Argentina Politics Update - 13 December 2023
Milei inaugurated as president, Caputo announces "shock" economic reforms, Argentina to "actively resume" OECD accession
Javier Milei assumed the presidency of Argentina on 10 December. This week’s newsletter will be the final news roundup of Road to the Casa Rosada. Stay tuned over the next few days for a final analysis of what the next four years could look like for Argentina.
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Politics
Argentina’s new far-right president promises shock to the system (Washington Post)
Javier Milei was inaugurated as Argentina’s new president on Sunday
Milei spoke directly to supporters, “symbolically turning his back on the political elite” as he broke with tradition and did not offer his remarks to Congress
Milei already decreased the number of ministries from 18 to 9
Far-right leaders were in attendance at the inauguration, including Hungarian Prime Minister Viktor Orban, former Brazilian president Jair Bolsonaro, and leader of Spain’s Vox Party, Santiago Abascal
Ukrainian president Volodymyr Zelensky was also in attendance
Argentina’s New ‘Anarcho-Capitalist’ President Starts Slashing (New York Times)
Key measures announced included a cut to energy and transportation subsidies, the firing of new federal workers, halving the amount of government ministries, and slashing government spending by 2.9% of GDP
It is expected that the new measures “will increase inflation, will reduce income, will reduce activity and employment and… increase poverty.”
Milei admitted that “in the short term, the situation will worsen” for many Argentines, who are struggling amidst over inflation nearing 150% and a poverty rate over 40%
Javier Milei summons divine assistance to help cure Argentina’s ills (Financial Times)
Prominent left-wing leaders from Latin America, including Brazil’s Luiz Inacio Lula da Silva, Colombia’s Gustavo Petro, and Mexico’s Andrés Manuel López Obrador did not attend the inauguration
Chile’s Gabriel Boric, another left-wing leader, was in attendance
Milei’s overt appreciation of Judaism - present in his inaugural address, his announced political appointees, and even in his expressed desire to convert - have some in the Argentine Jewish community feeling weary
“If Milei succeeds, nobody will remember his Jewish connection but if he fails, everyone will blame us,” said a Jewish Argentine
Social tensions are likely to appear in the weeks and months ahead, with Argentine society expecting quick results from the new administration
Javier Milei’s government begins with first presidential decrees (Buenos Aires Times)
In one of his first acts as president, Milei reduced the country’s total number of ministries to nine: Interior; Foreign Affairs; International Trade & Worship; Defence; Economy; Infrastructure; Justice; Security; Health; and Human Capital
The Cabinet was also confirmed:
Cabinet Chief: Nicolás Posse
Interior Minister: Guillermo Francos
Foreign Minister: Diana Mondino
Defense Minister: Luis Petri
Economy Minister: Luis Caputo
Security Minister: Patricia Bullrich
Health Minister: Mario Russo
Justice Minister: Mariano Cúneo Libarona
Infrastructure Minister: Guillermo Ferraro
Human Capital Minister: Sandra Pettovello
Karina Milei, Javier Milei’s sister, was also confirmed as Secretary General to the Presidency
The Human Capital Ministry will absorb the duties of the Education, Culture, Labor and Social Development, and Women, Gender, and Diversity Ministries
The Justice and Human Rights Ministry was also renamed to just “Justice Ministry”
Argentina’s new Congress will condition Milei’s bid for reform (Buenos Aires Times)
Milei’s own La Libertad Avanza (LLA) party, even with its alliance with the Juntos Por el Cambio (JxC) coalition, will have a minority in both houses of Congress, a significant condition on the new president’s ability to pass his proposed reforms
LLA has 40 of the 257 seats in the Chamber of Deputies, and only 7 of the 72 seats in the Senate
A president without money to spend (Buenos Aires Times)
“There is no money left,” explains Milei, saying that austerity measures are the only way to get Argentina out of its long-lasting economic crisis
Milei will now face the unenviable task of reducing public spending in a country whose population is largely dependent on welfare; it is estimated that up to 90% of the population could become impoverished under a future bout of hyperinflation
Argentina will stay in Paris climate agreement under Milei: Negotiator (Reuters)
Climate diplomat Marcia Levaggi, head of the Argentinian delegation at the UN COP28 climate talks currently underway, confirmed the country will maintain its commitments in the Paris Agreement
The Environment Ministry has been disbanded by Milei, and its responsibilities will be dispersed and assumed by the remaining ministries
U.S. offers Argentina's Milei support on IMF, lithium, White House adviser says (Reuters)
In a discussion between Milei and senior director of the Western Hemisphere of the National Security Council Juan González centered on US support for Argentina’s lithium development and the potential for Argentina to gain benefits from the US Inflation Reduction Act (IRA)
Sister, vice-president, girlfriend – the women in Javier Milei’s inner circle (Buenos Aires Times)
Karina Milei, the president’s sister - whom he refers to as “The Boss” - was sworn in as Secretary General to the Presidency
Little is known about the president’s sister, though she is opposed to feminism “and the way it’s being carried out,” and is opposed to the legalization of abortion
Victoria Villarruel, the country’s new vice president, is the daughter of a military general and has routinely espoused controversial views regarding the country;s 1976-1983 military dictatorship, visiting former military generals in jail and and questioning the number of individuals disappeared by the dictatorship
It is unclear whether Fátima Flórez, Milei’s girlfriend, or Karina Milei will be the first lady
Economics
Argentina peso devalued over 50% as markets welcome Milei's 'tough pill' (Reuters)
The peso’s official rate was allowed to plunge to 801 per dollar on Wednesday, following the announcement of Milei’s first round of “shock” economic reforms
This means that the official rate was brought much closer to its actual market rate, currently known as the “blue” rate
There are further plans for a 2% monthly devaluation of the peso
Argentina Bonds Rise to Two-Year High After Milei Debuts Shock Plan (Bloomberg)
2035 bonds traded as high as 35 cents on the dollar, their strongest showing since 2021
Yields fell slightly, but still remain close to 18%
Economists warn that though investors see Milei’s recent announcements as a step in the right direction, the economic impact of the policies will be seen in the coming months, which will serve as a true test for the future of the country
Argentina monthly inflation set to spike to 12% as Milei era begins (Reuters)
A median estimate of a poll of 22 analysts put Argentina’s November Consumer Price Index (CPI) increasing by 11.9%, up from 8.3% in October
Milei expects monthly inflation to reach between 20% and 40% in the coming months
Updated inflation data for November is expected to be published this afternoon
Argentina's Milei formally seeks OECD accession talks (Reuters)
Milei sent a letter - dated 11 December - to the Organisation for Economic Cooperation and Development (OECD) to “actively resume” the process for Argentina to become a member
Argentina had begun the process of OECD membership under Mauricio Macri in 2016, but halted proceedings when Alberto Fernández took office in 2019
Lithium + Energy
‘From horrible to merely bad’: will Javier Milei take his chainsaw to the environment in Argentina? (Guardian)
The Environment Ministry will cease to exist under the new administration, and no plans have been made to organize the transfer of power of the existing ministry to where it will next be housed
Milei has already announced he would not comply with the 2030 environmental agenda
Some analysts believe Milei, as he seeks to sign new free trade deals to compensate for the $20 billion loss caused by a historic drought earlier this year, will take a stronger interest in the environment and environmental protection measures given the demands and interests of investors
With soy and lithium trade in the balance, Argentina's Milei has a China conundrum (Reuters)
China is Argentina’s second-largest trading partner, as well as being “the top buyer of Argentine soybeans and beef, a key investor in its lithium, and the provider of an $18 billion currency swap”
China is also financing various infrastructure projects across the country, and has many mining investments - it is unclear if Milei will choose to cancel any of these public works projects, nor what China’s response might be
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