Libertarian Javier Miley became president of Argentina. The hardest thing is ahead of him

Second round of presidential elections in Argentina won right-wing populist, libertarian economist, “mini-Trump” Javier Miley. The advantage in his favor (56% versus 44% for his competitor, Economy Minister Sergio Massa) turned out to be unexpectedly large and quickly forced Massa to admit defeat.

While the country is frozen in the already familiar uncertainty: November 20 is Independence Day in the country, stock exchanges are closed. On foreign markets, Argentina’s government debt has risen slightly in price, but is still trading at a 30% discount to par. The “commercial” peso exchange rate fell by 8%, to 1,000 per dollar.

Miley himself, who will take office only on December 10, has so far chosen not to promote the libertarian experiment, to moderate his rhetoric and do not detail radical proposals – dollarization, dissolution of the Central Bank and severe cuts in government spending. He assured that his government would respect private property, promised to balance the budget and “solve problems in the Central Bank,” which “left us with a destroyed economy on the verge of hyperinflation.”

It is very likely that Miley’s success in the second round was brought about by his rejection of the most unpopular ideas – the privatization of education and healthcare, the liberalization of small arms and the trade in human organs, notices Financial Times.

“While the president-elect’s caution in extending an olive branch to everyone who wants to join Argentina’s recovery is understandable, the country simply does not have the time,” Bloomberg notes. — Inflation reaches 180% by the end of the year, business activity is falling, the Central Bank has no reserves. The risk of a complete loss of control in the economy is growing.”

The agency sees four main dangers:

• Transfer of power. The period until December 10 is an eternity by the standards of Argentine politics. The Peronists, who have become the opposition, can easily wash their hands of it, create a power vacuum and force Miley to pay with image points for the inevitable fall of the peso without a real opportunity to influence anything. Rumors about Massa’s immediate resignation are already circulating, Miley said that the administration of President Fernandez must be completed.
• Out of control Congress. Miley’s victory gave him a mandate for reform, but did not guarantee that the reforms would pass the Argentine parliament. In the lower house, his party has 39 seats out of 257, in the Senate – 8 out of 72. In three weeks, Miley will have to write an acceptable plan, enter into a coalition with the faction of ex-president (2015-2019) Mauricio Macri and somehow win over moderate Peronists.
• Personnel issue. It is quite possible that he will become the main challenge of the first stage of Miley’s presidency: he simply has few comrades who are ready to become normal managers. It is not even known who will decide to take the portfolio of Minister of Economy, especially in a future dollar economy without normal monetary levers. For now, it looks like Miley will also have to look for the key minister in Macri’s camp.
• Shock therapy. Argentine-style inflation can be quickly curbed only by radically reducing the deficit and budget spending, which will not add to Miley’s popularity and could provoke street riots. JPMorgan Chase estimates that the necessary measures alone will result in Argentina’s GDP contracting by 3% in 2024.

In any case, Miley will have only one chance, writes FT: in Latin America, “presidents without parliament” do not survive. “Voters were seduced by a TV show about how the candidate would kill inflation and deprive the ruling class of privileges,” the publication notes. “We’ll see how they feel about cutting public sector employment, utility subsidies and payments to the poor to balance the budget.”

A “live” experiment in the dollarization of a large economy (so far only Ecuador and El Salvador are institutionally tied to the dollar) will be interesting in itself. Other ideas of libertarianism, with which the type of nepotic capitalism that has developed in Argentina, will also be tested in real conditions. In this system, the private sector relies on access to the resources and capabilities of the state, and at the grassroots level is supported precisely by social subsidies, which Miley intends to cut.

Russia’s trade turnover with Argentina is small (about $1 billion per year), and most importantly, it has not increased, but fell with the introduction of international sanctions against Russia. That is, Argentina is not a significant channel for bypassing them. Miley said that he does not intend to join BRICS or do business with the “socialists” – Brazil and China, but supports economic rapprochement with the USA and Israel. What will remain of these plans, only time will tell.

We wrote about who Javier Miley is, what economic views he holds and how he intends to solve Argentina’s huge economic problems Here.