For the second time in a few weeks, President Javier Milei has successfully fended off a fierce challenge in Congress. Wednesday’s vote in the lower house Chamber of Deputies upholding his veto over a law increasing the budget for state universities provides fresh reassurance that, until a new Congress is elected next year, Milei will be able to govern through the power of decrees and vetoes. If two highly sensitive issues like pensions and universities fail to gather the special two-thirds majority needed to overturn his vetoes, the President can rest assured that his executive powers will remain intact for another year.
This is not the only success Milei has to show off of late. Financial market stability continues to improve, with one key indicator of the market’s view of the country — the foreign exchange gap — reaching its best level in five months. That’s why, on Tuesday, Milei left the Casa Rosada presidential palace and crossed Hipólito Yrigoyen Street to be greeted with an enthusiastic hug by Economy Minister Luis Caputo, followed by a festive meet-and-greet with the official’s team. Milei frequently praises Caputo as “the best economy minister in history” and his words were almost validated this week by one of the country’s most-respected economists, Ricardo Arriazu, who said that the government’s short-term stabilisation plan is going “better than expected.”
While the government has the right to celebrate its immediate achievements, the game is far from over. The two congressional victories over Milei’s vetoes have positioned the administration against both the old and the young — pensioners and university students, who have become the latest casualties of Milei’s “chainsaw” fiscal policies. This partly explains the recent drop in the President’s approval ratings, which nevertheless remain at a surprisingly solid 44 percent, given the level of economic adjustment the country is undergoing (a survey this week found out that almost seven in 10 Argentines have made budget cuts in food shopping this year). The government seems to have abandoned efforts to secure a legislative majority to pass reform and is simply content with building a minority strong enough to block opposition proposals.
Foreign investors remain more optimistic than the domestic public but have also noticed some troubling signals. Despite this week’s victory lap, Milei and Caputo hinted that lifting the capital controls, otherwise known as the “cepo,” is not imminent. In an interview with the Financial Times — a strategic platform for reaching international investors — the two economists reiterated that they do not know when the controls will be lifted. “Not yet,” Milei said. Caputo added that the controls will be removed “when it no longer causes stress for our people,” as though projecting his own sentiments out onto the entire population. He further claimed that among the investors he speaks with in “the real economy, nobody asks about currency controls.” He wishes.
Milei is also celebrating former president Cristina Fernández de Kirchner’s formal announcement this week that she intends to lead the main Peronist party (Partido Justicialista). As a symbol of “the past” that Argentines voted to leave behind last year, Fernández de Kirchner is arguably the ideal opponent for Milei. On November 13, just days before the Peronist internal election is due to take place, a Criminal Appeals Court will rule on whether to uphold or overturn her December 2022 sentence of six years in prison and a lifetime ban from holding public office over corruption related to public works during her administration.
Kirchner’s potential return to the frontline lends credibility to Milei’s otherwise vague campaign rhetoric against the political “caste.” As he celebrates his latest victory in Congress, Milei is likely to focus on combating “populist demagogues” instead of the entire political establishment, in order to create room for negotiating electoral alliances and expanding his support base ahead of next year’s elections.
The government’s pre-emptive celebrations should not overlook warnings from the IMF too, whose officials in Washington DC have described the country’s economic situation as “delicate.” Whether or not Donald Trump wins the US presidency in Noember, IMF bureaucrats are unlikely to negotiate a new agreement with Argentina while currency controls remain in place. Yet these controls are unlikely to be lifted unless Argentina secures the kind of funding a new IMF deal could provide. Is it the chicken or the egg?
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