Reconstruction Pact, Anybody?

2024 is a Leap Year and February was a very long month for Javier Milei (Javi). He’s looking increasingly frayed around the edges but his speedy energy levels haven’t dropped yet and he’s at it again.

March 1st. was another big day for Javi. With February finally over, he had prepared his first address to the National Congress and Senate, he girted himself with a blue and white sash, grabbed his Presidential staff and jumped in a Toyota SUV for another furious battle.

In January, in emergency sessions over the Christmas vacation, at the same legislature, neither the house nor the senate bowed to his pressure to push through 600 new laws. Javi wanted all or nothing. For now he got nothing. He’s back looking for everything again and he’s got some new ideas.

The Financial Times in an interview that same week, cited Javi, that his coalition has 4000 pre-prepared legislative changes. Designed by corporate lawyers with a health dash of libertarian dogma, these new laws would remove government regulation, protection and oversight of corporate and financial activities, paleo-libertarian style. Javi also told the FT that he wasn’t giving up and “[would] send back all the reforms after the 11th of December 2025 [Mid-term elections]. We have sent 1,000 but we still have 3,000 more to present.”. If these 4000 legal changes ever happen Argentina will be a very different country. Indeed it will be unique. It might be the world’s first paleo-libertarian ‘state’.

Troubling Start

Not all has gone well for our rebel Javi. Rumors abound that his partners in government may want him to resign citing unsubstantiated leaks about his mental health but this seems to be all bluster. Meanwhile his own security minister in a dark alliance with Diana Mondino (the very undiplomatic Minister for Foreign Affaires, also from UCEMA) are spreading their own counter-rumours on the Macri-friendly LN+ network. They warn of phantom Cuban and Venezuelan infiltrators present in Argentina undercover as “fake” journalists. Again no proof nor any direct threat assessments just innuendo and fear-mongering but this is nothing new. Only a month before the failed candidate for the PRO party (now Minister for Security) Patricia Bullrich’s police forces were shooting scores of journalists outside the same Congress building (as Milei’s team inside tried unsuccessfully, to railroad through those same 600 laws). Present in the plaza too was a single young Chilean reporter who Bullrich also suspected because of his nationality.

Javi’s team is highly paranoid about the kinds of social revolts that happened in Chile against structural adjustment. What happened in the Chilean capital with rising train fares pales into insignificance when compared with what Javi is up to in Argentina. Yet even the tiny trigger of train fares in Chile meant right-wing President Piñera, who recently died in a helicopter crash, was forced to call a constitutional referendum to replace the Pinochet Constitution. The street protests in Santiago were truly enormous and led to a new president. When asked in the same FT interview to evaluate “the chance of ordinary Argentines rioting against austerity” Javi answered a confident “zero”.

None of the fake news about foreign journalists has proven in any way relevant but it does help to deflect public anger over the collapsing Argentine economy away from Javi and his new team.

What happened February?

While Javi has been flying around the planet chatting with his ultraright heroes, Netanyahu in Israel, Trump in the US and in Italy, (no, not the Pope!) but the neo-fascist Meloni. The LLA has been fighting fires at home, metaphorically speaking that is. The recent disastrous forest fires in the Alerces National Forest in Patagonia also threatened Esquel, the largest Andean city in the Chubut province, but the environment and nature means nothing to Milei. There’s no profit in nature, quite the opposite! Javi left the real firefighting to the provinces, and to rangers in Argentina’s national parks. Those same rangers risking their lives to put out these fires know that the LLA regime plans to lay off half of them to balance the precious budget. Javi is also advocating privatising the national parks. You could not make this up.


None of this should confound anybody even vaguely familiar with the libertarian cult, rather it is perfectly predictable. Javier Milei is a libertarian zealot. Anarcho-capitalism, Javi’s self-proclaimed philosophy, isn’t compatible with statesmanship. Rather Javi is more like a suicide bomber entering the presidential palace in a bulky jacket.

On February 12th in Italy Javi said he admitted “feeling a profound contempt for the state” which he described as a “Mafia”. One can only speculate how his partners in crime Caputo and Macri feel personally about Javi’s Italian terminology. Liberalism cannot contemplate state policy for social needs, culture (except in the negative sense of hating “cultural Marxism” another oxymoron), or the environment. These non-monetary concepts don’t have a value which can be counted in dollars. Human-caused climate change and biodiversity loss are negated and ignored. Libertarians have to do this because such concepts cannot exist in their models, they have no room for such ideas.

In the same intervirw in Italy Milei quoted an obscure libertarian called Franz Oppenheimer whose theory holds that the state is nothing more than bandits using the monopoly of violence to steal resources from the private sector. “The methods of the market are trade, production, savings, investment”, while “the method of the state is theft”, Milei concluded that “the state is the largest criminal association in the world”. In fact in the wildfires in Chubut the construction and agro-industrial sectors are the most likely culprits for starting these fires, so if anything the state is having its resources stolen by the private sector but Milei is having nothing of such nonsense.

So why did Milei become president donning the bulky jacket? It’s about showing the world that libertarian economics work. All that interests Milei is legislative power to redesign the Argentine economy along theoretical anarcho-capitalist lines. He sees himself as a bit of a pioneer in this; pushing the envelope for an ultraliberal state he is the lion a messianic hero. One can’t but help think he chose the wrong country for his experiment but for Argentina Milei is an accident of birth. He does understand that an anarcho-capitalist state is an oxymoron but he doesn’t care. His followers on the other hand haven’t learned that yet but by the time they do the state will be sold off to the private sector Menem-style all over again. The state will be destroyed and Javi will have shown them all.

Balancing the Budget

Javi’s new Argentina begins with just one thing: balancing the national accounts:


1. First he wants to balance the government budget so he’s squeezing the poor. Most affected were those who used to receive state assistance and now do not, also retired people and the working poor, whose minimum wage now keeps them below the poverty line. Also infrastructure will decay and the provinces will be hurt by being forced to pay off debt.
   
2. Second there are the external accounts. Javi wants to have a global surplus. In fact he wants to enshrine this into his pact. In so doing he’s removed rules that guarantee local markets first (hiking prices internally by giving preference to exporters). Flat local salaries in devalued pesos with dollar-denominated exports is good for the balance of payments but it’s a cruel fiscal adjustment.
   
3. Finally hidden in the capital account are “financial services” i.e. debt and bonds. Argentina’s National Debt denominated in Yuan and Dollars is large. Also ridiculous peso bonds are now worth trillions. Previously called Leliqs they are owned mainly by the private sector, but Javi’s dogma is property is king so here too, the adjustment it seems, will be paid by workers and not the banks.

In reverse order. Servicing the debt has been going reasonably well. While there may indeed be more debt now and it may also be more expensive, ’Toto’ Caputo is a banker and an expert on debt rollover, he’s also an old hand at creating new debt. Caputo’s focus for now has been making debt payments and it has been going well. He made all of his debt payments in his first quarter without defaulting. So zealous has been Javi’s team been on this matter that the nation has nearly two out of three children under the poverty line. Even the IMF has warned Javi that his extreme approach could cause social revolt, but for Javi and Caputo hungry children are just collateral damage.

Balancing the external accounts has been given a boost by industrial agricultural exports (commodities denominated in dollars). The devaluation of the peso made it more profitable to local exporters (charging in pesos) to empty their grain silos and meat plants (frigorificos) selling it all abroad boosting exports. Local poverty drives also down demand with the continuation of import taxes and higher prices has forced down imports also creating a tiny surplus.

As to balancing the internal budgets, that’s complicated. In a Federal state like Argentina, the central state and each and every province have two-way flows moving back and forth. Taxation pays their bills but taxes on exports are collected nationally. Greasing these gears is a system of national and provincial tax collection and re-integration of payments to the provinces. Provinces can also run up debts with the central government, so they do (some have even experimented with emitting their own bonds). Javi wants that money back now to balance the accounts. He blocked payments meaning that the nation state could balance their books but the provinces were left with bills to pay and no money to pay them. In particular this meant that teachers were to go unpaid and transport subsidies would grind to a halt.

Predictably this led to a ‘revolution’. Various governors, especially in Patagonia under Ignacio Torres, governor of Chubut, who is from Mauricio Macri’s PRO party Javi’s supposed ‘allies‘. In the end this went to court and Chubut won but then Javi appealed to the Supreme Court. It’s a mess.

The Grand Speech

Back to the March 1st and Javi enters the Buenos Aires National Congress for his first time as president. The speech began at nine PM Friday evening. Javi arrived in his black Toyota SUV accompanied by the pomp and circumstance of the horses of the Granaderos, who after an afternoon waiting in the sun dropped a vast quantity of horse shit on Avenida de Mayo on the short route. This prompted one comic protestor to cry out “Stop with that shit, smells worse than Conan” (Conan is Javi’s beloved dead dog) who appears on his presidential staff which Javi carried with him in the Congress building.

Through the gates and into the entrance halls of the imposing building, the new President greeted lines of friendly deputies and senators with the fondest greeting coming from Espert (an uncomfortably long hug). Espert is Javi’s congressional henchman while the main operator in the Senate (Vice President Villarruel) sauntered behind the president looking slightly bored. Finally Javi stepped up behind the podium to give his speech (propped up by a small step that Javi’s aides had had installed so that he would look more imposingly tall) facing off to the adversarial congress.

The Argentina National Congress building was stacked with younger Javi fans in the eaves who shouted down and applauded essentially drowning out any adversarial reactions below. The stage management was working well so Javi got down to it straight away.

The Speech

Javi began with a longer than usual list of the dreadful economic legacy received by his reformist heros, La Libertad Avanza (with Javi up front in the lion’s position). This was a dual legacy, recent problems from his hated Peronist government of course, but this was, as we had heard so many times now, only the final phase of 100 years, not of solitude, but of Argentine economic decadence, the details of which seem to be lost in the socialism mists of time. This myth is questionable at best but sells well with the nationalist masses.

Javi went on to repeat his mystic untruths about Argentina being a great power —it never was except in football, indeed Argentina was never even a great power in South America. Instead Javi’s focus is on a single interesting Argentine statistic from about 100 years back, the Argentine Gross National Product (GDP did not exist then) most of which was exported to Europe, during and after WWI. This number he then divides by the tiny population of that time (or at least those noted in the census 40 years before universal suffrage). This resulting statistics put Argentina in the top ten exporters by population, the basis for his Make Argentina Great Again (MAGA) exhortations at the Conservative Political Action Conference (CPAC) with Bukele and Trump at the end of February.

The massive influx of golden sovereigns and pounds sterling back then was mainly used to build and maintain the export infrastructure (trains and ports) bleeding Argentina’s cattle dry and filling British, French and German grain silos as well as the London bank accounts of a very small number of massive Argentine land owners. Javi will sell of what is left of that massive investment soon. Many owners were British themselves (especially those in the Patagonian sheep trade) but there were also rich locals who benefited from this trade too especially in the Pampa region and further North in Cordoba, then Argentina’s second city, where Javi is now calling his May pow-wow (more on this below).

From Myth-making to Deal-making

Phase two of the discourse followed on from the sad economic legacy with Javi attacking the political casta again, the source of all evil. The LLA party are obviously absolved as all they care about is personal liberty, neither power no money attracts them, butter would not melt in their mouths but maybe not quite so innocent for Javi were their political partners in the PRO.

In fact Javi took a blatant sideswipe at his own coalition partners, Macri’s Republican (PRO) party. He made a point of mentioning (not once but twice) that he was “offended by the silence of those who call themselves Republican”. This silence he referred to was a lack of condemnation of the jailing by the powerful caudillo family, the strongman Governor of Jujuy, the Morales clan. The now sidelined governor of Jujuy jailed two people because of snide claims (made in a Tweet) of infidelity by Morales’ latest wife Tulia Snopek, who, it seems, had a little accident with a musician in a car. Morales, not someone who cares much about the law or the constitution, placed two people in jail for fifty days because they posted something in Instagram. All is not well with the PRO coalition particularly when it comes to the all our war with between Javi and the PRO Governor of Chubut, Ignacio Torres.

The Grand Plan, The May Pact

So then it came out, Javi’s grand new plan consisting of two phases. Javi wants to invite all of provincial governors to Córdoba to sign into effect ten points which he is calling the May pact. He chose the 25th of May, Argentina’s declaration of independence to appease his nationalist voters who are managed by his vice president.

But they will be checking at the door for tickets. The grand reorganization of the Argentine economy along Libertarian lines with “The Inviolability of Property rights” first on his list comes with entrance requirements. It requires the pre-approval of the “Ley de Bases” (Javi’s Omnibus law, the famous 600 legal changes) the same one that was thrown out of by Congress in emergency sessions in January. In his speech Javi added threats of conflict and violence if this did not happen assuring the Argentine people, and his political opponents, that when faced with a difficulty his team do not step back from confrontation, rather they accelerate even faster toward their goal.

Javi’s goal according to his FT interview is the approval of 4000 new laws and he wants to top this off with a restructuring of the state under ten points of the May Pact. It should also be remembered that this Omnibus law also includes a declaration giving Javi the ability to override congress and a ratification of another 300 laws in the DNU which is currently unresolved so, if he gets his way, Javi the bulldozer will have flattened Congress on the road to Cordoba and the previous constitution as well as 60 years of a social pact will be gone by May anyway.

Conclusion

To cut a long story short Javi wants it all and he wants it now. The gauntlet has been thrown down and it is up to the political opposition to regroup and to act sarving the provinces the middle classes and the poor till he gets his way. Maybe by now the Peronist opposition will realize what is happening is not just a common exchange of power with another slightly less nationalistic neoliberal party like Macri’s PRO, but rather this is an attempt at a complete reorganization of the Argentine state to rebuild it in an archaic and untested libertarian mold. It will wipe out Perons legacy, the middle class.

Until now the Peronists have voted against everything Javi proposed, but they remain silent and disorganized, leaving the LLA and the PRO to fight among themselves. The JxC coalition split when Macri dragged the PRO party to quietly support the candidacy of Javi. Until the so-called Patagonian Revolution, when provincial governors bandied together to confront the central government because Javi cut off their cash, only the FIT coalition has taken Javi on and they just don’t have the numbers. Now is time for the silent Peronist majority behind the two vocal young leaders (Grabois and Kiciloff) to stand up to this weak coalition and this starkly radical president. Time for the Peronists to get the finger out or step out of the way so someone else can.