The Duran Podcast - Argentina elects Javier Milei. Enter USD, exit BRICS

Episode Date: November 20, 2023

Argentina elects Javier Milei. Enter USD, exit BRICS

All right, Alexander. Let's talk about the elections in Argentina and let's talk about the new president of Argentina because everyone is talking about Javier Nelay. He could be a force for change in Argentina, perhaps positive change. He could also be a big bust. He's very eccentric. He's very eccentric, very colorful. He says a lot of stuff. He says a lot of stuff. He's. He's a big bust. He's very eccentric. He's very eccentric, very colorful. He says a lot of stuff. He says. He says a lot of He does a lot of stuff. There's a lot of bizarre stuff. But, you know, the Argentinian people, they voted for him to be the president. And he says he's going to enact some very, some very drastic, controversial, risky policies, for example, moving Argentina away from the peso towards the U.S.D. And perhaps even moving Argentina away or out of bricks for which they just entered. bricks. So we're going to need some time to see how he governs. But what are your thoughts on the election in Argentina? I mean, in some ways, it is unsurprising. I mean, Argentina has had a very

troubled economic history for as long as I can remember. And I'm not an expert on Argentina and its economic system. I don't know why these problems exist in what logically should be a rich country with abundant raw materials, an educated workforce and an industrial base, but they do. And no government up to now seems to have been able to get on top of them. I mean, we've had brief moments when things did appear to be getting better. For example, under Ferdinand Kirchner, not Christina Kirchner, this is the husband, not the wife, but when he was president, he did seem to be able to bring things sort of under control. these dawns, these periods of stability tend to be relatively short. Things go wrong. At the moment,

Argentina has 120% inflation. The Pezzo has been devaluing and losing its value, and both internally and externally, things have not been well in Argentina. And it is not surprising, given all this history that we've seen and given the current realities, that people have decided, well, look, I mean, you know, Millie may be a bit eccentric and a bit strange and perhaps some of his proposals are way out of the box, but they could hardly be worse than they are now. You know, he's offering us some way forward, some way that's different to the problems we've long since had. And, you know, let's go for him. And again, I'm not going to predict the outcome of this. I suspect, this is my guess, in the short term, some of the things.

that he's going to do might actually stabilize the situation. I mean, replacing the Peas with the USD might for a while bring inflation under control, might cause parts of the economy to revive. I suspect that in time, there would be unsustainable and that they could probably cause all kinds of other tensions. But, you know, let's wait and see, as you said, and see what comes. more importantly, and it's not perhaps more importantly for the Argentinian people, but perhaps in terms of geopolitical terms, is what he's going to do about Argentina's recent alignments? And here I'm going to say straightforwardly, I'm absolutely sure that he is not going to take Argentina into the bricks. Argentina isn't yet in the bricks, but at the summit in Johannesburg, it received an invitation to join the bricks.

the previous government was intending to join the BRICS in January. It is universally known that it was President Lula de Silva of Brazil, who very, very strongly lobbied the other BRIC states to admit Argentina. Some of the other BRIC states, notably China, I understand, and India were skeptical. They said, you know, do we really want Argentina with all its massive inflation? and its other economic problems, joining the BRICS at this time. But Lula insisted on it.

He'd been working towards some kind of partnership with the previous government in Argentina. He also wanted more Latin American representation in the BRICS. And he was able to, the Argentina was able to get this invitation. Millet says absolutely not. We're not going to do that. We're going to align instead with the United States. We're going to accept their currency as our currency, and we're going to become, again, what we have been in the past. Not always, but in the past we have been, we're going to be a full US AMR.

And I think that is now a certainty. I mean, that is the one thing, it seems to me, that it is easy for him to do and which he will do. Yeah, I have two questions with regards to where Millet is going to align Argentina. It seems to me like Milley is betting on the fact that Trump is going to be president in 2020, 24 he's going to win the elections. I think his first tweet actually was thanking Trump. If I'm not mistaken, that was one of his first tweets was directed, or at least directed towards Trump. I know that Trump congratulated him as well.

But what happens if it isn't Trump in 2024? And he has to deal with the Democrats, maybe Biden, White House. what happens then as he's realigning fully with the United States. And my other question is, you know, for someone that, that I guess, positions themselves, I mean, he says he's a libertarian, but he also comes across as, I guess you could say, a nationalist patriot. I guess you could call him that. It doesn't really align that ideology, that, that, that, that ideology, that, that, branding of Millay doesn't align with the policy of getting rid of your currency.

You know, to me, I've always thought of a country that gets rid of its currency, no matter how bad, is essentially seeding its sovereignty. I mean, that's it. You don't control your currency. You're not really a sovereign country. I mean, I can agree. What are your thoughts? I completely agree. And I mean, I should say that, you know, this idea of replacing your currency with. with someone else's currency. It never in the end, so far as I can see, at least not if you are a big country.

It never has ultimately good outcomes. Argentina, by the way, has experimented with something like this in the past. They've never gone so far as to replace their currency with the USD before. But during the period of Carlos Menem as president, they linked, they established a sort of linked between the Pesos and the,

dollar and they tried to sort of fix the pezzle against the dollar and what they found is that of course the usd is run by the federal reserve board and the u.s government ultimately in american interests and they may not align exactly with argentine interests and this created increasing problems eventually for argentina and in the end it failed catastrophically it resulted catastrophically it resulted in a complete implosion of the Argentine economy, as I well remember, sometime after Menem left office. And it was what eventually led to Argentina's default and to the election of Ferdinand Kirchner. Also, by the way, I mean, when I say because one of the effects of making the dollar your currency, and it's probably part of the plan, is that you then borrow in dollars.

and that was what happened before. And I suspect it's what's going to happen again. So Argentine companies and businesses will take up big dollar loans. And of course, previously they defaulted. And it's likely they will again. So it's not, it seems to me a good plan. And as you correctly say, from a perspective of a nationalist patriot, which I think, you know, they actually is, you know,

he may be an eccentric person and he may have all sorts of contradictory ideas. But I suspect at some level he really does, he really is that. I think it doesn't make a great deal of sense. And perhaps a more ideologically consistent approach would be to follow the one that the equally nationalist, populist, patriotic president in El Salvador did, who if you remember, he also did things with the current. but he certainly didn't make the U.S.D. the currency in El Salvador. And that, for the moment at least, has worked or so it seems relatively well there.

But anyway, that's what Milley is going to do. I'm pretty sure that's what he's going to try and do over the next few months. He's going to try to make the dollar, Argentina's currency. And as you're right, he's gambling very heavily on Donald Trump. Donald Trump doesn't win the presidency. in next year, then Millet looks extremely isolated. And he will probably find that if he runs into trouble domestically, he'd rather like Bolsonaro in Brazil.

He lacks outside support to help him out. Final question. Bricks, if Millet does indeed decide to not proceed with Argentina's entrance. free it to bricks. Does bricks care? Is this just merely kind of an optics, an optics defeat for bricks in that, okay, we wanted these countries in and Argentina told us no, but just it's like just on a surface level, okay, it doesn't look good for bricks, but as far as a functioning stable bricks, do they really, are they going to, are they going to be damaged by this? I think some of them, perhaps privately, most of them are going to breathe a sigh of relief

because Argentina looks chaotic at the moment. As I said, it's got 120% inflation. The political situation in Argentina already looked unstable when the invitation to Argentina was made at Johannesburg. I mean, we've actually mentioned this in our programs in the past. And I think that there were many, many doubts about this. Moreover, Argentina was chosen and Algeria was not, even though it's known that some countries, and I think notably the Russians, would have been more keen on Algeria than Argentina. And Algeria made, to all appearances, a far better fit than Argentina does to bricks at this particular time. But there was the insurmountable argument that, you know, with Saudi Arabia, the UAE and Egypt joining, you couldn't have another Arab country.

So that's why they turned against Algeria, which was offended and angry and upset as a result. And they went for Argentina. And I think there'll be people who will be saying within the bricks, thank goodness this happened before Argentina formally did join the bricks because had it happened a bit later, then we might have seen Argentina leave the bricks. Remember, it hasn't yet technically joined. Argentina leave the bricks, and that would be much more embarrassing.

And of course, in the meantime, if it had remained inside the bricks and had continued to have all of these problems, it would have taken the gloss away from us. We've been able to present ourselves as the growing, developing, emerging market economies that are building up the economic stability around the world. And then people who are critics of the bricks

would have said, well, look at Argentina. That's a brick state, and it's not doing so well. think quietly quite a few people within the bricks are going to be relieved that this has happened. Yeah, a final question. Wouldn't the bricks of perhaps stabilized Argentina though? Wouldn't they have acted as a force of stabilization? Well, that was the argument. That was the big argument that, you know, get Argentina into the bricks, bring Argentina into this economic system. Argentina potentially has a huge amount of awful, which it does, by the way. And over time, it's a long-term investment, and it'll be an

investment which pays. And who knows, that might have been what happened. But in the meantime, we're talking about a fairly big economy. It would have required an awful lot of work. And trouble to stabilize Argentina. And it's probably more trouble, some people within the bricks are probably saying to each other more trouble than bricks really is adapted to take on at the moment. We want in a strong functioning economy so that when we set out our trade system float our global currency, we don't have these problems of, you know, Argentina. pulling us down. So it was probably offered prematurely. And, you know, in Argentina, the pendulum swings from one side to the other quite sharply. And who knows, maybe there will come a better moment,

both for Argentina and for the bricks when it can join. I just wanted to say one other thing. one other one person who is undoubtedly embarrassed by this affair and will have suffered some loss of prestige is lula because i said lula it was lula who really lobbied for argentina to join bricks it was lula who was also pushing very hard this idea of argentina and brazil forming a kind of economic confederation plenty of people in brazil were against the idea also. And a lot of people are going to be saying to Lula, well, look, this was not a good idea to start with. You see that the Argentinians are not quite as willing to go along with your ideas as you told everybody that they would be. And also, given what's happening, maybe we've all had a

narrow escape. So Lula, who has only become president relatively recently, but it has been making a big, big global play over the last few months. I mean, this is going to take some of the shine off him. Yeah, it makes sense. I mean, he went for bat. He went to bat for Argentina, and now it looks like Malay is going to go in another direction. When they all knew that Argentina was going to have an election, I mean, this wasn't hidden. All right, so we will edit there.

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