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Elections in Argentina: The Million-dollar question of Javier Milei

Updated: Nov 28, 2023

International Affairs Analyst

Javier Milei campaign , 2021 | Credit: Wikimedia Commons

In the tapestry of Latin America's diverse landscapes and cultures, Argentina stands as a nation with a geography that defies the conventional expectations of the region. From the rugged Andes mountains to the expansive Pampas grasslands, Argentina's geographical diversity is as captivating as it is unique. Beyond its physical features, the nation's economic and political trajectories have always held a distinct place in the Latin American narrative. As Argentina grapples with various economic strategies, one proposal has stirred substantial discourse – Javier Milei's dollarization plan. As proponents and critics engage in fervent debates, the potential ramifications of such a plan loom large over the country's future trajectory, poised to leave an indelible mark on its economic landscape and beyond.

The geographical restrictions of Latin America inherently stymie any potential for fast-paced development in its constituent states. The entire continent boasts few natural ports, making importing/exporting difficult. There are very few navigable waterways, limiting capital generation. Extremely rugged terrain severely limits the amount of meaningful economic interaction between countries. Even today, despite sharing the third longest border in the world, Argentina and Chile rarely trade with one another, preferring to interface economically with countries a continent or an ocean away. According to World Highways, any roads or rail lines constructed require numerous switchbacks, making infrastructure costs in Latin America some of the highest in the world, throttling the chance of economies of scale, and large-scale economic growth.

More simply put, the same features that make cities like Medellín or Rio de Janeiro perfect for Instagram photos also condemn it to having the unenviable combination of the highest transport costs and most capital-poor populations in the world. Add in the fact that most of South America resides in the tropics, meaning increased exposure to tropical diseases and shorter lifespans on average, and it's not terribly difficult to imagine why South America boasts some of the highest levels of political polarization, economic inequality, and low levels of economic mobility in the world.

However, within South America, there is one region that stands apart from the rest. The Río de la Plata, located around a third of the way down Argentina’s coastline, is one of the largest estuaries in the world. Made up of a combination of the Uruguay, Paraguay, and the Paraná Rivers, all of which are navigable, the Río de la Plata is one of the world’s largest commercial hubs, and the largest in Latin America. Additionally, these rivers also flow through the Pampas region of South America, one of the most productive farmlands in the world, and the fourth-largest contiguous chunk of arable land, suitable for growing a range of crops, including soy, corn, and wheat. The territory between the Uruguay and Paraná rivers is also among the world’s most suitable rangelands.

Being far enough south of the equator, the Pampas also experiences a winter strong enough to kill off pests and other disease-spreading insects, helping to improve agricultural productivity and public health without any extra investment in medications or pesticides. For all intents and purposes, the Pampas region acts as the South American Midwest. If you factor in Argentina’s relative isolation from outside superpowers, its mountain barriers to its west and northwest, as well as its remarkably young, healthy, and skilled population, Argentina should be a major power. But it isn’t. Not by a long shot. Part of it has to do with the colonial legacy left by its Spanish settlers.

Because of South America’s largely unforgiving terrain, this meant that the settlers who colonized Spanish America were starkly different from the ones who settled in North America. Given then-British America’s relatively flat terrain, laden with the world’s longest network of interconnected navigable waterways, access to transport and capital was stupidly easy, relatively speaking. All that was required was labour, sourced from working-class European immigrants, criminals sent by the British crown, and enslaved Africans.

Switch the geography to one where capital and transport were the scarce resources, and you get a completely different type of immigrant. Spanish immigrants to Latin America were typically wealthy and willing to explore what they saw as a new business opportunity, as they were the only ones with the available capital to near-terraform the existing geography and build the infrastructure required. Nicknamed caudillos, or jefes, these settlers would, with the permission of the Spanish crown, bring large numbers of servants with them, enslave the natives, and import additional slaves from Africa. With this manpower, especially in the Spanish Caribbean, Central America, and the northernmost regions of South America, the jefes would go about creating communities largely resembling company towns.

Each population centre was so disconnected from one another, and the terrain so difficult to traverse, that trade between jefes was almost unheard of. As such, even after the Latin American wars of independence in the 1810s, it would be inaccurate to view the newly-independent Latin American nations the same way we do today – they bore more of a resemblance to competing medieval fiefdoms than any sort of citizenry with a national identity. As Argentina is located much further south down the continent than the original Spanish colonies, it wasn’t until 1776 that the Rio de la Plata region received a formal viceroy from the Spanish crown. Despite Argentina’s geographic blessings, the jefe culture became a well-established tradition across Spanish America

For the most part, this divide remains today. While Latin American national identities are much stronger, for the most part, social stratification is extreme. Within Latin America, the ultra-wealthy oligarchs, typically of European descent, view every accomplishment made by their countries as coming as a result of their capital and expertise (which is generally true) and view themselves as the only ones qualified to have an opinion on their country’s future. On the other hand, the lower classes, typically of mixed, indigenous, or African descent, tend to view every accomplishment made by their country as being achieved through their exploitation by the oligarchs (which is also true).

As a result (and this coming from an American), the Latin American political landscape is spectacularly polarized and partisan. Coups by one faction over another are common, with countercoups by the recently deposed faction just as common. Coups by the military, meant to restore some level of order, are also pretty common. Character assassinations run rampant, and actual assassinations aren’t as rare as one would think. In essence, taking the traditional view of political shifts being akin to a pendulum, the Latin American pendulum has a person on either side with a baseball bat, knocking the lever to the opposite side with as much force as possible. A couple of U.S.-backed coups don’t help things, either. Unfortunately for Argentina, it has largely not escaped this legacy.

Following independence from Spain and the War of the Triple Alliance in 1870, Argentina, and more specifically Buenos Aires, received an outpouring of foreign capital mostly loaned from imperial Britain, allowing Argentina to build itself into a nation and bring its agricultural sector up to speed. These loans, combined with Buenos Aires’ position as the centre of the Río de la Plata region, quickly built up Argentina into being one of the wealthiest countries in the world - the undisputed second power of the Western hemisphere.

This is all on paper, of course. The British only loaned the money to recipients they considered trustworthy, which were generally the descendants of the original caudillos of the Río de la Plata region. Wealth inequality ran rampant, and the resulting debt proved too much for the oligarchs to handle. Despite all the geographic advantages Argentina possessed compared to its Latin American contemporaries, it was still no match for the United States, which mercilessly dominated global agricultural and industrial markets by the 1890s.

After the British called for repayments to fund their WWI fight, Argentina suffered its first financial collapse. In response, the Argentine government delved into the agricultural sector using borrowed capital, extending subsidies to support the enterprises of the oligarchs. This approach exacerbated social disparities and intensified economic hardships among the lower socioeconomic strata, reaching a boiling point shortly before the onset of the Great Depression. In a bid to forestall potential anarchy, the military executed a coup in 1930, thereby initiating a tumultuous era marked by a succession of military juntas, coup d'états, and popular uprisings that spanned decades.

Enter Juan Domingo Perón. Rising to power in 1946, Perón quickly became known for his authoritarian populist ideology chock-full of contradictions, coined Perónism. Under Perónism, the government absorbed unions and outlawed a worker’s rights to protest while claiming to be negotiating on their behalf with factory managers, who were administered by the government. Despite this, Perón and Perónism were immensely popular, especially amongst the working class, contributing to a powerful cult of personality around Juan Perón, and his wife Eva, that lasts to this day. Eventually, Perón was ousted from power under a military coup, and Argentina fell into a violent cycle of anti-Perón governments, Perónist governments, and military juntas. All the while, the Argentine economy became heavily statist and inefficient, throttling Argentina’s export potential. Such mismanagement persists today, where Argentina boasts a poverty rate of nearly 40%, according to Bloomberg, as well as the continent’s second-highest inflation rate at 113%, just behind the kleptocracy of modern-day Venezuela.

All of this, from the legacy of colonial Spain to the ravages of the Perónism/anti–Perónism cycle, has set the stage for the emergence of Javier Milei. Having emerged as the front-runner for the Argentine presidency following the Argentine primary, the self-described Libertarian has continued the global trend of anti-establishment leaders ascending to power. Many of Milei’s policy proposals have made waves internationally, most notably his proposal to eliminate Argentina’s Central Bank and to dollarize the Argentine economy. While it’s definitely still an open question as to whether Milei could pull these off, allow us to assume for a moment that he is successful.

While many outsiders have scoffed at Milei’s proposal to eliminate Argentina’s Central Bank, it’s worth understanding where such sentiments come from. Argentina has a vast social welfare system that it has long been unable to afford, leading to large-scale foreign borrowing. Under this system, Argentina has become notorious for borrowing large sums of money from institutions like the IMF, funnelling large portions of these loans into the coffers of politicians or other special interests, and then requesting a restructuring or a bailout, typically while devaluing the Argentinian Peso in the process. Rinse and repeat. With this level of graft within the system, not much capital is ever seen by the bulk of the Argentine population. With Argentina’s recent admission into the BRICS economic group, it’s almost a guarantee that it will attempt to repeat the same practices with the Chinese-controlled BRICS Development Bank. With such a backdrop, it’s little wonder why Milei would be so viscerally opposed to the Argentine Central Bank.

Milei’s other proposal, to dollarize Argentina’s economy, could raise tantalizing prospects for Argentina’s economic future if pulled off successfully. With the exception of a relatively small number of Saudi oil shipments from the Middle East to China, the vast majority of critical industrial and agricultural commodities traded worldwide are traded in U.S. dollars. A successful dollarization would attach Buenos Aires at the hip to arguably the world’s largest and most stable financial system - combined with Argentina's massive export potential, such a move could allow it to become a leading producer of a large number of these materials, such as corn, soy, wheat, or corn. Argentina boasts some of the densest known shale petroleum reserves in the Western hemisphere, even rivalling the reserves that have made the United States the world’s largest energy producer. Given that Argentina is also located in a zone with large wind and solar potential, limiting petroleum needs at home, Argentina can also become a globally significant producer of oil and other petroleum products. Argentina borders Paraguay, a globally significant soy and beef exporter, as well as Bolivia, a significant producer of numerous critical minerals, all of which will have to be processed for export in Buenos Aires. Given that the U.S. dollar is already the preferred currency in Argentina, a successful dollarization, although it does contain several hurdles, is far from out of the question.

In essence, while Milei is far from a perfect candidate, his likely victory in the Argentine presidential election gives the Argentines a much-needed break from the terrible Perónist/anti-Perónist pendulum on which it has existed to this point. Indeed, it could potentially start Argentina down the path of becoming the regional hegemon it has the potential of becoming. If Milei is able to successfully dollarize the Argentine economy, Argentina will possess the ultra-rare combination of navigable rivers, natural geographic boundaries, fertile lands, a stable financial system, and a pre-industrial demographic profile with the skillset of an industrialized nation.

It is this combination of factors that has contributed to the United States’ rise as the preeminent global superpower. This is not to suggest that Argentina is destined to become a global superpower akin to the United States. However, could Argentina become globally significant power with no equals within its own geographic neighbourhood? This is absolutely possible. In any case, while it is far too early at this point to make any clear prediction of Argentina's future, the next decade is critical for Argentina, and it should absolutely be a country to watch going forward.


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