By now, if you follow crypto media or crypto Twitter, you’ll have seen streams of headlines and posts crowing about the victory of Javier Milei in Argentina’s general elections yesterday. This is uncomfortable as it highlights how blinkered crypto enthusiasts can be to bigger issues, and reminds me of the old adage “be careful what you wish for.”
Noelle Acheson is the former head of research at CoinDesk and Genesis Trading, and host of the CoinDesk Markets Daily podcast. This article is excerpted from her Crypto Is Macro Now newsletter, which focuses on the overlap between the shifting crypto and macro landscapes. These opinions are hers, and nothing she writes should be taken as investment advice.
Don’t get me wrong, I’m glad Javier Milei won, and if I were Argentinian, I would have voted for him (only reluctantly, with deep sadness, and because the “continuity” opponent Sergio Massa would have been even worse). Profound change is needed in Argentina, and I am eager to see the results of the radical economic experimentation Milei – an outspoken, libertarian economist – has been promising.
But three key things need to be kept in mind:
- Milei is not as “pro-freedom” as many assume.
- A lot of Argentines are going to have to endure significant economic hardship, even more than they currently do, as Milei slashes government spending through reducing benefits and subsidies. This is tragically necessary, and will hopefully bring growth on the other side. But let’s not gloat over what will be painful for millions.
- Bitcoin is unlikely to be part of his political platform, at least not for the next few years. He has plenty of other things on his plate to worry about, not least the upcoming currency chaos and the whopping debt with the IMF.
Below, I’ll dive into more detail on the above.
But first, a positive takeaway from the results: the victory was quite spectacular. Milei won the highest percentage of the vote (almost 56%) since Juan Peron’s landslide victory in 1973. Opponent Sergio Massa (the current government’s now-former economy minister) called to concede even before the official results had been released.
The very loud message sent is one of a fed-up population, and it has plenty of reason to be, with annual inflation of over 140%, more than two out of every five people living below the poverty line, and one of the world’s worst-performing currencies relative to the U.S. dollar.
Voters made a brave call for change and risk rather than the comfortable “devil you know.” The Argentinian people have my deep respect for this, and I sincerely hope that Milei pulls off an economic miracle. At least he has a chance – the other guy didn’t.
But it’s going to be bumpy, both economically and socially. Milei promises “freedom” from the yoke of socialism and desperate governments trying to buy votes through wasteful and profligate spending. He is pro-free markets and pro-free trade. His rhetoric around “individual freedom” strikes a chord with an angry population. These are all freedoms that I can get behind, but we have to recognize they could come at the cost of other freedoms that many of us take for granted.
One is monetary independence. Milei ran on a campaign of dollarization, which at least will solve the foreign exchange crunch that is hampering even basic operations. But it will not necessarily bring the promised relief from inflation, and it will shackle the country to the conflicted monetary policy of a global superpower.
Let’s not forget that Milei and his vice president Victoria Villarruel are far-right in political terms. Both have downplayed the atrocities committed during Argentina’s dictatorship, proposed dismantling the museum in memory of its victims, and stressed “zero tolerance” for crime. “Freedom” that only applies to those that agree with the government is not really freedom at all.
It’s not clear from where the growth will come from. Milei has talked about cutting off all relations with its second-largest trading partner, China (he has called the Chinese “assassins”, which I guess makes “dictator” sound tame). He has also said that he will refuse to even talk to “communist” neighbors such as Brazil (Argentina’s largest trading partner), Colombia (the country’s fifth largest trading partner) and Chile, although the private sector can continue to transact.
And the currency chaos that would result from dollarization will most likely put a significant dent in the country’s revenue, at a time when the worst drought in six decades has slashed production of soy products, Argentina’s largest export.
One international entity that should be happy is the International Monetary Fund (IMF). Argentina is the IMF’s largest borrower by far, with more than double the outstanding debt of the second largest (Egypt). The Washington DC-based lender has been urging austerity, which Milei seems happy to try to deliver – but austerity hurts growth until finances are on a stronger footing. Necessary perhaps, but painful.
It’s also worth bearing in mind that Milei has virtually no leadership or even business experience, and has spent only a couple of years in Congress. He was a TV commentator and economics professor, neither of which even hints at an ability to manage teams let alone a country. And while we can appreciate the novelty of a president who has reportedly worked as a tantric sex guru and who enjoys cosplay, we’ve seen elsewhere what a carnival-like approach to governing can do to a country’s reputation – plus, it’s exhausting.
Finally, there’s no indication that bitcoin will be a part of Milei’s platform, at least not at first, and possibly not ever.
Milei has rarely, that I’ve been able to find, spoken publicly about bitcoin unless in answer to a direct question. He’s never sounded like an evangelist. He gives the impression of playing to his base by supporting the anti-system ethos. But we’re left with the idea that, for him, bitcoin is more a distraction than a tool.
Plus, Milei can’t afford to annoy the IMF, which really does not like the idea of bitcoin at all. Last year, the Argentine Senate accepted a $45 billion IMF loan that came with the condition of discouraging cryptocurrency use. The IMF has since recognized that attempting to ban bitcoin would be impractical. But it’s no fan.
Milei is possibly radical enough to tell the IMF to go stuff it – but if he is planning on dumping the only other sizeable international lender, China, that would be close to economic suicide.
One positive is that he is unlikely to try to stop the growing bitcoin interest in the country, and the prohibition on banks offering crypto services could be walked back. Earlier this year, the securities regulator approved bitcoin derivatives. Holders of bitcoin will have done very well – in Argentine peso terms, the price of BTC is up almost 400% over the past year.
But bitcoin is not going to become the currency standard of Argentina, and we are unlikely to hear Milei mention it again, other than when directly asked to. It’s a very different situation to El Salvador, which does have a president who sees bitcoin as a tool for freedom, and who is not so beholden to the IMF.
Nevertheless, bitcoin will do well from the changes that lie ahead for Argentina. Local interest in bitcoin is likely to continue growing, especially when savers are faced with even more currency turmoil and especially as inflation will take time to come back down.
Even more importantly, there is a chance that the potential prosperity of Argentina will be restored. The economic and social cost of runaway inflation would have led to intense and drawn-out misery under a government lacking the courage to take necessary measures. Milei does not seem to lack courage. And the economic experiment could end up providing a roadmap for other beleaguered nations eager to move past disastrous socialism.
I’m hopeful. I’m glad that Milei won. But this is not the win for bitcoin or for freedom that many think it is, and we need to be respectful of the pain that lies ahead for a truly beautiful country.