Buenos Aires — Javier Milei, a Libertarian economist and current Lower House representative, has caused a stir in Argentina’s political and economic landscape, after becoming the most voted candidate in this Sunday’s Primary, Open, Simultaneous, and Mandatory Elections (PASO). The leader of “La Libertad Avanza,” a political outsider until 2021, has managed capitalize on the frustration of a society that has been immersed in economic crisis and stagnation for the better part of the last decade, and which currently faces triple-digit inflation and a poverty rate hovering around 40%.
What until recently appeared as a pipedream materialized yesterday for Milei, a radical liberal with bellicose rhetoric who ended up winning in 16 out of the country’s 24 districts. Now, he will hope to reaffirm his performance in October general elections: “We took the first step to put an end to Argentina’s decline.”
To be sure, he only defeated the other main opposition force, Juntos por el Cambio, by a slim margin, making a run-off in November a very likely scenario.
What are Milei’s Proposals for the Argentine economy?
Milei’s radical proposals for the Argentine economy, often dismissed as extremist and unfeasible by representatives of both the ruling party, Unión por la Patria, and Juntos por el Cambio, have struck a chord a large part of the electorate.
His motion to fully abandon the peso and dollarize has been particularly impactful in the public debate, along with the elimination of the Central Bank and consequently its money printing, and the promise to eradicate the “political caste”, embodied by Argentina’s two traditional parties, which have been unable to put an end to decades of economic and social deterioration.
Who is Javier Milei?
Javier Milei burst onto the scene in Argentina during the Mauricio Macri administration (2015-2019), a government which he fervently criticized as an analyst and from an economically liberal standpoint. He has worked at HSBC, as an advisor to local billionaire Eduardo Eurnekian’s Corporación América, as a public speaker and as an author, among other jobs.
Milei is a staunch defender of the free market, and the name of his political party translates as “Liberty Makes Progress”. represents “the ideas of liberty,” as he often emphasizes in each public appearance.
In 2021, he was elected as a Lower House lawmaker, and gained further notoriety for aggressive rhetoric and relentless critique of both Kirchnerism and “Juntos por el Cambio,” the two most prominent political currents in recent years in Argentina. His decision to auction off his monthly salary as a legislator was also a publicity hit.
Regarding his reportedly tumultuous background, Milei has expressed that he severed ties with his parents, whom he refers to as his progenitors, but maintains a close relationship with his sister Karina, whom he calls “El jefe” (the boss) and whom he proposes as a potential “first lady,” as he is currently single. In his public appearances, he also often refers to his five dogs as his “four-legged children.”
Dollarization in Argentina
The presidential candidate for “La Libertad Avanza” claims to have an electoral platform comprised by no fewer than 60 economic measures, which would be carried out over several generations. Among them, his proposal for dollarization stands out within the first generation.
The economist suggests that Argentine society has already rejected the peso and chosen the US dollar as its preferred refuge, due to the constant loss of value of the local currency, a result of rampant inflation that has been traveling at a rate exceeding 100% annually for several months.
Milei has proposed a competition of currencies that would allow citizens to freely choose the monetary system, which he thinks would ultimately end in a full dollarization of the economy. The proposal has not gone without criticism.
Economists from both the ruling party and the opposition have rejected the idea on numerous occasions, arguing that its implementation would involve a very high conversion rate, which would have serious social consequences, considering the central bank’s net negative international reserves. Critics have focused on the uncertainties regarding where the funds would come from to rescue the peso monetary base and the country’s interest-bearing liabilities.
Shutting Down the Central Bank and Ending Currency Controls
Another of Milei’s most well-known proposals involves eliminating the Central Bank and exchange controls. The economist has not held back in criticizing the country’s monetary authority for constant money printing to finance the budget deficit.
The proposal also includes the removal of currency controls that limit access to dollar-buying in the country. Faced with a shortage of reserves, the Argentine government has been gradually tightening exchange controls in recent years, aiming to contain the outflow of foreign currency. However, economists often argue that the controls not only restrict the outflow of dollars but also their inflow.
According to La Libertad Avanza’s 13-page document titled “Bases of Political Action and National Electoral Platform,” Milei would seek a progressive elimination of social welfare programs and the provinces’ federal revenue-sharing system, as well as a reduction in public spending and tax reform to lower taxes.
He would also aim for a significant reduction in the size of the government and the number of ministries. He would move forward with privatizations and implement labor reform by reducing employer contributions and replacing severance pay for unjustified dismissals with an unemployment insurance system.
