Javier Milei: Challenges and perspectives for the governance of the new President of Argentina

At 52 years old, Milei beats Sergio Massa in the 2nd round and will be the country's 52nd president. His inauguration is scheduled for December, marking the beginning of a four-year term. Among his proposals, the dollarization of the economy and the closure of the Central Bank stand out.

Javier Milei is elected new president of Argentina - Photo Reproduction/Agustin Marcarian/Reuters

In a surprising political turnaround, Argentine economist and ultra-liberal politician Javier Milei (La Libertad Avanza) defeated Peronist Sergio Massa (Unión por la Patria) on Sunday (19), in the second round of the 2023 presidential elections in Argentina. The Peronist candidate admitted his defeat even before the official results from the National Electoral Chamber were released. Around 26 million (76%) of Argentine voters voted in the elections. The ultra-liberal economist will take office in December, beginning a four-year term.

At the end of the poll counting, Milei secured 55% of the votes, while Massa received 44%. The surprising difference of around 3 million (11 percentage points) is remarkable, especially considering that the polls indicated a closer race. Milei received the most votes in 20 of the country's 23 provinces, in addition to the capital Buenos Aires, which is an autonomous city. Milei's victory marks a turning point in the Argentine elections and reflects a growing demand for substantial changes in the country's politics.

Milei's campaign: Radical speeches and libertarian ideas

Javier Gerardo Milei, known for his blunt rhetoric and liberal or minarchist libertarian economic ideas, attracted attention during his campaign for his radical proposals, such as ending the country's Central Bank, reducing the role of the State to a minimum, promoting the dollarization of the economy Argentina and end the “political caste”.

Adopting dollarization implies renouncing the Argentine peso, adopting the North American dollar as the country's official currency. However, this procedure is not as simple as it seems. The support of the United States Mint would be necessary to obtain dollars, and the country would be subject to the interest rate policy decisions of the Federal Reserve (Fed), the North American central bank.

Another promise emphasized by Milei throughout his campaign was the extinction of the Central Bank of the Argentine Republic (BCRA), a measure correlated with dollarization. This would occur because, by depending on the dollar and the Fed's decisions, Argentina would give up its monetary sovereignty, ceasing the ability to arbitrate the economy's basic interest rates. The BCRA would lose its primary function. However, in practice, this could become a challenge for the economy. Decisions to increase or reduce interest rates would be made based on the United States, without considering the possible needs of the Argentine economic panorama.

During his campaign, Milei addressed the possibility of Argentina withdrawing from Mercosur and cutting international relations with Brazil and China. Experts warn that, in addition to the legislative challenges to implementing such proposals, it is crucial to consider the economic impacts. An eventual rupture in relations with Brazil and China, two important trading partners, could have significant repercussions on the Argentine economy, with notable initial effects on the industrial sector's value chains.

Milei's meteoric rise

Javier Gerardo Milei, an Argentine economist, university professor and writer, has risen to prominence in recent years due to his critical stance towards interventionist economic policies and state bureaucracy. Before entering the political sphere, he had a career in the private sector, working in banking institutions and in a company responsible for administering contributions and pensions. Milei also served as chief economist at the Acordar Foundation, linked to Peronist and former presidential candidate Daniel Scioli.

Milei gained greater visibility among the Argentine public when he was invited to participate in radio programs and, mainly, television. In 2021, his rise was marked by fiery rhetoric, characterized by a stance "against everything and everyone", culminating in his victory in the elections for the position of federal deputy for the A Liberdade Avança party, which he founded in the same year. Political analysts often compare him to former American presidents Donald Trump and Brazilian Jair Bolsonaro.

During the campaign, Milei's personal life became a topic of discussion, due to the publication of an unauthorized biography by journalist Juan Luis González. In this biography, the economist's involvement with esotericism is revealed after the death of his dog, Conan, in 2017. Milei cloned the animal and looked for ways to communicate with him after his death. His other four English mastiffs are also Conan clones, born from a procedure in the United States. Friends and acquaintances say he also claims to have the ability to communicate with deceased economists.

Perspectives for governance

In the current legislative dispute, the A Liberdade Avança party, led by Milei, recorded the biggest growth, going from three deputies and no senators to 38 deputies and eight senators. On October 22, Argentines participated in the first round of the presidential elections, simultaneously renewing 130 of the 257 seats in the Chamber of Deputies and 24 of the 72 in the Senate.

In the next legislature, Milei's party will establish itself as the third largest force in Congress, falling behind Sergio Massa's Peronist coalition, which holds 108 seats in the Chamber, and the center-right coalition led in the first round by the former minister Patricia Bullrich, who won 93 deputies. Together, the parties opposing Peronism (Liberty Advances and Together for Change) outnumber the Union for the Fatherland bench in terms of the number of deputies.

The election of Javier Milei as President of Argentina represents a significant shift in the country's politics. His challenge now is to turn his promises into actions and manage a nation that faces complex challenges, such as dealing with the most serious economic crisis in decades, described by annual inflation of 142%, the highest in more than 30 years. Furthermore, approximately two-fifths of the population live in poverty, and there is significant currency devaluation. These challenges are worsened by a billion-dollar external debt and the scarcity of international reserves.

Diplomatic and International Challenges

Milei's election also raises questions about how his administration will handle foreign relations. Argentina has significant ties with countries in the region and beyond, and Milei's approach to trade agreements, environmental issues and international cooperation will be closely watched.

The market demonstrated significant risk aversion in the face of the Central Bank's closure and dollarization plans, evidenced by investors' reaction when Milei stood out in the primaries in August. Due to the holiday in Argentina this Monday (20), the impacts of Milei's election will probably only be noticed on Tuesday (21).