Javier Milei has started his libertarian economic experiment to transform Argentina. In a series of dispatches, The Telegraph’s World Economy Editor, Ambrose Evans-Pritchard, travels through what used to be one of the world’s richest nations to examine whether “shock therapy” can work.
Argentina’s repudiation of the Brics is more than a minor earthquake in global diplomacy. It has broken the spell of an ever-widening bloc of states pitted against the Western liberal order.
Momentum has been all one way since the original quartet of Brazil, Russia, India and China launched the bloc in 2009, later expanded to South Africa, and then Iran, Saudi Arabia, Egypt, Ethiopia and the Emirates at the start of this year.
Finally, a country from the Global South – a tortuous ideological construction – has pulled back from a grouping that is increasingly a front for Xi Jinping’s expansionist China, and for the creation of a Chinese-run financial system aimed at displacing the Bretton Woods institutions.
A defector has repositioned itself as a stalwart member of the liberal democracies and the US military alliance, without ifs or buts, as a matter of moral and philosophical preference, and at some risk to its immediate economic interests.
“The West is in real danger, that is why we have to stick together,” said President Javier Milei.
“My priority is to be an ally of the United States. I will not negotiate with communists,” he declared after winning the election in November. To near universal surprise, his actions have been swift, dramatic and fully aligned with his words.
The Biden administration can hardly conceal its delight that a country so often in the vanguard of Latin America’s intellectual and political fashion has switched sides. The White House has bitten its tongue over Milei’s rapturous praise of Donald Trump, concentrating on the larger strategic prize.
The US Secretary of State and the head of the CIA have hurried to Buenos Aires to seal the alliance. So has the four-star chief of US Southern Command. “President Milei, we hear you loud and clear,” said General Laura Richardson.
“This is quite a blow for China after all the hype on the Brics. If Milei can make a success of it and show that he doesn’t need China after all, it will have a demonstration effect across Latin America,” said George Magnus, from Oxford University’s China Centre.
It is hard to overstate the extraordinary spectacle of Javier Milei appearing last month in naval combat dress side by side with Richardson at the frozen Patagonian port of Ushuaia and announcing a joint military base to patrol the Antarctic, with almost no prior warning and against the furious dissent of the governor of Tierra del Fuego, who declared the US general to be persona non grata and “an accomplice of the British occupation of the Malvinas”.
Days later, Argentina bought 24 American F-16 fighter jets from Denmark with Washington’s approval to replace its ageing Mirage jets. The defence minister called it “the most important purchase since the return to democracy in 1983”. The UK quietly lifted its objections to help smooth the way.
The same week, Argentina formally applied to join Nato as a “global partner”. The political pieties of the Peronist Left establishment are toppling like ninepins. Even flights from Buenos Aires to Cuba have been suspended.
Javier Milei’s admiration for the United States seems entirely genuine, and at times almost mystical. It harks back to a golden age of Argentine prosperity in the late 19th century shaped by the thinking of Juan Bautista Alberdi, an evangelist for the moral doctrines of Adam Smith and the Wealth of Nations.
“The US constitution is very like our Alberdi constitution of 1853, which turned Argentina from a barbarous country into a top-tier world economy in 35 years. We share the same cultural DNA rooted in our founding fathers,” he said.
“It is these ideas that have lifted the vast majority of the world’s population out of extreme poverty and turned America into the power it is today. We deviated from the path and it has cost us 100 years of failure and economic misery.”
Whether Argentina’s golden age was ever quite so rich is disputed, but the country was doing well enough in 1901 to prompt a book by an Australian politician entitled, Our Great Rival: The Argentine Republic. Clientelist statism put paid to that. Australia’s per capita income is today four times higher.
Mr Milei calls himself an anarcho-capitalist, a storm-trooper for “Austrian” economics, but that is his showman act. His latest book – Capitalism, Socialism, and the Neoclassical Trap – is better read as a celebration of Adam Smith, the Hidden Hand, and the labour theory of value, even if the Scottish economist fails to make it into Milei’s canine pantheon.
The four grown clones of Milei’s beloved English Mastiff Conan (RIP) are named Murray for Rothbard, Milton for Friedman, and Robert and Lucas for Nobel laureate Robert Lucas, representing the Austrian School, monetarism and the Lucas Critique of neoclassical economics.
He plays with the dogs for an hour every morning before starting work, each clone kept in a separate pen because they fight. How do dogs establish hierarchy among a pack of clones? It is a behavioural conundrum.
Mr Milei’s philo-Semitism is just as genuine and just as mystical. “It is when I read Moses in the second book of the Torah that I became a Taliban for liberty. Without doubt, Moses is the greatest hero of liberty of all time,” he said.
Raised a Catholic, Milei was captivated by Paul Johnson’s History of the Jews and moved by degrees into the orbit of the Moroccan Sephardic synagogue in Buenos Aires.
One of his first presidential trips abroad was to pray at the Wailing Wall in Jerusalem, wearing the kippah and a dog tag in solidarity with the hostages in Gaza. He revealed last month that his great grandmother was the daughter of a rabbi.
Unlike culture warriors on the American Right, he is a champion of Ukraine rather than an agent of Putin’s propaganda. That makes him an unusual and more compelling figure on the Western stage, alongside Italy’s Giorgia Meloni.
Will Argentina pay a high price for confronting the Russia-China axis head on, and for flirting with Taiwan? The outgoing Peronists – seduced by the extrapolation fallacy of Chinese GDP growth – cried from the rooftops that Argentina would lose millions of jobs and face “financial implosion” if it turned away from the Belt and Road and the beneficence of Beijing.
Javier Milei defied this Latin version of project fear. Chinese and Argentine private companies were free to conduct whatever legal commerce they wished, he declared, but the state would not have dealings with Xi’s communist regime beyond minimal protocol. Reality is already intruding, however.
Beijing provided $18bn of emergency swaps to cover foreign exchange reserves when nobody else would touch the country. The last tranche of $4.9bn comes due in June.
It is touch and go whether the Argentine central bank will have accumulated enough hard currency by then to meet the deadline, and failure to do so amounts to sovereign default. Much depends on the soybean harvest and the vagaries of the weather. Argentina’s foreign minister and central bank governor have both been in Beijing over recent days to plead for an extension. China is playing hardball.
Two giant hydroelectric projects in Patagonia worth $5bn have been suspended in a move widely seen as retaliation. Gezhouba Group has laid off 1,800 workers and repatriated its engineers. Such Chinese infrastructure contracts and loans always have secret clauses and penalty triggers.
But at the end of day, China depends on imported food and primary products for its economic survival. It buys 93pc of its soybeans and almost 100pc of its sorghum and barley from Argentina. These are fungible commodities.
Even if China cut off Argentine purchases it would have to buy its animal feed from somewhere else, otherwise its own meat industry would collapse. The global market would reshuffle the grain trade until supply and demand came back into balance. Ditto for lithium. So who really calls the shots?
The next year is going to be a test case of what happens to an emerging market economy that pulls out of the Belt and Road and defies China.
The experiment is taking place at a time when informed economic opinion no longer thinks that China will overtake the US to become the world’s biggest economy by mid-century, and that it has probably condemned itself already to the middle income trap under Xi Jinping’s neo-Maoist regression.
It is happening as India gravitates towards the Quad and the US-led security nexus in Asia, exposing the political incoherence of the Brics project. And it is happening as even Brazil starts to lose patience with China’s beggar-thy-neighbour strategy of dumping its vast excess industrial capacity on the rest of the world.
Javier Milei may be a one-off personality, but he gained power by using TikTok and Twitter to tap into the libertarian undercurrents of Argentina’s post-Peronist youth. Far from being a fleeting anomaly at the far end of the world, he may be the forerunner of a free market counter-revolution against wokery and the leviathan state. The West is not finished yet.
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