrees and went on to become a university professor before joining the private sector where his roles included working as an economist for HSBC Argentina.
During the 2010s, Milei was a popular pundit on several television and radio shows, drawing in viewers and listeners with foul-mouthed rants against the protectionist nanny-state policies of successive governments. By this time, he was describing himself as a proponent of “anarcho-capitalism”, a political and economic philosophy that seeks to abolish centralized states and holds that almost everything can be left to the market.
The pandemic brought him greater prominence, as a stern critic of the government’s draconian lockdown strategy. In 2021, he was elected to congress.
A genuine eccentric, Milei has claimed to be a “guru” of tantric sex. His frequent expressions of love and admiration for his younger sister, Karina, who has also managed much of his campaign, have been so intense that his campaign felt the need last week to deny online rumors that he was sleeping with her. In August, he said he was in a relationship with the well-known actress and impersonator Fátima Flórez. He also owns five English mastiff dogs, most of them named after free-market economists and all cloned from another pet, who died in 2017.
El Loco’s untested management style is a concern about his leadership. “He fires people all the time,” Pablo Touzon, a Buenos Aires-based political scientist, said. He recounted stories of those close to the new president who had said they would periodically find themselves “ghosted” by Milei, who would not accept calls from them for weeks.
“He’s enjoyed the rock star part of the campaign, mixing with the masses and being radical”, Touzon said. But governing, he warned, will be something completely different. (Source: thetimes.co.uk)
What are his immediate plans? This from Bloomberg:
Argentina’s president-elect, Javier Milei, plans to visit the US and Israel before taking office on Dec. 10., reflecting how he wants to realign the country’s foreign policy priorities. “The trip has more of a spiritual meaning more than other characteristics,” Milei said in a radio interview Monday without providing many specifics. Milei won Argentina’s presidential election by a landslide, defeating the incumbent candidate, Economy Minister Sergio Massa, by nearly 12 percentage points, a margin nobody expected. The outsider has repeatedly pledged to deepen relations with the US and Israel, a shift away from the current government’s approach to focus more on relations with Brazil and China. (Source: bloomberg.com)
And there’s this from The Wall Street Journal:
Mr. Milei plans to ditch his nation’s peso and adopt the U.S. dollar as the national currency. President-elect Javier Milei’s top campaign proposal was aimed at eradicating rampant inflation that has for decades ravaged Latin America’s third-biggest economy by removing the battered national currency from circulation and stripping the central bank of its power to print money. Uncontrolled money-printing to cover public expenditures, economists say, has fueled 143% inflation, one of the world’s highest. “Closing the central bank is a moral obligation,” Milei said late Sunday. (Source: wsj.com)
Perhaps the most interesting take on the election results from Argentina came from Eurointelligence:
Fiat money is the most vulnerable part of our economic system. We in the west have been using it to bail out banks after the global financial crisis, to bail out governments in the sovereign debt crisis, to stabilise economies during a pandemic, and to impose sanctions on our opponents. The economic consequences of our abuse of the fiat money system are not nearly as extreme as they are in Argentina. Not yet at least. Nor is the backlash. But we should not be surprised to see the German AfD at over 20%, or the UK's Conservative Party being taken over by right-wing extremists. If we continue with the same macroeconomic policies, we could end up in a scenario where political outsiders are no longer focused on immigration as they are now, but on the abolition of money.
The real danger for fiat money systems is not a scenario where Argentina falls into an economic hole, but one in which Milei appears to succeed, and where his ideas catch on. It will come as a total shock. (Source: eurointelligence.com)
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