An ongoing debate in Argentina’s economy centers on the question of whether interest rates should be determined by the Central Bank or the market. Unsurprisingly, libertarian President Javier Milei holds this view. In 2023, he advocated for the closure of the Central Bank. He did not succeed. The Milei government appears inclined to attribute the recent economic uncertainties and political crises stemming from corruption charges to various external factors, suggesting a deliberate intent to inflict damage. Recent developments have seen a convergence of international spy teams, former local intelligence agency officers, Venezuelan and Russian agents, local and international banks, and Kirchnerism—the local ethereal evil—among numerous other names.
For weeks, the staff of Economy Minister Luis Caputo has attributed “the kuka risk,” a term likened to a cockroach, to the Kirchners. Confidence in the markets will remain elusive until the Kirchners are definitively off the table. Any solution other than eradicating the “kukas” would ensure their continued existence and maintain them as a viable option. Milei asserts his intention to “put the final nail in the coffin of Kirchnerism” in the upcoming Buenos Aires Province municipal election and the national polls in October. The crises faced by the Milei administration are of an endogenous nature, akin to the government’s libertarian approach to interest rates. Milei and his associates initiated these efforts independently through various economic and political measures. For several months, a majority of the country’s leading economists have cautioned that the program is failing to produce sufficient foreign reserves to sustain itself. The nation’s cash flow situation has remained negative for almost a year, with the exception of this autumn’s agricultural exports.
Following the International Monetary Fund agreement that eased ‘cepo’ foreign currency restrictions for individuals in April, there has been a significant surge in the accumulation of US dollars by Argentines—exceeding US$10 billion, as indicated by the latest report from the Central Bank. Throughout the entire period, they allocated billions towards international travel. The statistical evidence indicates an appreciation of the peso that has been overlooked by the administration in both discourse and action. The Milei administration engages in unnecessary confrontations that hinder its objectives. An illustrative case is the recent gubernatorial election in Corrientes over the weekend. Governor Gustavo Valdés of the centrist Unión Cívica Radical party has backed Milei’s proposals in Congress for a duration of 1.5 years, which makes it a logical step for the ruling La Libertad Avanza to pursue an electoral alliance with him. Most provinces function as feudal power structures, presenting difficulties in establishing a rapid foothold. In a departure from expectations, LLA chair Karina Milei endorsed her own candidate, who ultimately secured a fourth-place finish with 9.5 percent of the vote.
The administration is beset by corruption cases. The ‘$LIBRA’ cryptocurrency fraud and the more recent, more serious kickbacks scandal regarding the acquisition of drugs and services at the ANIDS national disability agency represent self-inflicted wounds with minimal external influence. Karina Milei, serving as the Presidential Chief-of-Staff and closely associated with the president as his sister and confidant, is under suspicion in relation to both incidents. Domestic challenges are likely more manageable for the government to address compared to external pressures, particularly those that are imaginary. Similar to previous hyper-presidential administrations in Argentina, Milei could alter the trajectory of his government should he make a firm commitment. Historically, incumbents tend to lose re-elections; however, the outcomes of the past two elections deviated from this trend.
The President is not exhibiting improvements. During a recent interview with a French journalist, he reaffirmed his unwavering confrontation policy, asserting that the opposition aimed to eliminate him. Argentina must ensure that verbal and physical violence does not become a persistent feature of its delicate democratic framework. This administration—any administration—must strive to avert that outcome. Indeterminate in its inclination to proceed.