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How Javier Milei is turning Argentina's economy around
Ian Bremmer's Quick Take: Hi, everybody. Ian Bremmer here and a Quick Take to kick off your week. And today, I want to take us to Argentina, where newly elected President Javier Milei deserves a round of applause, at least for where we see the country so far in his administration.
We've had a first budget surplus that Argentina has enjoyed in over a decade. And monthly inflation, which has been significant highs and impossible for the people, is actually slowing down. Now, that's a really big deal. After several administrations in Argentina doing their damnedest to destroy the economy, Milei is turning the place around. He's succeeding. And by the way, this was not what I expected when the elections were happening. When he was first elected, I wrote, “expect more economic collapse imminently. ” And clearly that didn't happen. And that's a great thing. for the Argentinean people. I'm happy to be wrong about this. And by the way, I'll be very happy if I could be wrong about Ukraine getting partition, that seems like a tougher one. But nonetheless, what happened and why has he been more successful than I expected? It's worth thinking about.
Well, first of all, what the challenges were. Milei’s party has a thin minority in Congress, so he's had to use presidential decrees to push most of his ambitious economic reforms. He's the weakest president in institutional terms that Argentina has had in modern times. So he's swimming against a really strong current. And the Peronists who control a lot of power in Congress and among mayors and governors and the trade unions. I mean, these are people that would love to see Milei fail. So, first of all, my expectation was that no matter how smart well-thought through his economic policies were likely to be, the desire of the kleptocracy that's been in place for such a long time in having this guy fail and come back to power themselves, would be so strong that he wouldn't have any chance to get anything through.
In other words, they wouldn't be willing to compromise. Now they have shown themselves willing to compromise. And some of this is if you leave Cristina Kirchner out, who's really kind of volatile and horrible, polemic as a governor and corrupt as someone running the country, a lot of the peronists are really happy to see essential things happen in the economy that they don't have to take responsibility for. In other words, it's on Milei. It's not on them. And so there's a willingness to provide some compromise, even though that's going to mean smaller budgets, more austerity, that they're not going to get as much. They're willing to give him a little more rope than I expected before he became president. That's interesting. That's absolutely worth paying attention to. The difference between the Kirchner's and her inner circle and the Peronists that have been running the country to ruin for a long time.
Second point though, is that Milei himself has been much more of a thoughtful leader in terms of economic policy and his willingness to back down from eccentric and overdone claims than I had expected when he first became president. Now look, unlike Argentina's last several administrations where they were pretty well known to anyone that covered the country and I've traveled there and got to know the cabinets and met with the presidents and all of that. In this case, you had a complete outsider. I had no idea who was around Milei and a lot of what was being said about him was a little bit out there, like for not just the fact that he wanted to go after the leftist libtards, but I mean, the fact that he had cloned dogs and that, you know, claimed to actually, talk with one of them that died from beyond the grave. And, I mean, a lot of the comments that he made were beyond eccentric.
Having said that, there was also a lot of media coverage of Milei that really didn't like him because he was a right-wing libertarian, and also because he aligned himself with Trump and said nice things with the former president. And then of course, goes and does immediate interview with Tucker Carlson, who was a spreader of disinformation and a bomb thrower, not exactly someone you can trust, but that, of course, meant that ideologically, a lot of people that were covering him were not covering him honestly. They were knee jerk reacting to, this guy is going to be an idiot. And frankly, you know, absent an understanding of the people around him, I was more willing to go along with that.
Well, it became fairly clear once he was in as president that his initial appointments were better than that. I sat down with his foreign minister to dinner back in January and was pretty impressed with her both individually, as a very competent, engaging and smart person on policy, but also in the way that she described, which struck me as very honest, her relationship and conversations with the president.
I heard from many people from different countries, developed countries around the IMF that his appointment of the former president Macri's economic advisor to the IMF board was extremely well received. This was someone that was really well respected across the markets and meant that the IMF negotiations were likely to go quite well, and that the meetings that Milei had with Georgieva, the managing director of the IMF, were very strong.
They were very engaged and he was willing to listen on issues of what the Argentinian government needed to do economically, which has led to a very constructive bilateral relationship between them, utterly essential given what Argentina's economic situation looks like right now. So all of that has been very positive. Now, having said that, there's no question that this cost of writing the Argentinian economy, has meant a fall in real incomes, leading to a slowdown in consumption and economic growth and a downturn in living standards and an increase in poverty.
That is happening. It's going to get worse. And government approval for now, given everything I've been saying, is actually surprisingly sticky and strong, especially if we look at Argentina standards historically. Will he be able to continue this? There's no question, it is a very high bar, and that high bar is not only because that Peronist opposition is still there, and they don't want him to be seen as a historic success, but also because economically, this would be hard for just about anybody.
But there's no question that for his first several months in government, this guy deserves respect for what he's been able to actually accomplish. And a final point is, you know, I don't think we should have such a problem with being wrong. And you only have a real problem with being wrong if you are so ideologically attached to what you were saying to begin with. And if it's just a question of analysis and you made a mistake in your analysis, you go back, you get the analysis right and you change your mind, and that's fine. Also, sometimes the world changes and so you change your mind.
But, you know, if the fact is that the analysis is wrong and it's not like I have a problem with Milei doing well, I would love him to do well. I would love the Argentinean people to succeed, and to get out of the corruption and the devastatingly poor economic policies that they've experienced for decades now. This is a country, anyone that spends time there knows incredible education, very, very beautiful and fertile land and a place that you just want to spend time. And they have been run into the ground by poor governments, a series of poor governments. And if Milei is the guy that turns that around, he has nothing but support from me.
That's all for me. And I'll talk to you all real soon.
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Argentine Economy Minister Sergio Massa leads in Sunday's first-round elections.
Peronists stage surprise comeback in Argentina
Argentina came closer to electing a new president on Sunday. In the first round of run-off elections, Peronist Economy Minister Sergio Massa defied expectations, clinching 36.7% of the vote to finish ahead of populist firebrand Javier Milei’s 30% and conservative candidate Patricia Bullrich’s 23.8%, with most ballots counted. The top two contenders will face off in a final round of voting on Nov. 19.
Pollsters had predicted the libertarian Milei would win on the first ballot, which required 45% of the vote or 40% with a 10% lead over the closest opponent. Massa’s Peronist party had taken much of the blame for the dismal state of Argentina's economy, where inflation has hit triple digits and two in five citizens live in poverty. Milei appealed to voters looking for change, preaching radical solutions like scrapping the peso, dollarizing the economy, abolishing the central bank, and cutting public spending by at least 15% of GDP.
But in the run-up to the vote, Massa rolled out some populist tactics of his own, granting welfare checks to workers, bonuses for retirees, and abolishing income taxes for 99% of the population. He also claimed that bus and train fares would rise sharply if he lost and emphasized the importance of Argentina's social safety net. Analysts say the institutional strength of the Peronist brand, as well as political polarization between left and right, helped explain Massa’s surprising comeback after his second-place finish to Milei in the August primary.
"It's amazing that the economy minister of an unpopular government with inflation accelerating to above 130% can be competitive," says Daniel Kerner, head of Eurasia Group's Latin America practice, noting that it "speaks to the strength of Peronism."
The eccentric Milei, meanwhile, cut a polarizing figure: The 53-year-old economist claims not to have brushed his hair since age 14, owns five cloned mastiffs, and wields a chainsaw at rallies. Massa and Bullrich criticized Milei for disparaging the country and advancing “bad and dangerous ideas,” perhaps influencing more voters to stick with the status quo than opt for the unknown.
After ballots were counted, Massa talked about “building a government of national unity,” “free education,” and promising “more order, and to build clear rules.”
Milei's Sunday night speech was described as “conciliatory.” “We can’t keep destroying ourselves with kircherismo," he says. "For everyone who wants change, we’ll need to work together.”
Financial analysts say Massa’s first-place showing rules out a sharp devaluation of the official exchange rate in the short term, though markets could still see turmoil. Between now and the Nov. 19 runoff, “we’re going to continue seeing high inflation and pressure on the exchange rate, but we’re not going to see a full-blown currency crisis and hyperinflation, that’s ruled out,” said Martin Rapetti, executive director of Buenos Aires-based consulting firm Equilibra.
But markets could still be in for a wild ride in November, should Milei pull off a win. The big question now is whether Milei can woo Bullrich's voters in the second round. "Most [of them] will vote for Milei," says Kerner, "but not all of them. Milei is too radical for some, and Massa will try to appeal to them," he adds, noting that he expects a very tight race to the finish.