artigas
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Today, an Argentinian relaxing on a Brazilian beach or shopping in a Chilean shopping mall has reason to be happy and content. The days of “deme-dos” have finally returned for the Argentine traveling abroad. Only a year ago Argentina’s economy was deeply troubled, a weak peso, runaway inflation, a huge budget deficit and negative growth fostering increasing poverty. Today Argentina enjoys a strong peso, falling inflation, a balanced budget, positive growth and decreasing poverty. Why has this happened, has Argentine industry suddenly become more efficient and productive, has Argentina's infrastructure become better, has Argentina opened up new world markets for its exports over the past year? Were 30,000 excess government employees the only thing holding back the Argentina economy? Did Milei engineer this economic miracle and does he deserve a Nobel Prize for the success of his “radical reforms”.
I believe that Milei (“Milei the Magnificent”) does deserve a Nobel Prize, not in Economics, but in Literary Fiction for this masterwork of Latin American Magical Realism, "Motocierra" although you could argue that he only copied the manuscript from Martínez de Hoz’s (“The Wizard of Hoz”) earlier works, “La Tablita” and “Plata Dulce”. The reason Argentines can cheaply and easily relax on Brazilian beaches and Chilean malls is that, overall, while their Peso salaries have only barely kept up with inflation, their US Dollar salaries have tripled over the last year. Yet Argentine productivity has not tripled over the past twelve months, nor has the country increased its global competitiveness in any tangible way. Why is this phenomena therefore possible, do Argentines really believe their comparative economic output in the global markets was so undervalued before that it is now, rightly, worth three times what its was worth a year ago due to the magic of Milei? This outcome, however, is certainly possible in a work of classic Latin American Magical Realism, more precisely in a short story of Economic Magical Realism written by Javier Milei in three chapters, a work of creative fiction worthy of Jorge Luis Borges, Julio Cortázar or Gabriel García Márquez.
Chapter 1 - Melting the Dollar : An initial “slight of hand” macro-devaluation of the previously completely overvalued, unrealistic and irrelevant official Peso rate, to a new, less overvalued exchange rate, while keeping in place the previous draconian exchange controls and taxes. Then introduce a new crawling peg exchange rate to further gradually boost the Peso overvaluation by limiting micro-devaluations to below the inflation rate to give the impression of responding to market forces. Meanwhile, manipulate the psychologically important, but smaller, Blue Peso market by channeling Blanqueo inflows and a portion of export proceeds into it, flooding the Blue market with Dollars and forcing hard up Argentine savers no choice but to draw down their Dollar savings to further prop up the Blue Peso as well.
Chapter 2 - Freezing the Peso : Limiting new Peso emission by balancing the Federal budget. Accomplish this by drastically cutting capital expenditure and critical infrastructure investment and slashing transfers to the Provinces while cutting absurd consumer electricity, gas and transport subsidies. By Sequestering previously issued Central Bank Peso debt from leaking into the market in the short term, the government then builds up a huge pool of high interest, overvalued Pesos debt that will eventually have to be dealt with, but only mañana. Meanwhile heavily publicized performative cuts in Ministry and government worker headcount with limited actual spending impact, which, never-the-less, distract the public and have outsized populist impact while generating favourable international commentary.
Chapter 3 - Fake It Till You Make It : Continue with the Chapter 1 & 2 narrative until you can raise enough new outside Dollars from the IMF, ever credulous overseas lenders and/ or investors to restock the Central Bank with Dollars which will then allow you to win the mid-term elections and pivot to some hybrid form of Dollarization. Meanwhile hope that Argentines do not drain the meagre Central Bank reserves by going overboard spending their newly strong Pesos before the elections or before Trump tariffs, Chinese economic problems and/ or European recession do not cause capital and commodity markets to reverse and overseas investors to lose interest in Vaca Muerta or Lithium mines.
Like all works of Magic Realism, the success of Milie’s story is dependent on keeping in balance the magical with the realism. Whether Milei can continue to do so is still up for debate, and only time will tell. Unfortunately, previous Argentine Magical Realists such as Martínez de Hoz, Cavallo or Macri could not keep the balance right in the long term, while the Peronists did not even bother with the reality part. Let us hope this time it's different.
I believe that Milei (“Milei the Magnificent”) does deserve a Nobel Prize, not in Economics, but in Literary Fiction for this masterwork of Latin American Magical Realism, "Motocierra" although you could argue that he only copied the manuscript from Martínez de Hoz’s (“The Wizard of Hoz”) earlier works, “La Tablita” and “Plata Dulce”. The reason Argentines can cheaply and easily relax on Brazilian beaches and Chilean malls is that, overall, while their Peso salaries have only barely kept up with inflation, their US Dollar salaries have tripled over the last year. Yet Argentine productivity has not tripled over the past twelve months, nor has the country increased its global competitiveness in any tangible way. Why is this phenomena therefore possible, do Argentines really believe their comparative economic output in the global markets was so undervalued before that it is now, rightly, worth three times what its was worth a year ago due to the magic of Milei? This outcome, however, is certainly possible in a work of classic Latin American Magical Realism, more precisely in a short story of Economic Magical Realism written by Javier Milei in three chapters, a work of creative fiction worthy of Jorge Luis Borges, Julio Cortázar or Gabriel García Márquez.
Chapter 1 - Melting the Dollar : An initial “slight of hand” macro-devaluation of the previously completely overvalued, unrealistic and irrelevant official Peso rate, to a new, less overvalued exchange rate, while keeping in place the previous draconian exchange controls and taxes. Then introduce a new crawling peg exchange rate to further gradually boost the Peso overvaluation by limiting micro-devaluations to below the inflation rate to give the impression of responding to market forces. Meanwhile, manipulate the psychologically important, but smaller, Blue Peso market by channeling Blanqueo inflows and a portion of export proceeds into it, flooding the Blue market with Dollars and forcing hard up Argentine savers no choice but to draw down their Dollar savings to further prop up the Blue Peso as well.
Chapter 2 - Freezing the Peso : Limiting new Peso emission by balancing the Federal budget. Accomplish this by drastically cutting capital expenditure and critical infrastructure investment and slashing transfers to the Provinces while cutting absurd consumer electricity, gas and transport subsidies. By Sequestering previously issued Central Bank Peso debt from leaking into the market in the short term, the government then builds up a huge pool of high interest, overvalued Pesos debt that will eventually have to be dealt with, but only mañana. Meanwhile heavily publicized performative cuts in Ministry and government worker headcount with limited actual spending impact, which, never-the-less, distract the public and have outsized populist impact while generating favourable international commentary.
Chapter 3 - Fake It Till You Make It : Continue with the Chapter 1 & 2 narrative until you can raise enough new outside Dollars from the IMF, ever credulous overseas lenders and/ or investors to restock the Central Bank with Dollars which will then allow you to win the mid-term elections and pivot to some hybrid form of Dollarization. Meanwhile hope that Argentines do not drain the meagre Central Bank reserves by going overboard spending their newly strong Pesos before the elections or before Trump tariffs, Chinese economic problems and/ or European recession do not cause capital and commodity markets to reverse and overseas investors to lose interest in Vaca Muerta or Lithium mines.
Like all works of Magic Realism, the success of Milie’s story is dependent on keeping in balance the magical with the realism. Whether Milei can continue to do so is still up for debate, and only time will tell. Unfortunately, previous Argentine Magical Realists such as Martínez de Hoz, Cavallo or Macri could not keep the balance right in the long term, while the Peronists did not even bother with the reality part. Let us hope this time it's different.
