To the left-leaning mainstream media, newly elected Argentine President Javier Milei is a bombastic “far-right libertarian” in the same mold as former US President Donald Trump. The pearl-clutching press seems to fear that other countries worldwide could produce similar election results: A conservative or libertarian outsider becomes the leader, takes a chainsaw to the establishment, and installs policies that are the antithesis of the globalist and socialist status quo. But is Argentina at the point of no return?
Milei to the Rescue?
In a presidential runoff against Economy Minister Sergio Massa, libertarian Javier Milei secured 56% of the vote and will serve as head of state from Dec. 10 to the end of 2027. The political shockwave will now result in a potential transformation of Latin America’s third-largest economy. From abolishing the central bank to dollarizing the country to abandoning the BRICS intergovernmental organization, Milei’s reforms could make or break a nation that is already on the brink of despair.
“We have the determination to put the fiscal accounts in check. We have the determination to fix the problems of the central bank. We have the determination to put Argentina on its feet and move forward,” Milei said. “Today, we return to the path that made this country great.”
A chorus of pundits has already declared that an economic collapse is coming because of the 53-year-old’s plans. However, the South American state has been in perpetual financial crisis for the last 40 years, mainly because of leftist policies that have been inflicted on the populace. Here is a breakdown of what has occurred in Argentina during the last year alone: a 140% inflation rate, a crashing peso, energy and food shortages, soaring poverty, and a recession. These disastrous conditions result from years of price controls, capital restrictions, ultra-generous public workforce salaries, volatile foreign exchange rates, and excessive spending.
Of course, the elephant in the room is the International Monetary Fund’s (IMF) persistent bailouts of Buenos Aires. Argentina is the IMF’s top debtor by a wide margin. It owes $48 billion. By comparison, Egypt is second with $16.6 billion, and Ukraine is third with $11.8 billion. The government is scheduled to repay the IMF $45 billion in the next few years and reimburse roughly $67 billion in international bonds. The problem? Officials do not possess the funds to cover these obligations, particularly in the aftermath of the pandemic, when leaders flooded the economy with fiscal and monetary stimulus and relief capital. Financial markets have conceded defeat by halving the bonds’ valuations.
The IMF is poised to perform a comprehensive review of the government’s finances. It is widely expected that the bureaucrats will give a checkmark to the ledger because the Washington-based global lender does not want to push the nation into a default. However, should Milei successfully eradicate Argentina’s central bank and swap pesos for dollars, it is unclear how the international institution would respond. The funniest narrative being pushed is that the IMF must now take a more rigid stance on the country’s finances or dismantle the continual financing.
Mark Sobel, a former US representative at the IMF, said in an interview with Reuters: “No matter who wins after the vote, the IMF should insist that the government either bite the bullet — or otherwise the Fund should pull the plug on its support.” Martin Muehleisen, the former director of the IMF’s Strategy, Policy, and Review Department, told the newswire: “The message to Argentina from the IMF but also from G7 shareholders needs to be clear: You fix your economy for real, or there is just not more money.”
Gee, what a coincidence there is a plethora of experts demanding the IMF become tougher on Argentina now that a president could potentially threaten all the standard pillars of the Leviathan.
‘Long Live Freedom!’
Milei campaigned against “gradualism,” meaning he plans to drain the Argentine swamp almost immediately upon taking office. He said in a recent interview, “Mickey Mouse is the aspiration of every Argentine politician because he is a disgusting rodent whom everybody loves.”
Despite the ineptness and gloom that has engulfed Argentina since the 1990s, investors are optimistic that Milei’s victory could be a new beginning for a country that had been one of the wealthiest in the early 20th century. Bonds due in 2041 jumped 1.9 cents on the dollar to 30 cents. Argentine firms listed on the New York Stock Exchange rallied double digits.
Remember, as late as 1950, Argentina was as prosperous as many parts of Europe, which explains the phrase “As rich as an Argentine.” If Milei takes his chainsaw to every statist’s dream, whether central banks or government buildings, maybe the population will not need to wait until the next election cycle to make the expression great again.