An Unlikely Winner

Milei is a classic outsider politician. An economist and media personality, he has been known for his uncombed hair and leather jackets, his libertarian variant of conservatism and his penchant for hurling insults at his opponents. On November 19, by a 56 to 44 percent margin he defeated Sergio Massa, who had represented a somewhat more moderate version of Peronism than the populist-leftist approach of outgoing President Alberto Fernández and former President Cristina Fernández de Kirchner. Massa, who had been serving as minister of economy, had based his campaign on appealing to very real public fears of the pain that Milei would impose, together with executing a last-minute pre-election spending spree.

But Massa was doomed by his unwillingness as minister to take the tough steps required to rein in inflation, now running at over 140 percent, putting Argentina among such economic disaster zones as Sudan, Venezuela and Zimbabwe. Now Milei must pick up the pieces, and it is clear that in the short term a tough fiscal program — which he has frankly called a “shock” — will be coming. And beyond that, he looks to extensive privatizations and cutbacks to Argentina’s welfare state, and most controversially to the eventual replacement of its highly devalued currency with the dollar.

The World Watches

Only a year ago Milei was viewed as a fringe figure, but now both in foreign capitals and at home there is an effort to understand what the consequences of his election will be. Within Latin America, some may see it as the retreat of the “pink tide” which brought leftist governments to power in recent years. Colombian President Gustavo Petro has called the victory “sad for Latin America” and Venezuela’s Nicolás Maduro has denounced the rise of the “neo-Nazi right,” while Chile’s Gabriel Boric and Brazil’s Luiz Inácio Lula da Silva have sent more correct, if not effusive, messages of congratulation.

In his campaign Milei devoted little attention to foreign policy, which is not surprising given the scope of Argentina’s internal crisis. However, he has had to walk back his comment that he was not interested in relations with “socialist” Brazil and China; he subsequently said that he had no objection to exports to these states continuing. Still, he is not interested in joining the BRICS grouping (Brazil, Russia, India, China and South Africa), which had recently agreed to Argentina’s entry. 

For its part, China has confined itself to saying that it would be a “huge mistake” for Argentina to abandon ties. Unspoken was the fact that in addition to being a key export market for Argentine agricultural exporters, China has agreed to extensive yuan-denominated debt swaps as part of Argentina’s seemingly endless financial maneuvering in the face of its chronic foreign currency shortage.

Milei has said that relations with the United States will be his priority. What that means is unclear. Certainly, it is in the United States’ interest for Argentina to pull out of its economic tailspin, and as the largest shareholder of the International Monetary Fund (IMF) it will have a big say in how Argentina’s negotiations with the IMF, to which it owes $44 billion, will go. Up to now the United States, and by extension the IMF, has been relatively lenient with Argentina despite a series of broken promises regarding steps toward fiscal consolidation. 

But there may be some broader skepticism in the Biden administration regarding Milei, who has made clear his affinity with former President Donald Trump, and who may be viewed as akin to recent or current right-wing populist figures such as Brazil’s Jair Bolsonaro, El Salvador’s Nayib Bukele or Hungary’s Viktor Orbán. Of course, Milei may gain some goodwill in Washington if Argentina becomes more supportive in international fora such as the United Nations and the Organization of American States.

Enormous Challenges

But Milei’s principal focus will be at home. And while his resounding victory and the public perception that real change is imperative will give him an initial boost, his own political vehicle, Liberty Advances, is far from a majority in Congress. Thus, he will need the support of other parties to be able to pass legislation, notably from Republican Proposal, the more conventionally conservative party of former President Mauricio Macri, and from the old-line centrist Radical Civic Union, as well as from dissident Peronists.

Peronism itself has suffered a body blow with this election but will certainly live to fight another day. Its redoubt will be Buenos Aires province (the suburbs of the capital and a large rural area, with 39 percent of Argentina’s population) where it still retains the governorship. And Peronism has a history, while in opposition, of no-holds-barred political tactics, which it will doubtless employ when it has recovered from the shock of its defeat.

And adjacent to Peronism are powerful labor unions and organizations of the unemployed known as “piqueteros” that have proven themselves capable of mounting massive demonstrations that can tie Buenos Aires and other cities in knots. Milei has vowed not to permit violent protests, but this may be easier said than done.

Milei will need to have (or at least procure advisors with) the political skills to play hardball with his opponents as needed and also compromise with them when appropriate. Despite his campaign promises to bring down the “caste” of professional politicians who have governed Argentina, knowing how to employ old-style patronage politics and how to disburse to his advantage revenue sharing among Argentina’s provinces will be important, even as he cuts back overall spending.

His immediate priority will be to pick a cabinet that inspires confidence within Argentina’s business community and general public as well as at the IMF and on Wall Street. He will likely pick figures from the Macri administration and perhaps even some Peronists, while he may want to reserve some spots for his own cadre of libertarian true believers. His immediate challenge will be to stabilize Argentina’s plummeting currency.

He will have to take a hard look at its ramshackle system of multiple exchange rates, while avoiding the disruptions too rapid a liberalization may entail. He will have to get deficits, worsened by Massa’s pre-election spending, down and initiate budget cuts, which will require legislative approval. And he will need to postpone his plans for dollarization to some future date.

Milei will have to find a way, while remaining true to his campaign promise of radical change, to convince Argentines, already exhausted from years of economic mismanagement, to stay the course of painful measures. Argentina’s current situation, with 40 percent of the population living in poverty, is comparable to that of the United States during the Great Depression. Franklin Roosevelt understood the importance of an optimistic tone which inspires public trust, which he gained by telling Americans that “the only thing we have to fear is fear itself,” and promising “bold, persistent experimentation.” If Milei is to have any chance of success, he will need to adjust his rhetoric and channel the spirit of FDR as he looks to rebuild Argentina.

Richard M. Sanders is a senior fellow at the Center for the National Interest. He is also a global fellow at the Woodrow Wilson International Center for Scholars. A former member of the Senior Foreign Service of the U.S. Department of State, he served both as desk officer for Argentina and as director of the Office of Brazilian and Southern Cone Affairs.