On Sunday, the political outsider Javier Milei defeated current Economy Minister Sergio Massa in the final round of Argentina’s presidential election by 11 points. Following a disappointing second-place finish in October’s first-round vote, Milei ended up winning all but three provinces of the inflation-racked South-American nation. His victory in the runoff represents the strongest showing for the Argentine right since the country returned to democratic rule in 1983.
In the end, the structural factors underpinning Milei’s triumph proved too great for the sly Massa to overcome. The election of Argentina’s first self-proclaimed libertarian president comes as the country languishes under 140 percent inflation, a poverty rate of more than 40 percent, and rising crime. Milei’s victory is a resounding defeat for the party that has governed Argentina for much of its post-dictatorship history. How did Peronism, the world’s most politically resilient populist movement, fall to a self-described “anarcho-capitalist” with a superhero alter ego?
Historically, the ideological flexibility and Machiavellian cunning of Peronist politicians have helped them stay in office, despite their frequent corruption and mismanagement. The current _capo di tutti capi _of the Justicialist Party founded by Juan Domingo and Eva Perón is incumbent Vice President Cristina Fernández de Kirchner, who has loomed large over Argentine politics since her late husband Néstor’s presidency from 2003 to 2007. She succeeded him, serving two terms between 2007 and 2015. Having presided over a period of economic boom, recovery, and redistributive spending after the financial collapse of 2001, the Kirchners fostered a cult of personality that still commands the veneration of about a fifth of the electorate. However, the end of the commodities boom, a string of multibillion-dollar corruption scandals, and a credible accusation of murder have all done their part to make “Cristina,” as she is both affectionately and derisively known, the most hated figure in Argentine politics.
With the loss of her hand-picked candidate to the conservative Mauricio Macri in 2015, the opposition Peronists regrouped in 2019 to oust the unpopular Macri in a landslide. To achieve this, the Peronists resorted to a stroke of electoral genius. Based on the understanding that Cristina was both necessary for turning out the base but toxic to the broader electorate, she was placed on ticket alongside a formerly virulent critic within the Justicialist Party, current lame-duck President Alberto Fernández, who went on to defeat Macri outright in the first round.
In the ensuing presidential term, Fernández proved to be inept and buffoonish. Not quite a puppet to his scheming vice president, he was nonetheless a hostage to her greater clout within the party. Hobbled by low commodity prices and inept economic stewardship, his administration was caught in an internecine tug-of-war between president and vice president. Default in 2020 following the outbreak of the pandemic led to an impasse, as commitments to higher spending came into conflict with the need to pay down a $50 billion loan from the International Monetary Fund brokered by Macri. Attempts to raise funds and control food prices through export taxes severely burdened Argentina’s agricultural exports, the lynchpin of the country’s economy. Strong economic growth reduced Argentina’s debt-to-GDP ratio by around 40 percent since Fernandez assumed office, but the government became increasingly reliant on money printing and creative accounting to continue paying back the IMF.
Making matters worse, the end of the pandemic saw the US Federal Reserve hike interest rates to more than 5 percent, with disastrous impact on Argentina’s dollar-denominated IMF debt. Having fallen slightly from 50 to 40 percent, inflation soared to 100 percent in 2022, when Massa was named as the administration’s third economy minister. One of the worst droughts in Argentina’s history compounded the nation’s economic woes, with Massa effectively borrowing from Peter to pay Paul. In August, Argentina secured a $775 million loan from Qatar to pay the IMF.
“All of these gaffes proved insufficient to quell voters’ hunger for change.”
Come election time, the Peronists attempted to recycle the Machiavellian strategy they had implemented to great effect in 2019. Massa was appointed concurrently as economy, development, and agriculture minister in August 2022, and later nominated as Peronism’s presidential candidate precisely because he had previously been the most strident internal critic of Cristina Kirchner within the movement. A skilled, if slimy, politician, Massa had previously collaborated with Macri and even threatened to send Kirchner and her acolytes to jail. The scale of Milei’s landslide is further bolstered by the fact that had his opponent been Fernández or any other Peronist closer to Cristina, Peronism likely wouldn’t have made the runoff at all.
Milei also triumphed despite his seemingly deliberate attempts to throw the election to his opponent. In the weeks before the runoff, he complained in an interview of fictitious voices in the studio background and bragged bizarrely that social-media users would see him “amid the bedsheets” of former presidential rival-turned-coalition partner Patricia Bullrich. What’s more, by all accounts, Massa handily defeated Milei in the pair’s lone runoff debate. The economy minister made Milei look foolish for his vow to end trade with China and “communist” Brazil. He also goaded Milei into praising Margaret Thatcher—a figure reviled in Argentina for her leadership during the country’s humiliation in the 1982 Falklands War. In the end, all of these gaffes proved insufficient to quell voters’ hunger for change.
Much like the Marxists they perpetually denounce, libertarians have a penchant for imposing purity tests and overlooking the results of their policy ideas when they are put into practice. Like true Marxism, true libertarianism has never been tried—and never will be. Even Milei, a more orthodox devotee of Austrian economics than any victorious candidate for national office anywhere, has been dismissed by Reason magazine for adopting a more socially conservative line on issues such as abortion and drug legalization. But the harsh reality for libertarians is that maximally socially liberal and fiscally conservative politicians can’t assemble winning coalitions. There is little reason to think that Milei would have displaced Argentina’s traditional right, let alone won the presidency, were it not for his embrace of an admittedly inconsistent social conservatism.
On economics, Milei’s ideas are functionally equivalent to those of other Latin-American conservatives, such as Brazil’s Jair Bolsonaro and Chile’s José Antonio Kast. In the days before the runoff, a number of commentators were struck by how similar the 2023 campaign had been to that of 2015, in which the more conventionally right-wing Macri prevailed over the Peronist Daniel Scioli. Unsurprisingly, Macri had been one of Milei’s most enthusiastic supporters even before the runoff, with many accusing the former president of deliberately sabotaging his own party’s candidate, Bullrich. Bullrich herself ended up endorsing Milei the day of her loss in the first round, with almost all of her voters going to Milei in the runoff.
“Free-market principles have been tried and retried in Argentina.”
Contrary to the narrative crafted by the Milei campaign, Argentina hasn’t suffered under the yoke of communism and protectionism for the past 70 years. In fact, free-market principles have been tried and retried in Argentina by actors as diverse as Argentina’s countless military dictatorships to Macri to the Peronist administration of President Carlos Menem, who ruled from 1989 to 1999. Under Menem, Argentina privatized a host of state industries, cut regulations, liberalized international trade, slashed inflation, and pegged the peso to the dollar.
While this did lead to a period of stability—and, crucially, deindustrialization—during the 1990s, it ended very badly with the catastrophic 2001 collapse. After the Russian and Asian financial crises of the late ’90s, investors began pulling dollars out of Argentina, thereby sending the peso into a death spiral. Milei has stated that Menem and his economy minister, Domingo Cavallo, were the best to serve in those offices in his lifetime. Of course, in the eyes of libertarian ideologues, both they and Macri weren’t sufficiently libertarian precisely because they didn’t deliver the promised land of the omniscient self-correcting market.
Rather than prolonged statism, the hallmark of Argentine economic management is both the inconsistency and fiscal irresponsibility of those in charge. Whether statist or free market, military or civilian, time and again the pitfalls of Argentine governance have been an inability to save cash for a rainy day when times are good and a habit of incurring exorbitant amounts of dollar-denominated debt.
Of course, not all debt is created equal. Around the world, most developed countries have a debt-to-GDP ratio north of 100 percent, with Japan at twice that level. Argentina’s ratio, conversely, stood at around 51 percent in 2018 when Macri requested the IMF loan Argentina is still paying off. Unlike Japan, however, Argentina’s debt in foreign currency consistently hovers around 70 percent of its total obligations. A quick review of Argentina’s recent economic management reveals continuous debacles predicated on short-term thinking.
Menem, for instance, failed to comprehend that by linking Argentina’s fate to the dollar and taking on too much debt in a foreign currency, he was opening the country to a sudden and precipitous collapse in the event of a loss of confidence from investors. His successors, Néstor and Cristina Kirchner, enacted short-to-medium-term policies that boosted industry and economic growth while paying down Argentina’s debt. They also controlled inflation by accumulating foreign currency reserves. But while Cristina Kirchner left the country with a record-low debt of 26 percent of GDP in 2015, she depleted the war chest in foreign reserves amassed by her husband to stem the commodities bust and bolster her party’s candidate in 2015.
After the 2015 election, a victorious Macri would go on to presage Britain’s debacle under Liz Truss by massively cutting taxes on the assumption that this would lead to historic economic growth. Instead, Argentina’s debt tripled to 62 percent of GDP in 2019, leading Macri to repeat Argentina’s original sin of assuming even more debt in US dollars from the IMF.
So it was that Argentina found itself in its current predicament. To be as generous as possible to the unhinged Milei, he may well succeed in taming inflation. As libertarians so often remind us, conventional conservatives like Macri or congressional Republicans in the United States are always happy to cut taxes, and many are even happy to cut myriad spending deemed ideologically objectionable, such as on the Internal Revenue Service. But where they almost always struggle is in reducing total government spending. This time Milei may actually be serious that he intends to drastically slash spending across the board. This, of course, will lead to a further contraction amid already-floundering economic growth—although the economy may pick up if Milei cuts export taxes, thus boosting agricultural output.
The elephant in the room is still Argentina’s IMF debt. The country will need to continue making routine payments to the fund and will be hampered by an impending devaluation of the peso and decreased state revenues from cutting taxes and reduced economic growth. Some relief may come in 2024, should the US Federal Reserve begin to slash interest rates. Regardless, what’s certain is that Argentina is in for more pain in the short term.
As for the president-elect’s signature proposal, dollarization, the country’s dollar reserves are so low it is hard to see how Milei can make his dream a reality. Should it occur, dollarization would bring an end to Argentina’s saga of never-ending inflation. At the same time, dollarization would forever confine Argentina to the fate of a banana, or more accurately, soybean republic, as the country would lose control over monetary policy. Depriving Argentina of any means of devaluing its sovereign currency in order to promote exports, adopting the dollar would snuff out any hopes of industrialization. In short, dollarization is no panacea. It may end inflation, but as the case of Ecuador illustrates, it isn’t a replacement for fiscal responsibility—nor the end of IMF indebtedness.
Market fundamentalists outside of Argentina would do well not to read too much into Milei’s victory. Outside the Latin-American right, the prevailing trend in political economy is one that favors increased protectionism and national development—including among conservatives. Moreover, in Latin America, recent right- and left-wing triumphs are more representative of a bias that favors outsider allure and anti-incumbent hostility, rather than a particular political orientation. Just as change in Colombia entailed the election of a former M19 guerrilla in 2022, so, too, in Ecuador, voters deemed a progressive banana oligarch to be the change candidate.
And while ostensibly heterodox populist conservatives—Tucker Carlson among them—have embraced Milei, it should be noted that, unlike the real Donald Trump, the “Trump of the Pampas” rejects tariffs as a matter of principle. For the sake of his country, we may hope that he can at least succeed in taming hyperinflation. But his policies, should he succeed in implementing them, won’t do much for Argentina’s long-term economic development.