The Journal. - Argentina’s New President Takes a Chainsaw to the Country’s Government

Episode Date: January 30, 2024

Argentine President Javier Milei took office in December promising a free-market revolution to fix the country’s ailing economy. In an interview with The Wall Street Journal, Milei explained his agenda, which includes privatizing state companies and slashing government spending. WSJ’s Ryan Dubé unpacks Milei's goals and the challenges he faces. Further Reading and Watching: - Argentina’s President Promised a Free-Market Revolution, and Says He’s Delivering  - Argentina’s Libertarian President Urges Global Leaders in Davos to Embrace Free Market  - Argentina’s Inflation Surges After New President Cuts Subsidies  Further Listening: - Why Protesters Rioted in Brazil’s Capital  Learn more about your ad choices. Visit megaphone.fm/adchoices

Argentina's new president, Javier Millay, took office late last year promising some bold ideas for fixing the country's broken economy. He said he wanted to shut down the central bank, switch from the peso to the U.S. dollar, dramatically cut regulations and slash social programs. He'd often bring a chainsaw to campaign events to illustrate his point. And he calls himself an anarcho-capitalist?

What does that mean? Basically, it means that he sees the state and the regulations and the public sector as kind of the problem across the board. Essentially, it's not the solution for anything. That's our colleague Ryan Dubé, who covers Latin America. So, unfettered capitalism, right? That any type of regulations is harmful for the individual, for freedom, and for society in general. So that's his perspective on how Argentina should be run with minimal, minimal kind of state intervention or state role in the economy or in the lives of people in general. And that the solution is the private sector.

In a recent interview, Millay told the Wall Street Journal that drastic change is the country's only option. There is no plan B. There is no plan B to do things right. You either do things right, or you do them right. Because if plan B is to start doing things halfway, or compromise. That's the story of Argentina. And that's where we are now. Welcome to The Journal, our show about money, business, and power. I'm Ryan Knudsen.

It's Tuesday, January 30th. Coming up on the show, Argentina's new president on his bold plan to overhaul the economy. This ad was expressly recorded to create a sense of simplicity. Just a few simple sounds. No complexity. Like Neutral. Made with just vodka, soda and natural flavour. Neutral. Refreshingly simple.

Can you introduce us to Javier Millet? Who is he and how did he rise to become president? So Javier Millet is a libertarian economist. He is a political outsider as well. He wasn't well known until about 2018 or so when he started to appear on television programs and kind of promoting his libertarian theories. You know, taxation is a form of state violence. Discussing monetary policy and fiscal policy, he'd get into these really passionate and heated debates where other members of the panels would get off and walk off the set because it was so just outlandish what he was saying and the screaming and stuff as well.

And, you know, the host would have to tell him, you know, Millay, calm down, red card, red card, just calm down a little bit here. Millay, but it made for really good television. I mean, it was entertaining, right? He was booked on, you know, different television programs constantly, became kind of a household name almost.

Growing up, Malay earned the nickname El Loco, meaning the madman, because of how he would throw himself recklessly around the soccer field. Malay has shaggy hair and long, bushy sideburns. He has five dogs, and they all look the same, which is not a coincidence, because they're all clones of the same dog. But that's a story for another time. He started his career in academia, and then worked as an economist at a big holding company in Buenos Aires. He was elected to Congress in 2021, and quickly set his sights on higher

ambitions. Has he said anything about why he wanted to run for president? I think he sees himself as kind of having a mission to change Argentina, right? He believes that the state has just gone way too far overboard. And there's, you know, with the traditional politicians, there's no options there. He calls them the political caste. They benefit from this type of system, which harms the regular Argentines, the workers, the business people. So he sees himself as having a mission to turn around Argentina, to make Argentina, you know, a wealthy country again, like it was

100 years ago. And he says he can do that with his proposals, which will take time. You know, in 10 years, Argentina will become, if we continue down this path, Argentina will become as rich as the countries in Europe. And, you know, in 25 years, it'll be as rich as the United States. Argentina's economy is in bad shape. And it has been for a while. 40% of Argentinians live in poverty. And inflation is more than 200%,

which is the highest rate in the world. During his presidential campaign, Millay pitched ideas that were really unorthodox for traditional Argentine politics. Historically, the country's government has had a lot of regulations and social programs, but Millay said he wanted to slash all that, lay off government workers and privatize state-run companies. One thing that definitely stood out in Argentina during a campaign, and campaigns everywhere during a lot of places, politicians will talk about kind of new programs, kind of what they're going to provide to the people and stuff. And Javier Millais was completely different in that aspect in that he said what, you know, the reality of the country is this, and we're going to need to cut back on spending. I'm going

to implement really difficult austerity measures. So he was just very honest about what he plans to do, I guess. And his reading of the situation, I mean, he wasn't trying to sugarcoat anything. Many of Millet's ideas were more drastic than just making cuts, like getting rid of Argentina's central bank and switching the country over to the U.S. dollar. On the dollarization, the thinking is that in order to end inflation once and for all, we need to get rid of the ability of the central bank and of governments to print money. And that means getting rid of the peso. So if we get rid of the peso, then the government, you know, a future government will come in and won't be able

to print money at the really extreme levels that they were printing money at during the previous administration. So he sees that as a very long-term solution in order to end inflation once and for all for Argentina and get it out of this circle. Because the country would just be tied to the U.S. dollar or it would just use the U.S. dollar. Yeah. So it wouldn't be able to print money. Right. So other countries that have done that, like Ecuador, for example, they did that in 2000, I believe. And also due to this issue with inflation was really high at that moment when they decided to dollarize. And they've been able to maintain inflation very low, you know, 2 percent, 3 percent%, 1% during the last 20 years. Another of Millet's bold ideas during the campaign

was to completely cut off ties to China, which has been one of Argentina's biggest trading partners. He said that he wants to realign Argentina with the West, that he's against communists, right? He's against left-wing governments, sees Beijing as a communist regime, so he doesn't want Argentina to have ties with them. He's not going to do business. He's not going to have a government relationship with communist regimes and far-left regimes. Venezuela, he mentioned Brazil as well, which is also a top trade partner, and China. So he wants to move Argentina closer to the U.S. and to Western Europe.

His ideas were dramatic. And voters seemed to like it. Millet won the presidency in a landslide, with 56% of the vote. You know, what was really interesting is that people kind of took to that. You know, just a political outsider that was so different from all the other politicians in Argentina. They said, we can't just continue to vote for the same guys who are in office, who are, you know, overseeing this really terrible inflation and stuff. So let's give Millet a chance, right? And see what happens.

Sort of like things here are so bad, we might as well vote for this guy who says he's going to be a total change agent. Exactly. might as well vote for this guy who says he's going to be a total change agent. Exactly. Coming up, our colleagues Ryan Dubé and Wall Street Journal editor-in-chief Emma Tucker sit down with Millay and ask whether he can actually deliver

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and a tasty bacon and egg or breakfast sandwich for only $5 at A&W's in Ontario. Last week, our colleagues went to Argentina to meet with President Javier Millay. Our editor-in-chief, Emma Tucker, is the one you'll hear asking questions in Spanish. Millay has only been in office less than two months, but he sees his presidency in historical terms. What political leader in the world do you identify with and why? I have said that throughout history, there have been great leaders who have embodied freedom.

I mean, the greatest liberator in all of human history is Moses. So, let's say he's a libertarian leader without a doubt. Then there are some other people, like Ronald Reagan, Pope John Paul II, and Margaret Thatcher. like Ronald Reagan, Pope John Paul II, and Margaret Thatcher. So, in all honesty, you will always find me on the side of those who have defended the ideas of freedom. While Millet is barreling forward on some aspects of his agenda, like cutting regulations, privatizing state-run companies, and slashing subsidies, in other areas, he's softening a bit.

For instance, he still wants to close the central bank and switch to the U.S. dollar, but he says he'll have to wait a bit before he can actually do it. And his plans to cut ties with China, which many Argentine businesses rely on for economic trading, also seems to be moderating. It is true that I will not be allied with communists. also seems to be moderating. It is true that I will not be allied with communists. It is true that we refuse to be part of the BRICS.

But we have always maintained that trade should not be affected because it is basically a decision by private actors. Now, it's also true that I don't consider China to be our strategic partner. But we must separate geopolitical issues from our trade ones. You may have different points of view. For instance, we may disagree with the United Kingdom over the Falkland Islands. However, that doesn't prevent us from having a set of mature trade relations. set of mature trade relations. Still, Malay is already facing a lot of opposition. So the first obstacle is Congress, I believe.

He has 15% of the seats in the lower house, 10% in the Senate. He needs to form alliances with different political parties, which he has long called the political caste. He needs to negotiate with what he calls the political caste in order to get through his reforms. The second one is the unions. Unions are very powerful in Argentina. There's also really strong social movements that'll protest against cuts to social programs.

So these are all kind of opposition political coalitions that he needs to negotiate with. Last week, tens of thousands of people took to the streets, including many union members, to protest his administration's aggressive austerity measures. My law is a waste, you are a dictatorship. My law is a waste, you are a dictatorship. Why do you think you will succeed in your ambitious economic policy when all of your predecessors failed?

In our case, the difference is that the president is an economist, and he is a hyper-Orthodox libertarian. In this context, ministers who are not in line with my vision of austerity will not be able to remain in their offices. I am still an outsider, and what citizens gave me, the way that I interpret my mandate, is as a job. I was tasked with putting the economy in order and ending insecurity. So I am committed to getting the job done. Millay says he's not intimidated by his opposition. I'm going to die with my boots on. Apart from that, to question our political force from the get-go,

we should remind those who say that nonsense that we got 56% of the votes in the runoff, that we have strong popular support. What does Malay have to do in order to achieve his vision? So I think he needs to show signs of improvement very quickly. He needs to show that, okay, inflation is still high, but it's starting to come down. Or, you know, there's kind of a light at the end of the tunnel. And he'll have a few months to do that, I think.

Malay has said that the situation in Argentina will get worse before it gets better. And that's exactly what's been happening. Between December and January, the cost of food and fuel has skyrocketed, and his approval rating fell nine percentage points. How long do you think Argentinians will give him to turn things around? Argentines at the moment say we need to give him a chance. Let's see what happens. I think people outside of Argentina say that even if he doesn't get everything that he wants,

even if he advances half of the regulations that he wants to reduce, if he's able to advance those, that would be a great success. That'd be something. That'd be progress. But in order to advance all his proposals, I think it's going to be difficult. But he'll probably be able to advance a fair number of them, right? And I think a lot of people are kind of betting on that and waiting to see if he'll be able to do that. That's all for today. Thank you.