The recent election of the far-right economist Miley as President of Argentina has drawn global attention. With the dust settling on the election results, there's growing interest in how closely he will adhere to his campaign promises. In his first public address on his economic plan since his election, Miley spoke to Argentine media earlier this week, discussing various policy topics.
Argentina's economy is teetering on the brink of collapse, and Miley's overarching plan involves overturning the current economic and social structures in favor of a free market based on liberal values. In his victory speech, he described this as a long-term vision, stating that within 20 years, Argentina could resemble Italy, and in 35 years, the United States.
In a recent interview with Buenos Aires' Mitre radio station, Miley said that upon taking office, everything that can be privatized will be transferred to the private sector. The media sector is a primary target for this privatization, with Miley promising a swift privatization of Argentina's state media, having previously complained about negative coverage of his campaign by state-run outlets.
Additionally, the national energy company YPF is high on the privatization list. However, Miley mentioned that it might take some time to improve its bargaining position. He indicated that before privatizing YPF, its financial situation needs to be improved to ensure a favorable outcome for the Argentine people.
Miley also criticized the nationalization of a significant portion of YPF's shares during former President Cristina's administration, which he claimed worsened the company's balance sheet. He noted that YPF's stock price rose by 40% following his discussions about privatization.
Regarding the controversial topic of "dollarization," Miley reiterated his stance on closing the Central Bank of Argentina, calling it a "moral decision," but he placed the plan to replace the local currency with the U.S. dollar as a secondary issue.
"The most important conceptually is to close the central bank. After that, the currency will be the free choice of the Argentine people," Miley said, downplaying the immediate shift to full dollarization. Observers suggest that this may reflect the complexity of such a move and its political difficulties. Whether Miley is backing away from this radical campaign promise remains to be seen.
In other areas, Miley plans to implement some of his proposals, such as reducing the size of national institutions, aiming to cut the number of national ministries in half. Regarding the country's high inflation, he claimed it could be resolved in just half a presidential term, or 18-24 months.
Kezia McKeague, a regional director at McLarty Associates, a U.S. consulting firm, commented that Miley's economic reform plans are ambitious, including trade liberalization, privatization of state-owned enterprises, significant cuts in government spending, taxes, and state size, as well as the removal of foreign exchange restrictions. However, the speed and sequence of implementing these policies will be delicate, considering the risks of rampant inflation.
The proposal for "full dollarization" is particularly contentious, both technically and politically. McKeague anticipates strong resistance from the Argentine Congress to dollarization and structural reform agendas.
Miley's party holds a weak position in Congress, posing a significant challenge. As a relatively new political force, Miley's "Freedom Forward Party" has only seven senators, less than 10% of the total seats, and just 38 of the 257 seats in the Chamber of Deputies.
Jimena Blanco, chief analyst at Verisk Maplecroft, a UK consulting firm, also noted that Miley's lack of administrative experience and the political mechanisms needed to steer the economy out of trouble take Argentina into uncharted political territory. The country's economic future depends on whether Miley can propose a credible stabilization plan to restore macroeconomic order.
"This will require a significant devaluation of the peso against the dollar to eliminate the gap with other foreign exchange instruments, followed by increased capital and currency controls, as well as tight monetary and fiscal policies. Only then can he consider dollarization and the abolition of the central bank. Major structural reforms are needed first to achieve these two campaign promises," Blanco said.
Jerry Haar, a professor at Florida International University's College of Business, pointed out that Argentina is a classic case of a resource-rich, governance-poor country. For Miley, winning the election is one thing, but governance is entirely another. His desire for full dollarization will be a "tough battle."
In foreign affairs, Miley's policies towards China and Brazil are also noteworthy. During his campaign, Miley frequently issued unfriendly messages, stating he would keep a distance from these two major economies and even threatened to sever diplomatic ties, while maintaining close relations with the United States and Israel.
After his election, Miley's foreign affairs advisor Mondino commented on China. At a Tuesday press conference of the Chinese Foreign Ministry, a reporter cited a report by Russian news agency RIA Novosti claiming Argentina "will stop cooperating with the Chinese government." In response, Foreign Ministry spokesperson Mao Ning called it "untrue." Mondino said in an interview that there was a misunderstanding of Miley's foreign policy, stating that no country can develop economic and trade cooperation without diplomatic relations. Severing ties with major countries like China or Brazil would be a serious mistake for Argentine diplomacy. China is an important trade partner for Argentina, and the elected government values the relationship, especially in economic and trade cooperation.
In his latest interview, Miley said he plans to visit the United States and Israel before his official inauguration on Dec. 10. His trip to the U.S. has a "spiritual connotation," with visits to Miami and New York planned, followed by a trip to Israel to show support. Miley has long considered converting to Judaism and plans to follow in the footsteps of former U.S. President Donald Trump by moving the Argentine embassy in Israel from Tel Aviv to Jerusalem.
