Argentina’s Milei tones down Libertarian agendas, secures US support with IMF
ALBAWABA – As Argentines celebrate the election of libertarian economist Javier Milei, a United States (US) delegation has given Argentina’s Milei its support in talks with the International Monetary Fund (IMF) and on developing its lithium sector during a meeting in Buenos Aires on Saturday.
Meanwhile, Argentina’s Milei has reportedly toned down his Libertarian agendas, Bloomberg reported, and is no longer planning to dismantle the central bank.
In fact, sources close to Argentina’s Milei told Bloomberg that his singular focus on the economy to the exclusion of all else, without recourse to trusted advisers, could spell trouble moving forward. Especially as he takes on one of the greatest challenges in his country’s history.
Argentina’s inflation rate is nearing 150 percent, while over two-fifths of the population is in poverty.
General view at the beginning of a session at the Argentine Congress in Buenos Aires on November 29, 2023, where Argentina's Milei and Vice President-elect Victoria Villarruel were officially declared the winners of the runoff election. (Photo by JUAN MABROMATA / AFP)
Its $44 billion IMF program has derailed, with central bank net reserves deep in the red and a recession looming on the horizon.
Argentina’s Milei was set to roll out a series of measures to rein in state spending after his inauguration, a "shock" therapy plan that his backers hope will stabilize the economy. However, it is likely to be painful for Argentines, at least in the short term.
One such measures was to dismantle the central bank and dollarize Argentina’s economy. But instead, he asked Wall Street trader Demian Reidel to lead the central bank, according to Bloomberg. An offer Reidel rejected late in November.
Likewise, since winning the elections on a platform of blowing up Argentina’s establishment to tackle the nation’s problems, Milei has ditched or shuffled into lesser roles several top advisers from his party.
Argentina’s Milei turns pragmatist at own agendas, party’s expense
He’s replaced them in key cabinet positions with people with years of experience in the public sector, mostly from different political backgrounds. He even kept a few key officials from the outgoing government he relentlessly attacked during the campaign, Bloomberg confirmed.
He appointed his rival-turned-ally Patricia Bullrich as security minister, a post she had under former President Mauricio Macri, with her vice presidential pick, Luis Petri, as defense minister. Even though he had reportedly promised his running mate, Victoria Villarruel, that she would handle both policy areas.
Argentina's Milei (R) and vice president-elect Victoria Villarruel share a light moment during a session at the Argentine Congress in Buenos Aires on November 29, 2023, where they were officially declared the winners of the runoff election. (Photo by JUAN MABROMATA / AFP)
Yet, what’s come as a hard blow to his friends and allies has been embraced by investors as a promising sign for his presidency, as a pragmatist. Sovereign bonds rallied by nearly 30 percent since his victory, and shares of Argentine companies such as state-owned oil firm YPF rose as much as 68 percent.
Meanwhile, Bloomberg’s traders and investors expect the new government to devalue the peso anywhere between 27 and 44 percent. Additionally, the central bank is already limiting the amount of foreign currency the nation’s commercial lenders can hold, to discourage the hoarding of dollars.
According to Bloomberg, dollarization is not an option right now, but Argentina’s Milei will keep it tabled until a later, suitable time.
US supports Argentina’s Milei on IMF, Lithium and used F-16s
As for talks with the IMF, Juan Gonzalez, adviser to US President Joe Biden and the National Security Council's Western Hemisphere senior director, said the talks were "very positive" and focused on the country's embattled economy.
Gonzalez said that the delegation had discussed lithium with Milei, including the country's hope to benefit from the US Inflation Reduction Act (IRA).
Notably, Argentina is not a Free Trade Agreement (FTA) partner and therefore does not benefit from it.
The country is the world's number 4 producer of lithium, which Gonzalez said the US is willing to support, to expand beyond production of the key electric battery metal.
"Certainly Argentina is a source of lithium, but there is no reason that Argentina should not be refining and moving up on the value chain of lithium, and we want to help," he said.
Women rest behind a sign that reads "Milei, Argentina is free thanks" during a demonstration in the framework of the International Day for the Elimination of Violence against Women and in support of the Palestinian people in Buenos Aires, on November 25, 2023 in the aftermath of the election of Argentina’s Milei as president. (Photo by TOMAS CUESTA / AFP)
Additionally, the two countries are currently “having discussions” about buying used US F-16 jets, the adviser confirmed, but did not give more details.
Argentina’s Milei has pledged a pro-US foreign policy and has been critical of China, in addition to having cultivated strong ties with right wing powers around the world.
He is set to be sworn in on Sunday with dignitaries expected to attend the ceremony including Ukraine's President Volodymyr Zelenskiy and Hungarian Prime Minister Viktor Orban. Right wing former Brazilian leader Jair Bolsonaro, who met with Milei on Friday, will also be there.
