Argentina’s transition to its new presidency will be very complex, not least because the incoming president is a far-right eccentric anarcho-capitalist with limited political experience. The first task for Javier Milei, who won a landslide victory earlier this month, will be averting hyperinflation when he takes office on 10 December.
This will be made harder by friction between the new president and the outgoing government. The strain became evident on election night itself, when Milei’s election rival Sergio Massa, the current economic minister, used his speech accepting defeat to claim responsibility for Argentina’s dismal economic situation now lay with Milei.
“From tomorrow, the task of providing certainty and transmitting guarantees about the political, social and economic functioning is the responsibility of the president-elect. We expect him to do so,” Massa said.
Two hours later, Milei responded in his victory speech, saying: “We want to ask the government to be responsible, to understand that a new Argentina has arrived and to act accordingly. That they take responsibility until the end of the 10 December mandate.”
This dispute gives an idea of the profound economic uncertainty in which Argentina is immersed, and heralds turbulent days to come. The short-term prognosis is very negative, particularly since Argentina already has a year-on-year inflation rate of 143% and a debt of $44bn with the IMF, which has had to intervene in the country’s economy 22 times since 1958.
In his victory speech, Milei declared that he would immediately begin to implement his shock plan, the flagship component of which was replacing the Argentinian peso with the US dollar – though he has rowed back on this in recent days – making large cuts to public budgets, scrapping all rent regulation and privatising large companies, including oil giant YPF and the public broadcaster.
“There will be no gradualism, there is no room for lukewarmness, there is no room for half measures,” he said hours after being declared the winner. “If we do not move forward quickly with the structural changes that Argentina needs, we are heading straight for the worst crisis in our history.”
Since then, the man whom Milei hoped to appoint as head of the central bank to oversee the dollarisation has announced he will not take the post, and the president-elect has begun backing away from his most radical policy.
It seems almost unfeasible that Milei will be able to push through far-reaching structural reforms.
If the dollarisation does go ahead in the coming months, which now seems unlikely, peso holders would have to convert them into dollars before capital controls are lifted. This will be followed by a major devaluation that will have a devastating effect on the already very negative debt-to-GDP ratio, according to the Financial Times.
Matías Bianchi, the director of Buenos Aires-based think tank Asuntos del Sur, whose work spans across Latin America, told openDemocracy: “With Milei's victory, the economic crisis went nowhere. If the problem is that people were not betting on the Argentine peso, now they are probably going to go against the peso, which could possibly lead to hyperinflation".
“Milei wants the outgoing government to assume the devaluation and the outgoing government wants Milei to assume it. Now, the problem is not who is going to take it on, but how it happens and how much it amounts to.”
Argentina’s high inflation and volatile peso means the only way to secure savings is accumulating dollars. Two days before the elections, the official dollar exchange rate stood at 353 pesos, the tourist dollar at 700 and the blue dollar (also known as the black market dollar) exceeded 950. The day after the vote, the official peso was stable but the blue dollar had soared above 1,050 pesos. Since imminent dollarisation looks increasingly unlikely, it has fallen back to the 950 figure seen before the elections.
Pushing through policies
The political weakness of the new president, whose party, La Libertad Avanza, celebrated its second birthday in July, is enormous. He has only 38 members of Congress out of a total of 257, and seven senators out of a total of 72. In Congress, Milei can make alliances with the conservatives of the centre-right coalition Juntos por el Cambio (Together for Change), led by former president Mauricio Macri which has 94 seats, but such an alliance would still not have a majority in the Senate.
This is a problem for Milei as Argentina’s bicameral system, modelled on the US’s, means the Senate can veto laws after they are approved by Congress. Milei’s party also does not have any of the 24 governors, meaning it has no regional power.
It seems almost unfeasible, then, that Milei will be able to push through far-reaching structural reforms. He has only one potential silver bullet: immediately controlling hyperinflation and sending reassuring signals to the markets – which he has already started to do with his backtracking on dollarisation.
Francesc Badia i Dalmases
Failing to do so will likely cause the powerful machinery of Peronism, with its enormous capacity for social mobilisation, to disrupt his plans in a disturbing way. Argentina’s highly mobilized civil society and powerful trade unions could bring their protest to the streets in efforts to paralyse Milei’s promised radical cuts to social spending. At that point, it will be seen how much of his electoral support translates into social support.
Many of those who voted for Milei did so to oust the current disastrous government but not necessarily because they liked his most radical policies. If he insists on carrying these out, his days may well be numbered. In a column for Argentinian digital news outlet Cênital on election night, journalist Juan Elman wrote: “A recent example of the limits to pure, ideology-based models occurred last year in the UK, when prime minister Liss Truss implemented a brutal, Thatcherite-inspired tax cut. She lasted less than two months in office".
Regardless of which policies Milei manages to force through, his election means Buenos Aires is already likely to become the new mecca for radical far-right populists. The president elect was quick to invite to his inauguration Santiago Abascal, the leader of Spain's far-right Vox party and president of the Disenso Foundation, which runs the annual Madrid Forum that brings together far-right parties and organisations from Latin America and includes members of the US Republican Party.
These tense early stages of the transition will shape the future of Argentina's unprecedented presidency. Brazil’s neighbours like to say that understanding its complex political dynamics is very difficult because “Brazil is not for amateurs”. As things stand, it could be said that understanding Argentine politics today, with Milei at the helm, is even more complicated, because Argentina is only for psychoanalysts.
