The president of dollarised Ecuador, Daniel Noboa, celebrated 100 days in office on March 1. The president of still-pesofied Argentina, Javier Milei, reaches 90 days in office tomorrow, on March 10. When Noboa took office, his popularity rating stood at 60 percent – three-and-a–half months on, more than 80 percent of the Ecuadorean people support him. Why did his popularity soar? Because he scored an early goal: adopting a hardline security policy that placed the country “in a state of internal armed conflict” to fight crime after a coordinated attack by gangs in early January.
To the contrary, Milei’s approval ratings have gone down – though not dramatically. When he took office his poll numbers exceeded 60 percent; now they are in the 45 to 50 percent range. The pundits in Casa Rosada believe that is still surprisingly high, given the size and depth of the adjustment of the economy, which is hitting most badly, especially on wages and pensions.
But the Milei government also knows that should the president’s popularity sink further, let’s say to below 40 percent, his power to impose reform on the political, business and union establishment (aka “the caste”) would wane significantly.
Milei needs to score his own goal – quickly. But which one?
An economist – the first to be president of Argentina – Milei campaigned on a mostly economic platform. Even with his dollarisation promise still on a distant horizon, experts from all political backgrounds have been surprised by the financial peace the Milei administration has achieved after three months into office. The main number they follow is the gap between the official and the parallel exchange rates, which this week touched 15 percent, a low in Milei administration’s brief time in office. Meanwhile, the Central Bank continues to accumulate foreign reserves, almost US$9 billion so far.
Yet the pax cambiaria can only excite people so much, if at all, and it is just a condition for the real goal of changing the public’s life for the better.
Milei and Economy Minister Luis Caputo hope inflation can be their opening goal. This week, the president said that February’s rate was around 15 percent monthly, down from 20.6 percent in January, down from 25.5 percent in December. By late March, inflation will have accumulated more than 80 percent already, though the head of state notes that “the reduction of inflation is very strong.” His objective is to reach one-digit inflation in May/June.
Is that the political goal Milei needs? Sergio Massa, the former economy minister who lost the presidential run-off to him last November, knows well from his experience last year that promises on inflation can be dangerous, especially when – as it happens – you don’t control a lot of the variables involved.
When he took charge of the economy, Massa also adjusted the economy (true, more gradually) and inflation went on a downward path until he was hit by a massive draught in 2023 that ruined his plans. His final campaign spending spree only made things worse.
Milei still must cut subsidies and thus raise utility rates, settle on a formula to update pensions, pray that the commodities cycle works in his favour (the international price of soy is not helping) and trust that the markets continue to buy his word that he can avert another devaluation of the peso.
Unlike Noboa, Milei is likely reluctant to consult directly with the voters – with good cause. The Ecuadorean president, confident about his popularity, has called a 10-question referendum for April 21, most of them related to his security programme. Noboa does this because, like Milei, his ruling coalition only has 25 seats out of 137 in the National Assembly. But in Argentina, despite threatening on several occasions during the campaign to bypass “rat’s nest” Congress via referendums, Milei used a March 1 state-of-the-nation speech to produce a decalogue of economic principles for “the caste” to adhere to.
Milei’s divisive attitude – which he seems to revel in – gives him a relatively low ceiling of approval, mostly because he wants to go solo, shouting and swearing his way forward. Unless he scores a goal and delivers a major achievement (which given the complex and multi-factor nature of the economic problem he faces would only come in instalments), his star risks fading away even if his staunchest followers fail to notice it.
His most desirable sequence would be as follows: the government avoids a major devaluation in Q2, inflation reaches one digit by June, the Central Bank continues to gather reserves, there is a new agreement – eventually with new cash – with the IMF, and currency market restrictions are mostly lifted in Q3. In parallel, social unrest does not spiral out of control, he manages to pass some legislation to consolidate his fiscal programme in Q2 and “the light at the end of the tunnel” becomes visible for the larger public in late Q3 or Q4. This, of course, amid a context of economic decline of four to five percent – with Argentina as the only G20 nation to suffer recession.
Even this “good” base scenario for the Milei administration (40 percent probability?) would be a disputed VAR call, because it would leave many casualties. Packaging it correctly might require more than the president’s anti-caste diatribe and his daily eruptions of verbal and social media violence. Otherwise, he might end up scoring an own goal.
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