Rewind to the spring of 2001 for a minute. Argentina had a one-to-one “convertibility” peg of the Argentine peso with the US dollar, but was in a three-year recession. Congress had just passed a “zero deficit” bill to try to regain market confidence. Midterm elections were happening. The people were furious with politicians, yet the campaign focused on which candidate was more corrupt and who bore greater responsibility for the economic suffering. The people responded by voting mostly in blank or not voting at all. A few months later, crowds took to the streets chanting “¡Que se vayan todos! (“Out with them all!”).
Argentina has been living a 2001 crisis, in installments, over the last few years. In 2023, the angry vote made Javier Milei Argentina's president. But he would be wrong to believe that people voted exclusively for him: most people voted against the rest. In the 2001 midterms, many people inserted slices of salami, photos of Osama Bin Laden, or cartoons of Mafalda into their voting envelopes, alongside their ballot, to express their anger. In 2023, they just cast a vote for Milei.
Now Argentines are waking up to the news that the President has proactively disseminated what turned out to be an online scam, the crypto token known as ‘$LIBRA.’ It’s as if the government prevented itself from enjoying a victory lap – the scandal started the day after the INDEC national statistics bureau posted the lowest monthly inflation rate in almost five years: 2.2 percent in January. Lowering inflation is exactly what Argentines voted Milei into power for and what he is delivering. This self-inflicted political crisis, rocking its own boat, will go down as one of the greatest political unforced errors of recent Argentine history — other examples include Mauricio Macri ruining his party’s presidential pole position in 2023 or Cristina Fernández de Kirchner picking Alberto Fernández to be the Peronist presidential candidate in 2019.
The spectacle Argentines will be watching in the coming days, or weeks, or even years, is that of politicians racing to win the ‘most-corrupt’ prize. While we still don’t know what other developments could follow the first hectic week since President Milei tweeted the would-be scam, history tells us that the public which continues to be suspicious about the value of the contribution of politicians to their lives will be more inclined to declare them guilty, even before the courts have started an investigation.
This means that, more than ever, Milei now relies on the success of his economic programme. His main mission is to contain the crisis, so that it does not affect the main variables of the economy. His first instincts do not serve that purpose well. Milei said he did nothing wrong and that all those who point their fingers at him do not have the right to do so because they are (also?) corrupt.
Milei’s administration needs both economic fundamentals and reputation to make the programme work. The President’s libertarian rock-star status has placed Argentina on the radar of investors, both in the financial sector and the real economy. But doubts remain about political sustainability, given that the country still has to undergo major reform to qualify as anything close to normal. In ecstasy, given his good start, Milei and his team run the risk of thinking they have passed the finish line when their race to success is only starting.
A classical crisis management manual would recommend the government apologise, find a culprit, isolate the problem and move on. The first item is not in the President’s nature, and the culprit is nowhere to be found yet — or perhaps is it too close to be tolerable? The administration’s best bet, then, is to move on, and the first obvious step should be the economy and a new agreement with the International Monetary Fund.
Until now, the government was in no rush to finalise a new agreement with the IMF, concerned that certain conditions – like unifying the exchange rate and lifting capital controls – could prove unnecessary risks on the eve of the October midterm elections. This crisis is likely to change that and turn timing into a more relevant factor, even if a new agreement comes with some undesired terms.
In the short term, most Argentines are likely to turn the other cheek regarding the crypto mishap, though the incident will invariably part waters for the Milei administration, both here and abroad. For the first time since December 2023, Milei and his people lost control of the narrative. All governments go through this at some point, and when that happens, it is in their best interest to realise that the honeymoon is finally over and things will not be as they used to be.
Milei involuntarily picked Valentine’s Day to end his, but he was lucky Argentina’s love affair lasted the 432 days it did.
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