Javier Milei’s difficult path ahead

On Sunday, November 19, Argentina voted in Javier Milei, a candidate until recently unknown in the political spectrum. Milei was a novelty due to his unusual ways to communicate and his radical programs, but he knew how to interpret the demand for change from his countrymen. Milei obtained an 11-point lead over his opponent, the current Minister of Economy, Sergio Massa, the largest lead in the history of the runoff system in Argentina.

Argentina has a history of decades – with few exceptions – of populist policies carried out by traditional politicians who made serious errors in economic and social matters while, in many cases, becoming personally enriched.

The vote for Milei and his party La Libertad Avanza (Freedom Advances), reflects the frustration that a large majority of Argentines have felt with the current government led by an inefficient alliance between President Alberto Fernández and Vice President Cristina Kirchner. Far from reversing those decades of wrong policies – with some exceptions – the duo is leaving a tragic legacy of more than 40% poverty, a peso in sharp decline, negative reserves, annual inflation projected at more than 300 per cent, erratic foreign policy, deterioration of state-run health and education services, insecurity in the streets – previously unknown in Argentina – and other problems.

These erroneous policies include uncontrolled currency printing to pay for the rising fiscal deficit, intricate administrative and labour regulations, sympathy for authoritarian governments in the region, as well as pressure on judges who did not rule in accordance with the government’s interests. All this discouraged investment, thus preventing the growth of the economy, the creation of private sector jobs and social well-being.

This is what President-elect Milei intends to change through radical libertarian economic and social programs, including a sharp reduction in public spending, the privatisation of state-owned companies, dollarisation and elimination of the monetary functions of the Central Bank to prevent future governments from returning to enthusiastic currency printing. He plans to strengthen health and education programs.

Milei will also have to deal with a geopolitical context that is entering a phase of the unknown. He favours an open economy and trading with the whole world. However, he prioritises his political alliance with Western countries and Israel, condemning violation of international law and distancing himself from communist and authoritarian regimes. For this reason, he opposed joining BRICS since the grouping is political and includes countries with authoritarian regimes, in particular Iran that is implicated in the terrorist attacks that took place in Argentina in the nineties. Therefore it is expected that Argentina won’t have an active role in the mentioned arrangement.

For now, Milei has a short window in which to form his cabinet – he takes the oath as president on December 10. The influence of former president Mauricio Macri and his teams will be visible, as will the impact of other minor political parties which supported him. The interactions with these political groups as well as the hard reality of Argentina’s economy itself could mean adjustments in his plans to obtain the necessary support to modify critical legislation that he considers has prevented the healthy development of Argentina.

It is difficult to predict the effectiveness of the new government’s plans. What is clear that it will need to show rapid results to create popular support and prevent powerful political, union and business groups from obstructing Milei’s Administration, as they have promised to do.

Guillermo E. Devoto is former Consul General and Director of the Trade Centre of Argentina in Mumbai.

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