“Libertarian outsider Javier Milei has won the Argentine presidency, promising a radical overhaul to address decades of political mismanagement. His strategy resonated with a population suffering from a plummeting economy and one of the fastest inflation rates in the world.
With 99% of the ballots counted after Sunday’s second round of elections, Milei won 56% of the vote compared to 44% for the Economy Minister, Sergio Massa, of the ruling left-wing Peronist coalition, according to the official electoral authority. The extent of his victory was unexpected. The fact that Argentines opted for a radical change instead of the continuity offered by Massa and the once-conquering Peronist movement reflects the pain they feel as inflation races towards 143%, eroding their purchasing power.
The result gives Milei the mandate to pursue his electoral promises, including abandoning the peso in favour of the US dollar and closing the central bank while undertaking drastic cuts in public spending to try to lift the country of 46 million out of its malaise.
However, Milei’s shock therapy places Argentina on a path of deep uncertainty, with some economists warning that dollarizing a $622 billion economy when international reserves are depleted could tip the South American nation into a new hyperinflation crisis.
Milei is set to take office on December 10. He still needs to clarify the timeline and process of dollarization, which, with negative reserves, does not seem feasible in the short term. The central bank had nearly exhausted its international reserves to support the peso, meaning a sharp devaluation of the currency is expected any day now.
His comprehensive victory gives him political capital to advance his economic agenda. Still, it does not protect him from the political costs associated with the measures he must implement to keep his promises. Moreover, Milei has no team for his plan, and he will face a highly mobilized opposition from the start.
A former legislator with no executive experience, 53-year-old Milei built his platform by linking Argentina’s history of high inflation to the decline of the political class through swear-filled tirades on TV shows. Illustrating his promise to drastically reduce the state’s size, Milei regularly declared that he would tear it apart, brandishing a chainsaw at massive street rallies, which has become a symbol of his challenge to the status quo. Despite his nonexistent party structure, Milei ranked first in the August primaries, shocking the political establishment and revealing the extent of voter anger towards their current leaders. His victory triggered an alarmist campaign by Massa, which overturned the result of the October first-round primaries, when the main pro-business bloc of former President Mauricio Macri, now led by Patricia Bullrich, was eliminated. Bullrich later supported Milei, but it was not enough.
Attention will now turn to how Milei implements his most controversial measures with only a handful of representatives in a fragmented congress and an impatient electorate, with over 40% of Argentines living below the poverty line.
Argentina will face $22 billion in external debt repayments next year, including interest due to international bondholders and the IMF, requiring a significant current account surplus as part of a stabilization plan. The fate of Argentina’s $43 billion program with the IMF now falls to Milei. The program, one of Argentina’s few sources of international funding, is far from on track as the previous government has not been able to meet any of the key targets that are typically crucial for the IMF to continue disbursing funds.
The free-market theorist’s victory is simultaneously a loss for Brazil and China, Argentina’s two main trading partners. Throughout his campaign, Milei stated that he would freeze relations with the economic powers because they are ‘socialist’. Milei went so far as to call China an ‘assassin’, then clarified that he would still allow free trade between private companies, thus illustrating his challenge in turning his campaign rhetoric into reality. Total trade with China and Brazil was about $55 billion last year, nearly three times the value of trade with the United States, Argentina’s third trading partner.”