There is no doubt that the majority of Argentina decided to change, with a relatively large majority. The direction of change is an unknown that goes far beyond the definition of the victorious Javier Milei’s economic program, however essential the stabilization and reform plan may be.
Without a very broad political agreement, the ultra-right libertarian will not govern. He has no parliamentary votes, no experienced technical or political staff, nor support from a large part of the economic elite. What will be left of Milei’s extreme plan after an arrangement with the center-right and the conventional right?
Milei for now does not have the votes in Congress, not even to avoid a political process, even if he had or would have the full support of the party of former president Mauricio Macri (2015-2019), the PRO. In order to obtain 129 of the 257 votes in the Chamber of Deputies, she would also have to add all the votes from the Together for Change coalition, which includes the PRO, Macri and his defeated candidate, Patricia Bullrich.
But the coalition is fractured, with the possible defection of the Radical Civic Union party, among others. In power, you make and acquire friends, of course. How many friends is the question — a question the size of up to 40 votes. One of the important changes in this election was the large increase in party fragmentation.
Milei beat the Minister of Economy —and de facto president—, Sergio Massa, by almost 56% to 44%. His vote increased by the equivalent of four-fifths of voters who had opted for Bullrich’s center-right and centrist Juan Schiaretti in the first round. It was an emphatic declaration of vote. In what?
Was it a vote for Milei’s dollarization program, huge cut in public spending, privatization of the provision of public services such as education, end of the Central Bank? An anti-Peronist vote, whatever that means? It was at least a vote against the heirs of Kirchnerism. A vote of rejection.
By arithmetic, almost half of Milei’s votes are not “libertarian” at heart, supporters of the “chainsaw” (huge cut in public spending) or the victorious candidate’s wastefulness. Thus, a power and program sharing agreement with Macri and Bullrich becomes more socially acceptable.
This agreement in theory should address much more than dire economic emergencies, which will only get worse without an economic program that makes sense. If Macri comes to have power in the Milei government, perhaps he will defend measures that he did not adopt in his failed Presidency — he barely carried out any reforms and promoted enormous external debt, which caused Argentina to go bankrupt again.
At least at first, Milei will live under the shadow of her dollarization promise, which is an extra reason for the further devaluation of the peso. There will be huge devaluation. With the official peso currently overvalued, there will be no prospect of any money returning to Argentina nor of a settlement in the country’s external accounts (more exports, fewer imports, some inflow of financial capital).
Such an adjustment also depends on the end of capital controls and exchange rate manipulation. It depends on some release of import controls and reduction of taxes on exports. Devaluation will put pressure on inflation. If the economic program makes sense, there will also be price corrections such as public service and fuel tariffs. More inflation.
Such adjustments, certainly more gradual, were planned for the days following the election, even in the event of Massa’s victory. In the case of the Milei government, what will be done is a mystery. But exchange rate and price adjustments will have to occur.
Still regarding emergencies: the Argentine government does not have the money to pay the external debt due for the next few months. Not even with the present help from China. You will have to renegotiate payments with the IMF. More than that, it will have to renegotiate the commitments and economic adjustment targets with the Fund, which were all breached, in what matters most. In theory, this means more fiscal tightening — less public spending, more cuts in social subsidies.
It is easy to see that this is a socially explosive situation. In theory: Argentines could be so tired of the crisis that they might accept the sacrifice, one speculation would say. On the other hand, 44% of voters voted to continue Massa’s, in their terms, unsustainable, assistance policy.
No matter what the economic stabilization plan was, there would be more pain, before any possible improvement: inflation of more than 150%, recession in 2023 and 2024, falling real wages, fewer social subsidies. The biggest question now is whether there will be a credible, sensible, long-term plan, a program that does not cause a senseless intensification and no way out of the crisis. Milei didn’t have that plan. President, Macri did not adopt such a plan. Ultimately, it remains to be seen whether Argentines will tolerate the suffering and whether what remains of Kirchnerism and/or Peronism will remain quiet.