Javier Milei is actively working to eliminate all remnants of Peronism, which has been the prevailing form of populism in Argentina, as he seeks to transform the country into a free-market stronghold. In a striking display of political change, images of Eva Perón have been removed from government offices, while statues of former president Néstor Kirchner have been dismantled from both the Senate and the ANSES social security agency. Recently, a yellow crane was employed to strip Kirchner’s name from the façade of a prominent Beaux Arts palace in downtown Buenos Aires, marking a significant shift in the city’s political landscape.
However, Milei has demonstrated greater effectiveness in dismantling the physical representations of the previous administration than in addressing the complex regulatory framework it established. Despite assurances of rapid dollarisation and the closure of the Central Bank, the ‘cepo’—a complicated framework of currency and capital controls that hinders investment—continues to be firmly established. In the inaugural year of Milei’s administration, Argentina secured under US$1 billion in direct foreign investment. The current figures align closely with those of his Peronist predecessor during the pandemic, representing only a third of the revenue generated by market favorite Mauricio Macri, who implemented less aggressive budget cuts while enjoying a lower popularity rating and fewer international engagements.
During a panel discussion in Buenos Aires, Mariana Gallo, general manager of PepsiCo Inc in Argentina and Uruguay, informed Bloomberg News that global investors are closely monitoring the situation but are currently adopting a cautious “wait and see” approach. “Demonstrating to my headquarters that Argentina offers superior regulation and tax conditions is crucial; this will pave the way for investments, as the potential for growth is highly appealing.” The challenges confronting Milei are epitomized by Cristina Fernández de Kirchner, who took over the presidency from her husband in 2007 and subsequently implemented capital and currency controls during her second term. The imposed restrictions prevent companies from remitting dividends overseas as the Central Bank maintains a careful management of the peso.
Morgan Stanley projects that Argentina could potentially draw in US$2.5 billion in foreign investment by 2025, should certain conditions be met. However, prior to the anticipated removal of these barriers, which has been likened to a dramatic underwater release, companies are likely to prioritize repatriating their accumulated wealth. This could potentially trigger a currency rush, posing a significant risk to the president’s efforts in controlling inflation. “A stronger political mandate for Milei in the midterms could significantly bolster the government’s capacity to implement structural reforms,” stated Kathryn Exum, co-head of sovereign research at Gramercy Funds Management.
Milei is cautious about easing restrictions as the midterm election in October approaches. This election will serve as a significant indicator for investors regarding whether voters will continue to support his free-market austerity agenda or revert to the money-printing policies associated with Peronism. Discussions regarding Argentina’s latest program with the International Monetary Fund, marking the 23rd rescue package in the nation’s extensive and challenging financial history, focus on the timing and method of lifting controls while avoiding a surge in inflation.
Upon taking office at the close of 2015, Macri’s administration appeared to signal the waning influence of Peronism, the predominantly left-leaning nationalist movement that has held sway over Argentina for approximately half of the past seventy years. The nation experienced a challenging 12-year period under the Kirchner administration, characterized by increased tariffs, significant budget deficits, unpaid investors, and manipulated economic data. The leader implemented measures to lift controls and unify the foreign exchange rate. However, two years later, inconsistent policies faced challenges from a severe drought that significantly impacted crop exports, leading to a dramatic decline in the peso’s value, prompting the reintroduction of restrictions. In 2019, Fernández de Kirchner made her return as vice president, aligning herself with her chosen leader, Alberto Fernández, who is not related to her. Under his administration, regulatory controls were intensified, culminating in the defeat of his economy minister by Javier Milei, a libertarian newcomer, in the 2023 elections.
“There’s optimism surrounding Milei, yet there is a reluctance to invest in production at this time,” stated Pablo Tamburo, the chief executive officer of Argensun SA, a company specializing in the export of sunflower seeds, nuts, and dried fruits. “Investors are increasingly questioning whether a new government will emerge that could drastically alter the country’s direction once more.” Tamburo’s company reports annual sales of approximately US$120 million and has streamlined its workforce, reducing headcount from 800 employees to 700 over the past year. A client in Spain was prepared to invest US$5 million in a production line but hesitated in December due to a decline in potential profitability. This shift occurred as the peso appreciated under Milei’s managed currency policy, compounded by ongoing challenges such as high taxes, tariffs, and frequent union strikes.
In a significant move, organized labor demonstrations are not only shutting down ports and transportation but are also making their presence felt in front of Argentina’s former public works ministry, strategically situated between Congress and the presidential palace. Milei contemplated the demolition of the structure adorned with Eva Perón’s visage, prominently located along the main boulevard in Buenos Aires. However, he ultimately decided against this course of action, citing financial implications as a significant factor in his decision-making process. It took nearly a year for him to eliminate his late predecessor’s name from the million-square-foot former postal hub located just a few blocks from his office at the iconic Casa Rosada. The government revealed plans for the building’s renaming last March, and it was officially designated as Palacio Libertad in October. The Centro Cultural Kirchner name remained prominently displayed on libertarian purple banners until just last month.
Fernández de Kirchner continues to assert her influence as a key player within the Peronist movement. The latest AtlasIntel poll conducted for Bloomberg News reveals a significant increase in the percentage of respondents who hold a favorable view of her, rising to 41 percent from 28 percent in December. The US government’s move to prohibit her entry due to a corruption conviction is poised to deepen the divisions within Argentina’s electorate as the midterm elections approach. Analysts are cautioning against underestimating the resilience of Peronism. “Governments have frequently been criticized for disregarding established regulations,” stated Steven Levitsky, a professor of Latin American Studies at Harvard University. “Should I have any stake in the future of Argentina, my wager would lean towards anticipating further political instability or shifts in institutional frameworks.”
Milei’s administration has garnered interest for approximately US$12 billion in investments across the oil and gas, lithium, and infrastructure sectors, facilitated by a benefits package designed to provide long-term tax and capital control protections. So far, the majority of investments have come from domestic firms, with the significant exception of the mining powerhouse Rio Tinto Group, which has committed a substantial US$2.5 billion. In 2024, a significant number of companies, including HSBC, Procter & Gamble, and Exxon Mobil, opted to divest their operations in Argentina or exit the market entirely.
Diego Sucalesca, head of the government’s newly established investment and international trade agency, emphasized that the lack of foreign investment is not a matter of quick decisions, particularly in nations with Argentina’s economic background. Sucalesca emphasized the government’s prompt actions to address the nation’s macroeconomic discrepancies and its initiatives to draw foreign investment via the RIGI program. However, a significant number of investors continue to express caution.
Diego Ferro, the founder of M2M Capital based in New York, has established himself as a notable figure among those who have long expressed skepticism regarding Argentina bonds. “The necessity to alter everything and the simplicity with which these changes can be made,” he stated, “raises an important question: How confident are we that this change is permanent?”