Argentina Politics Update - 22 November 2023
Key issues to watch out for as Milei prepares to take office, speculations on Cabinet appointments, international responses to Milei's victory
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On Sunday, libertarian outsider Javier Milei won the runoff election against Economy Minister Sergio Massa by an almost 12 point margin. If you missed Monday’s analysis of the election results, you can catch up here:
Politics
Who is Javier Milei, Argentina’s new libertarian president? (Reuters)
Reuters profiles the self-proclaimed anarcho-capitalist Javier Milei, who won Argentina’s runoff election on Sunday by almost 12 points
Milei will take office on December 10
Argentina Braces Itself for Its New ‘Anarcho-Capitalist’ President (New York Times)
During his campaign speech, Milei avoided mentioning some of his more radical policies such as dollarization and eliminating the central bank
It is likely some of Milei’s first acts as president will be to try and eliminate foreign exchange restrictions and currency controls, though it may be difficult to implement some of these policies within the first year
Milei’s sister, Karina, is expected to play an important role in the next administration
Milei Opens a New Era: What Comes Next in Argentina Policymaking (Bloomberg)
Four key issues to watch as Javier Milei prepares to take office are:
Transition - how will Milei, with little to no government experience, navigate the risk of a political vacuum and an almost-certain devaluation of the peso?
Congress - Milei’s La Libertad Avanza (LLA) party holds a small number of seats in the Chamber of Deputies and the Senate, meaning Milei will need to seek legislative alliances in order to pass bills including the 2024 budget and emergency measures
Economic Team - Milei’s announcement of who will be his Economy Minister will signal his intentions on dollarization and pursuing some of his more radical economic proposals
Some names being floated around for the top economic job include Federico Sturzenegger, Demian Reidel, Luis Caputo, and Guillermo Nielsen
Shock Therapy - Milei has promised to lower inflation through drastic measures, something that “is likely to produce volatility and social tensions in the short-term, with his proposals for significant government spending cuts proving a drag on growth while posing question marks over his ability to govern in such circumstances”
Javier Milei names some members of cabinet during interviews (Buenos Aires Herald, Buenos Aires Times)
Milei will not formally announce any cabinet appointments until he officially takes office on December 10
Milei wants to cut down the current 19 ministries to only 8, including Defense, Justice, Economy, Foreign, Infrastructure, Security, Interior, and Human Capital
The Human Capital ministry will combine the work of Social Development, Health, Labor, and Education
Some positions Milei has already announced include:
Foreign Minister: Diana Mondino
Interior Minister: Guillermo Francos
Justice Minister: Mariano Cúneo Libarona
Social Security Administration: Carolina Píparo
Infrastructure Minister: Guillermo Ferraro
Chief of Staff: Nicolás Posse
Human Capital Minister: Sandra Pettovello
Labor Secretary: Gustavo Morón / Miguel Ángel Ponte
Health Secretary: Dr. Eduardo Filgueira Lima
Central Bank: Emilio Ocampo
Vice president-elect Victoria Villarruel will choose defense and security ministers
Milei has not yet confirmed who his economy minister will be
Is Argentina’s new president too divisive to fix a broken economy? (Economist)
Milei’s La Libertad Avanza (LLA) party is only two years old, holds no governorships across the country, and has a limited amount of seats in Congress, making governability a real challenge for Milei
In order to cut spending, Milei will need to reduce or eliminate government spending on pensions and subsidies, both of which will hurt Argentines in the short term and could cause social unrest
“Only one of Argentina’s three non-Peronist presidents has been able to finish his mandate since the collapse of the military junta and the return of democracy in 1983.”
“Mr Milei himself often puts ideology before sound policy,” meaning his team of advisors will be critical in determining how he will govern and what policy changes can be expected
Argentine election winner Milei greeted globally by mix of hostility and support (Reuters)
Mexican president Andrés Manuel López Obrador described Milei’s win as an “own goal,” believing that although democracy prevailed, Milei is unlikely to ease Argentina’s economic woes
Current and former leftist leaders Evo Morales (Bolivia), Nicolás Maduro (Venezuela), and Gustavo Petro (Colombia) expressed public display of the election’s outcome, while other leftist leaders including Gabriel Boric (Chile) and Luiz Inacio Lula da Silva (Brazil) congratulated Milei on his win
Milei also received international support from Russia’s Vladimir Putin, Brazilian former president Jair Bolsonaro, and former US president Donald Trump
Chinese leaders indicated they would work with Argentina to “keep relations on a steady course,” indicating goodwill following some campaign comments Milei made towards China
China warns Argentina that severing ties would be ‘serious mistake’ (Buenos Aires Herald)
Milei had previously said he would not deal with “communists,” as he referred to China and Brazil
Incoming foreign minister Diana Mondino has already confirmed that Argentina will not be joining the BRICS trade bloc
Milei Meets Outgoing Argentina President in Start of Transition (Bloomberg)
Milei met with outgoing president Alberto Fernández in the Olivos presidential residence on Tuesday, beginning to chart out how the transition will take place as Milei prepares to take office on December 10
Javier Milei confirms visits to United States, Israel before December 10 inauguration (Buenos Aires Times)
Milei was also invited by Uruguayan president Luis Lacalle Pou to visit the neighboring country
Dates for the trips have not yet been confirmed
Argentina Gets Delay on Payment of $16.1 Billion in YPF Case (Bloomberg)
US Judge Loretta Preska, who just a few weeks ago ruled that Argentina owed $16.1 billion to Burford Capital and shareholders following the 2012 nationalization of oil company YPF, announced yesterday Argentina could delay its payments as it appeals, on certain conditions
In order to delay the payment, Argentina must pledge “51% equity interest in YPF and its receivables tied to a dam and hydroelectric power plant built between Argentina and Paraguay,” by December 5
Economics
Argentina's stock market react with optimism to Milei election (Buenos Aires Times, Reuters, Reuters)
As Monday was a public holiday in Argentina, local market reactions to Milei’s Sunday electoral victory could not be assessed until Tuesday
On Tuesday, the local stock market opened at 20% before leveling off to 14%
The parallel “blue dollar” exchange rate fell 12%, reaching 1,045
Shares of state-owned oil company YPF rose 34% in Argentina’s market after Milei announced he would seek to privatize the company, and reached 40% on Wall Street
Morgan Stanley expects the peso to drop 80% by the end of the year
International bonds rose on both Monday and Tuesday
Argentina's Javier Milei may find an unexpected friend in the IMF (Buenos Aires Times)
The fiscal adjustment Milei has promised would meet IMF demands that the country reduce its public spending
However, Milei has previously criticized the IMF as a “perverse mechanism that favors irresponsible governments”
It is possible that the IMF will not approve its next disbursement to Argentina, considering the increased levels of government spending as Economy Minister Sergio Massa implemented various tax breaks and initiatives in an effort to boost his popularity ahead of the runoff vote
Kristalina Georgieva, managing director of the IMF, congratulated Milei on his victory, saying "We look forward to working closely with him and his administration in the period ahead to develop and implement a strong plan to safeguard macroeconomic stability and strengthen inclusive growth for all Argentinians."
Milei's policies could boost Argentina's commodity businesses (S&P Global)
“If Milei is able to implement his dollarization policy, commodity producers would likely seek to increase exports immediately and begin earning in dollars instead of the weaker [Argentine] peso," I said
Milei reveals first privatization plans as president-elect (Buenos Aires Herald)
Milei announced he would nationalize state-owned oil company YPF, energy group Enarsa, and state news agency Télam, in addition to TV Pública and Radio Nacional, among others
The president-elect also indicated that his idea was to “rebuild” these companies so that they could then be sold at a higher price; it is unclear what changes Milei wants to implement, or how long they will take
Milei did not confirm whether state-owned airlines Aerolíneas Argentinas would be one of the companies privatized
Lithium + Energy
Can President-Elect Javier Milei Turbocharge Argentina’s Energy Industry? (Forbes)
Milei’s announcement that he would privatize state-owned oil company YPF caused shares to rise almost 40%, though he also explained that his plan was to “rebuild” the company before privatizing it
Argentina is expecting an energy surplus of $4 billion in 2024 due to the recently-built Nestor Kirchner pipeline
Milei has also promised to eliminate bureaucratic red tape in the energy sector
Argentina and Chile sign key lithium agreement (MercoPress)
Both countries signed an MOU to establish a “Binational Lithium and Salt Flats Working Group”
Negotiations have been occurring since June 2022 to increase bilateral strategic cooperation in lithium production
The MOU specifically addresses sharing production and scientific knowledge, developing and promoting joint actions, and increasing education and training of human resources at all levels of the supply chain
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