A chainsaw wielding politician? Really? Yes.
Argentinian politics have been ignited and this in a country known for passionate politics, by a radical libertarian individual standing for President. The cult of personal popularity has strong historical roots in this troubled South American country – and it suffered under the Perons; and then under the military junta – until it was brought down by the fiasco over the Falklands, but it has been relatively stable in a political sense since then, of not in an economic sense.
In the recent presidential elections two things emerged: firstly, and against expectations, the ruling Peronist, left-wing, party took pole position in the election; closely followed by Javier Milei, a libertarian, who has promised to take a chainsaw to the country‘s economic ills. The Peronist Sergio Massa, currently Minister for the Economy, took 37% of the vote; whereas Milei only came second taking just over 30% – despite having been in the lead in the primary vote. The Conservative Patricia Bullrich came third on 24%, but now falls out: to leave two dancers in this Argentina political tango.
The markets had been concerned about the election result when Melis was in the lead – but given Massa’s strong showing the Argentinian peso strengthened by 14%, but only to 1050 against the dollar.
Secondly the strong showing by the Economy Minister is all the more surprising given that under his party the economy has tanked with inflation running in three figures. Argentina is the second largest economy in South America, after Brazil, and what happens there has local repercussions. One of the planks of Milie’s reform proposals is the “dollarisation” of the peso. This is an imaginative but complex suggestion akin to going on the gold standard. It would involve, inter alia, freezing foreign exchange (F/X) fates; converting all bank accounts and F/X contracts to US dollars; allowing dual currency trading for a period; and transferring Government Debt to an offshore fund.
This would, he claims, stabilise the currency, but it needs strong legislation and probably a referendum.
The peso currently holds the position of “the world’s worst performing currency” – a prize no government wants to win – and stabilising the currency will be a key objective whoever wins the dance – and the big question is – How?
Another key question going forward will be ‘where will Patricia Bullrich’s votes go?’ To Milia or Massa? With 24% in play it has the possibility of shifting the balance of votes. She was particularly strong in Buenos Aires, the capital, but she has not yet told her supporters where or how to vote. Whether she is holding out for offers from either candidate is not yet known.
Argentina is currently an economic basket case with 140% inflation and about half the population living in poverty. Whoever wins will need to take drastic measures to rescue it. The run-off is in November and Melie will be hoping to pick up enough votes to repeat his success in the primaries, whereas Massa will hope to keep his lead by getting conservative votes.
Melie has promised to slash ministries and cut bureaucracy – hence the chainsaw – as well as loosening gun laws and restricting abortion – in this Catholic country. This is a libertarian agenda – but it is not likely to be in the interest of those on benefits to see them cut and, given high level of those under the poverty line, that is a significant percent of the electorate. Similarly, those employed as civil servants are unlikely to emulate turkeys by voting for Christmas and elect someone promising to get rid of their jobs. Interesting times as the Chinese curse has it!