Image: Javier Milei, via Wikimedia Commons.

The eccentric bushy-haired Javier Milei – who wielded a chainsaw in campaign appearances and hinted at receiving guidance from his deceased pet dog – was lifted to the Argentine presidency last December on a wave of voter frustration and anger. The self-styled “anarcho-capitalist” captured 56 per cent of the vote in a runoff against his opponent from the party of Argentina’s long-enduring Peronist tradition.

Milei’s ascension to the Casa Rosada, the presidential office, was convincing, yet – for all his iconoclastic style – does not mark a radical departure from a pattern that has defined Argentine politics for a century. Since the legendary Juan Perón was first elected president in 1946, Argentina’s politics have been an unsteady oscillation between two tendencies: on one side, reliance on government intervention to protect national industry and redistribute wealth, and on the other, attempts to shrink government to restore competitive market forces and repay the debts incurred paying for extensive social programs.

The Seesaw Process

Perón initiated the seesaw process after managing against all odds to ally Argentine conservative forces with organized labour. In the late 1940s and early 1950s, that political contract boosted worker incomes and social benefits while managing class conflict and encouraging social stability. In historian Alejandro Cattaruzza’s summary, Peronism can be “understood as homegrown fascism, a movement of worker emancipation, populism, an inheritor of nationalism, but also of radicalism and social Catholicism … (It) defined the second half of the 20th century in Argentina.” Shapeshifting over time, Peronism has embodied, at different junctures, both the state-expansionist and state-limiting vectors of Argentine politics.

Peronist president Carlos Raúl Menem implemented extensive liberalizing reforms between 1989 and 1999, but Menem’s efforts failed to free markets from regulatory shackles or quell the country’s always looming international debt. The liberal Fernando de la Rúa (1999–2001) presided over a collapse of the national economy while defaulting on $132 billion in international debt, the largest of nine such episodes in the country’s history. His government was the subject of angry protests that forced him literally to flee from his presidential office, by helicopter.

The subsequent Peronist presidents Nestor Kirchner and Cristina Fernández de Kirchner presided over a fragile stability between 2003 to 2015 during which they pursued an endless series of acrimonious negotiations with international financial institutions. An eventual agreement to restructure debt ran aground when a U.S. hedge fund insisted on receiving full payment rather than joining other creditors in “taking a haircut.” The stalemate was broken when the subsequent non-Peronist, centre-right government of Mauricio Macri agreed to pay the hedge fund’s bill.

Credit somewhat restored, Macri took a gradualist approach to market opening and debt reduction between 2015 and 2019. Characteristically, his government was supplanted by that of Alberto Fernández, another Peronist, who presided over a worsening economic crisis in which the government again defaulted on its debt before restoring a fragile liquidity. A late orgy of government spending, meant to secure the Peronists’ hold on office, failed to persuade electors that things could get better. In 2023 Milei was brought to power, the latest – and the most colourful – proponent of the state-shrinking, liberalizing tendency.

The crisis that propelled Milei into office has exacted much pain and suffering and fostered an abiding despair about the government’s ability to fix things. In 2023, inflation rose to 211 per cent. According to the International Monetary Fund, GDP shrank by 2.5 per cent and official unemployment rose to 7.8 per cent. Before Milei’s election in December, 44.7 per cent of Argentines had incomes below what was considered the poverty line for affording a basic basket of goods and services. The Argentine Catholic University’s Social Debt Observatory calculated that 9.3 per cent of Argentines were considered “destitute.”

According to World Bank figures, “The real wage for formal private sector workers and public workers fell 15 per cent and 18 per cent respectively (in the six years before 2023), while it decreased by 40 per cent among informal workers.” Scandalous revelations of members of Fernández’s government enriching themselves at public expense added to public exasperation.

Milei’s angry diatribes against what he calls “the caste” that occupies the top offices gained traction with the public. An expression current in the aftermath of Menem’s late-nineties regime was heard again: “Que se vayan todos” – in the characteristic Spanish subjunctive mode, “that they all should go,” roughly equivalent to “Throw them all out.” Milei’s “image of anger, vulgarity, and accusing everyone involved in politics was quite successful,” a seasoned Argentine diplomat said in an email exchange from Buenos Aires.

Milei was most popular among Argentine men between 16 and 30 years of age, not surprising given the 60 per cent poverty rate among young adults. He harvested nearly 50 per cent of all women’s votes, skewing more to the middle-aged and older demographic. The self-employed gave Milei a 30-point advantage; support from the industrial and high-tech sectors was also high and particularly significant given Peronism’s long association with interventionist industrial policy. Milei’s electoral support among the military reached 90 per cent, and among police 70 per cent.

The diplomat noted the importance in the campaign of social media, including TikTok, which he argued made for even greater superficiality than normal for electoral discourse. He characterized the campaign as a “degradation of values,” a gradually diminishing focus on community and social responsibility. “Argentina,” he concluded, “is a completely different country than 40 years ago.”

The time frame was chosen advisedly. In 1983, Argentina shook itself free from a sinister military dictatorship that waged a “dirty war” against often arbitrarily identified political opponents. The diplomat referred more to Argentina’s preservation of its “social capital” than its welcome escape from military repression. High levels of social, educational and cultural development seemed to survive the dictatorship. Social capital has been deeply eroded by four decades of economic mismanagement and turmoil.

Harsh Adjustment Measures

Milei’s unexpectedly large presidential victory does not guarantee him any greater chance of success in breaking the long-term pattern and restoring – or, more aptly, finally establishing – a stable economy. The primary limitation, as in all previous efforts to right the fiscal boat, is politics and whether the government can maintain popularity while implementing corrective measures that cause public pain.

Hampering Milei is the fact that his party holds only a handful of seats in Argentina’s lower house and no seats in the Senate. The Peronist alliance, Unión por la Patria, holds the most seats in Congress. None of Argentina’s provincial governors is from his party. He is getting some support, however, from the party of the former liberal president Mauricio Macri, Juntos por el Cambio. Its candidate in the opening round of the 2023 election, Patricia Bullrich, has joined Milei’s cabinet.

Milei’s first and most sweeping omnibus bill of radical measures put to Congress failed to win enough support. Since modified and resubmitted, the Ley de Bases, as it’s called, includes plans to privatize state entities, reform taxes and curb state subsidies. It has been approved by Congress but not yet by the Senate. In the meantime, Milei has relied on what he can do by presidential powers alone, which under the Argentine constitution are significant.

By decree, Milei has devalued the Argentine currency, closed ministries, slashed transport and fuel subsidies and cut spending to project a federal government budgetary surplus. Controversially, he has eliminated funds for food banks. He has also proposed increases in export tariffs on agricultural goods, a measure contradicting his espousal of free markets but an indication of how deeply embedded protectionism is in the Argentine economic toolbox. The largest contribution to achieving a projected budgetary surplus is the liquidation of assets in government employees’ pension funds. In a speech to a business forum in the resort city of Bariloche, Milei boasted of having introduced the harshest adjustment measures in history. Argentina “had neither the time nor the financing for a more gradualist approach to austerity.”

The short-term effect of these supposedly reinvigorating measures has been the withdrawal of great swaths of income from the economy. For example, those with public pensions, after having had their reserves cashed out, have also had their payouts reduced through suspension of inflationary adjustments. State funding of universities has been reduced by 30 per cent. Some major public works have ground to a halt.

“Informal” or “black market” workers, who constitute 44 per cent of the private-sector workforce, mostly in the domestic service, construction, agriculture, social service, and private health sectors, have been most affected by the currency devaluation. Between December 2023 and January 2024 their wages rose only 20 per cent against price rises of 51 per cent, according to the Argentine National Institute of Statistics and Census. Argentine taxpayers will also begin to feel the bite as the government restrains thresholds beyond which income tax kicks in.

A Reuters poll of economic analysts estimated the annual contraction of the economy by the end of February to have been 5.9 per cent, the fourth registered decline in as many months. Milei acknowledges that his shock program is causing pain. “I know that the situation we are living through is hard. Yet we are already halfway through,” he tried to reassure viewers in a television broadcast. “This time the effort is going to be worth it.”

Will he, against historical precedent, be able to run out the clock? Will what he views as necessary austerity carry the economy to the tipping point where market signals recover and genuine economic growth resumes? Or will the public suffering and immiseration become so great that the affected populace will erupt in protest and demand relief?

As is usual with shock therapy, financial markets have been supportive. As Reuters reported earlier this year, investors are “starting to believe.” Dollar-dominated bonds in the Argentine market were pushed to four-year highs. Among ratings agencies, Standard and Poor gave Argentina a triple C stable rating in March 2024, hardly a glowing endorsement but an improvement over the triple C negative of a year before.

But the cool calculations of market managers and investors are being challenged in the streets. On April 23, at least 150,000 people, according to estimates, marched in opposition to severe cuts in postsecondary education. At the University of Buenos Aires, some faculties had to turn off the lights and the school’s associated hospital had to suspend surgeries and reduce its activities by 30 per cent. The much-constrained budgets of the universities struck directly at what many Argentines have for years considered part of their social contract: free access to university education. Protests have also taken aim at the suspension of aid for Argentina’s many food banks, which have proliferated in recent years to mitigate long-term declines in families’ purchasing power.

Revisiting the Dirty War

Milei’s primary focus has been on the economy, but his iconoclastic instincts have carried him into other fields. His appointment of Victoria Villaruel as vice-president has brought attention back to the human rights abuses of the 1976–83 “dirty war.” Villaruel has long pressed for reviving the cases of hostage-taking and murders by militant left-wing organizations, such as the Montoneros and the Ejército Revolucionário del Pueblo (ERP, People’s Revolutionary Army). Their attacks on the military and businesspeople in the 1960s and 1970s strove to bring “socialist revolutionary” change to Argentina. Such quixotic objectives matched those of other militant organizations in Europe and North America at the time, although they gained more traction in Argentina.

Many of the left-wing militants were part of the multitentacled Peronist movement and were even encouraged in their violent acts by Juan Perón in exile. Perón led a short-lived government after he returned to Argentina in 1973. It morphed after his death in 1974 into a military dictatorship overseen by his third wife Isabel. The “armed struggle” waged by the Montoneros and ERP provoked the military regime’s counterattack after the 1976 coup. Between 1976 and 1983, some 5,000 people were kidnapped, tortured and killed by the military’s security services, and about 30,000 disappeared, according to human rights organizations. The diplomat described the military regime of that era as “the worst thing that has happened in our history.”

Villaruel has disputed the number of kidnappings, disappearances and deaths as published by Argentina’s Truth and Reconciliation Commission. She insists that the crimes of the left-wing guerrillas were minimized. Her attempt to reopen the debate on the dirty war emboldened some Argentines who resented the commission’s investigative work and supported the many military officers convicted in criminal trials. Following Milei’s election, green Ford Falcons provocatively appeared in many public spaces, conveying what looked like a sinister message. During the dirty war, individual Argentines – often with no discernible link to politics – were kidnapped in broad daylight and hustled into the back seats and trunks of green Ford Falcons.

The Truth and Reconciliation Commission was the great predecessor and inspiration of many such projects to investigate human rights abuses elsewhere. Expertise in research, including forensic investigations that informed the commission’s work, has been a key feature of Argentina’s international brand. It is generally acknowledged that Argentina’s international diplomacy has been successful in promoting this expertise. Whether it remains part of Argentina’s soft diplomacy may become less important, though, than other changes in Milei’s foreign policy.

The thrust of Milei’s foreign policy is winning approval in Washington, and as he pursues his economic program the goodwill generated may weigh favourably with U.S. representatives in international financial institutions that must approve any debt restructuring. Milei’s “pro-Western” tack sharply distinguishes Argentina from its Latin American neighbours. Most significantly, Milei has withdrawn Argentina’s application for membership in the BRICS (Brazil, Russia, India, China, South Africa) alliance. He has strengthened ties with Washington and has expressed strong support for Israel.

In a visit to Israel, his first trip abroad as President, he prayed reverently at Jerusalem’s Western Wall. He has expressed an affinity for Judaism that seems to go beyond just diplomatic calculation, reflecting a certain mysticism. His stance is significant, given the antisemitism that once infected a segment of Argentina’s conservative elites. Furthermore, his department of justice is reinitiating a criminal case against former Iranian diplomats implicated in the 1994 bombing of a Jewish community centre, the Asociación Mutual Israelíta Argentina, in Buenos Aires. Previous Peronist regimes blocked investigations, formally ignoring an Interpol “red alert” to arrest and try the Iranian operatives.

The Missing Formula

Foreign visitors to Argentina have often minimized the hardships of its stumbling economy. They pass time in patios and confiterías of the fashionable and trendy Recoleta and Palermo barrios where life goes on at a leisurely pace. Stories abound of how Argentines sequester their wealth abroad and supplement their incomes with careful withdrawals in U.S. currency when needed. The gleaming office towers that rise on the banks of the Rio de la Plata at Puerto Madero seem evidence of a thriving business community. Despite years of economic struggle, Argentina still has Latin America’s third largest economy; much of its population is highly educated and its international reputation warrants a seat at the G20, Latin America’s only member after Mexico.

But an hour-long stroll along the three-kilometre length of Buenos Aires’s Avenida Nueve de Julio (Ninth of July), one of the world’s great central thoroughfares, tells a different story. Stretches of architectural grandeur contrast with neglected structures and empty lots. And just beyond Nueve de Julio’s northernmost terminus sprawls Barrio Padre Mugica, a semiformal congregation of do-it-yourself housing occupied by some 40,000 of the city’s poor. The city’s geography serves as a metaphor for Argentina’s years-long struggle to pursue – but never catch up with – the dreams of its past. Inequality has been rising for years; the middle class has been shrinking; and the struggles of the poor have become more arduous, painful and persistent.

Milei’s radicalism offers no assurance of success, and astute gamblers would not give him favourable odds. Argentina’s perennial economic crises cry out for a mix of effective policy and public mobilization. The way forward demands great creativity of politics and economics. To date, there is no clear model to draw on. Market-based solutions need to be combined with sufficient social supports and a compelling national narrative that includes some readiness to sacrifice.

Until that formula is found, Argentina remains mired in purgatory, a state of yearning reminiscent of the country’s renowned tango songs – always full of aspiration but never fulfilment. In one of legendary singer Carlos Gardel’s biggest hits, the protagonist compares his pursuit of love to the races that his champion stallion always loses “por una cabeza” – by a head. “What does it matter to lose by a head a thousand times – only to have lived?” Can Argentina ever break away from this melancholy refrain?