How Javier Milei Could Change Argentina

When Javier Milei is inaugurated as Argentina’s next president on December 10, he should remember that he is hardly the first of that country’s leaders to come to power boldly promising an end to stagnation. For decades, new leaders—left and right—have entered office with radical reform programs meant to mark a sharp break with the past. None of them has had more than temporary success in breaking the country out of the malaise that has characterized most of its modern history.

Argentines elected Milei, a libertarian outsider who entered politics only two years ago, with 56 percent of the vote (over Sergio Massa of the long-dominant Peronist party), because they were fed up after years of economic instability. But the tense electoral campaign was dominated not just by the ruinous state of the economy but also by Milei’s eccentricities. An admirer of former presidents Donald Trump of the United States and Jair Bolsonaro of Brazil, he promised to slash public spending, shut down Argentina’s central bank, and adopt the U.S. dollar as the national currency to tame inflation. Some of his more outrageous statements included proposing to legalize the sale of children and human organs and calling Pope Francis a “filthy leftist.”

Milei won partly because he seemed authentic and, as someone with little political experience, embodied the rage many Argentines feel against the status quo. He proved particularly popular among young voters, who enjoyed his outbursts on social media and saw him as a fresh start. He chastised the “political caste” and carried a chainsaw to signal his intent to drastically reduce the size of the state. His targets included not just Kirchnerismo, the left-wing Peronist faction that has dominated Argentine politics since 2003, but also the center-right coalition Juntos por el Cambio (JxC) that ruled between 2015 and 2019 under former President Mauricio Macri.

Milei’s victory was not entirely of his own making. In the first round, he received 30 percent of the vote against Massa’s 37 percent. After his party’s candidate, Patricia Bullrich, came in third with 24 percent, Macri quickly endorsed Milei ahead of the second round. This support was crucial to convince moderate voters, who wanted change but distrusted Milei’s erratic style, to vote for him anyway. Macri sees Milei’s triumph as a personal vindication and evidence that the more moderate elements of JxC had constrained him too much during his presidency. Milei agrees and has promised shock therapy as opposed to the gradualism that defined Macri’s reforms.

As Milei assumes office, the challenges confronting him are enormous. To succeed and break the cycle of decline and instability the country has been trapped in for decades, Milei will need not just the boldness he showed during his improbable rise to power but also a willingness to compromise, avoid unnecessary fights, and learn from past attempts at reform—above all, that the path to real change may be even narrower than he thinks.

DOUBLE-EDGED SWORD

Milei’s first task is to put together a competent administration and build political support for his reforms. Ensuring governability will not be easy. Milei’s party, La Libertad Avanza, controls only 7 of 72 senators and 38 of 257 deputies and does not control a single provincial governorship or local mayor’s office. Most members of the new president’s team lack experience and knowledge about the workings of the state they will try to reform. Macri’s support will be important, as he can offer more seats in Congress and experienced former officials. In fact, some of Milei’s potential ministers have served under Macri, including Bullrich, who could return as security minister, and Luis Caputo, who was announced as Milei’s new economy minister after other candidates for the job fell through.

Milei will also need to reach out to Peronists, whose party will do some soul-searching after a chaotic time in power and a painful electoral defeat. He might find support among some Peronist provincial governors, who are often pragmatic and control several seats in Congress. To achieve this, however, Milei will need to water down some of his more radical proposals, such as eliminating all public works projects, and offer federal assistance to replenish depleted provincial coffers. He will also need to preserve his autonomy from Macri, who is despised by most Peronists. Indeed, Macri’s influence might be a double-edged sword for Milei. The former president is quite unpopular, having lost reelection in 2019 amid a serious economic crisis that continues to this day. He had promised to implement pro-market policies to boost growth and reduce inflation, but he achieved neither aim, despite incurring $44 billion in International Monetary Fund debt that Argentina is struggling to repay. Milei needs Macri, but if Macri proves too influential, those who voted for Milei to get rid of the establishment will feel betrayed.

The need for pragmatism extends to the topic Milei cares about the most: the economy. A self-described anarcho-capitalist who has almost absolute confidence in free markets, Milei must accept that he was elected to solve Argentina’s problems, not use the country as the subject of an ideological experiment. The economic situation is dire. Central bank reserves are depleted, and the peso’s value has crumbled against the dollar, fueling inflation that reached 140 percent in October and continues to rise. The economy, which will contract this year, has been stagnant since 2012, pushing more than 40 percent of the population into poverty.

The good news is that Milei has backtracked on key proposals such as complete dollarization and shutting down Argentina’s central bank, which worked as campaign slogans but had been questioned for their applicability and disruptive implications. An attempt to peg the Argentine peso to the U.S. dollar in the 1990s stopped inflation but collapsed amid a serious socioeconomic crisis in 2001. Milei should avoid the temptation of taking such shortcuts and instead do what other Latin American countries did to control inflation: strengthen central bank independence, limit fiscal deficits, and avoid financing the Treasury by printing money. This recipe will take time to work, but the results will be more sustainable.

BOTH SIDES

Another area in which campaign rhetoric is giving way to pragmatism is foreign policy. During the campaign, Milei bashed Brazilian president Luis Inácio Lula da Silva and promised to leave the Mercosur trade bloc (made up of Argentina, Brazil, Paraguay, and Uruguay). He also pledged complete alignment with Israel, the United States, and the “free world” and suggested he would cut relations with China, as he did not want “deals with communists.” Since his win, Milei has softened his stance on Beijing, a necessity given the close economic ties between the two countries. China buys nearly ten percent of all Argentine exports (particularly soy) and extended a $20 billion currency swap line to shore up Argentina’s reserves. Chinese corporations are also heavily involved in Argentina’s lithium and infrastructure sectors.

Unlike his ally Trump, a protectionist nationalist, Milei is an avowed free trader. His proposals to dismantle Argentina’s massive protectionist barriers could allow the economy to regain competitiveness and encourage innovation and investment, but only if they are part of a long-term plan to allow uncompetitive industries to adapt. To his credit, Milei has sought to mend fences with Lula and supported Brazil’s attempts to conclude a free trade agreement between Mercosur and the European Union. Milei should not allow his relationship with Bolsonaro to hurt ties with Brazil. Impoverished Argentina is not the United States, which can (at least to some degree) afford to alienate its allies because of its own power and influence.

Milei’s first trip as president-elect was to the United States, where he met with former President Bill Clinton and National Security Adviser Jake Sullivan. Before that, he held an amicable call with President Joe Biden. Differences remain on issues such as Milei’s climate denialism and his close ties to Trump. But there is space for a positive agenda with Washington—for instance, on U.S. support for Argentina at the International Monetary Fund and Milei’s stance against left-wing dictatorships in Cuba, Nicaragua, and Venezuela. Milei will also find allies in the U.S. private sector, which is excited about potential opportunities in a more investment-friendly Argentina. Rather than take sides, Milei should engage both Washington and Beijing to seek further investment in key areas such as lithium extraction, oil and gas production, and infrastructure.

A QUESTION OF TEMPERAMENT

Milei must accept that his electoral success does not mean that voters approve of his entire platform. He should not try to mobilize his core supporters and divert attention by fueling “culture wars” and adopting an ultraright agenda. (During the campaign, his team made baseless allegations of electoral fraud, following the playbooks of Trump and Bolsonaro.) Milei opposes abortion, which was legalized in Argentina in 2020, and dismissed massive human rights violations by Argentina’s military dictatorship in the 1970s and 1980s as “excesses committed in war.” He has also proposed making it easier for civilians to purchase firearms. Members of his party, including the vice-president-elect, have even more extreme views on human rights, LGBTQ rights, deploying the military to combat crime, and other social issues. Should he push this agenda, Milei will squander his scarce political capital and alienate Argentines who agree with his pro-market economic orientation but not with his conservative views of society.

Even many of those who voted for Milei doubt that he has the temperament to manage the pressures of the office he just won. The first days since his victory were marred by his party’s infighting, tensions with Macri’s party, and chaos around future cabinet appointments. Milei must be pragmatic but firm and must be open to new ideas but convinced of his goals. He must break with the past but bring in people with experience and knowledge. He must take advantage of Macri’s backing without turning into a copy of the former president.

Milei must also contend with the dilemma that has doomed previous reform attempts in Argentina: the social cost of the reforms is immediate, the benefits uncertain and long term. Few disagree that Argentina must reduce government spending and incentivize private investment, but in the short run, millions who benefit from public subsidies, unfunded pension plans, cash-transfer programs, and low-paying but stable government jobs will suffer. Argentina has a long tradition of street protests against economic liberalization. The Peronists dominate the labor unions, which have been weakened by growing labor informality but remain powerful, and organizations of unemployed workers will fight any attempt to cut benefits. Former President Cristina Fernández de Kirchner has seen her grasp on Peronism weaken, but she retains significant influence, not least in Congress. Milei will need to strike a careful balance between resisting extortion and making sure his policies are sustainable.

Milei has a narrow window of opportunity to enact his policies and jump-start the economy before Argentina’s antireform antibodies kick in. The first few months of his presidency may well be decisive. To succeed, and break with a decades-long cycle of decline and political volatility, he must abandon the image of firebrand outsider and become a pragmatic leader. If Milei fails, as many have before him, Argentina might not get another chance like this in many years.