Esta entrevista se puede leer en español aquí.
It didn’t take lengthy for the brand new President of Argentina, Javier Milei, to don gloves within the worldwide enviornment and showcase his libertarian strategy to international coverage. Some political gestures have already stirred conflicts with Brazil and China—the nation’s two most important buying and selling companions. In December, Milei invited former Brazilian president Jair Bolsonaro to his presidential inauguration, and final month, his administration initiated relations with Taiwan by arranging conferences with representatives from the Taiwanese commerce workplace and Taiwan’s consultant in Buenos Aires.
Identifying as an “anarcho-capitalist,” Milei goals to strengthen ties with what he calls the “free world.” However, this ideological rerouting of Argentina’s international coverage clashes with very explicit dependency relationships, primarily with the International Monetary Fund (IMF) and China. Milei’s early confrontations with different leaders within the South American area and his fast distancing from boards like BRICS and Mercosur (the Southern Common Market) point out his need to swiftly select his adversaries. These conflicts may show expensive.
To higher perceive the preliminary steps of the Milei authorities’s international coverage, we spoke with Maia Colodenco, Head of the International Affairs Unit on the Ministry of Economy of Argentina in 2019 beneath Alberto Fernández’s authorities. She represented Argentina on the G20, labored as a guide for the Inter-American Development Bank, and served as Principal Advisor to the Executive Director for Argentina on the World Bank in Washington.
An interview with Maia Colodenco
CAMILO GARZóN: Some members of Milei’s financial staff have already been introduced. They embody financial advisors who beforehand labored with Macri, equivalent to Luis Caputo, the Minister of Economy, and Santiago Bausili, Governor of the Central Bank of Argentina. How do you see this preliminary circle of financial advisors?
Milei undeniably got here to energy by successful the runoff, however he wanted coalition forces to assist him obtain that victory. On one hand, this factors at a sure negotiation of continuity with these forces that aided him in gaining energy. On the opposite hand, contemplating the nation’s present financial scenario, I believe Milei now acknowledges the necessity for a sure macroeconomic pragmatism in distinction to his marketing campaign rhetoric. It is a lesson realized from when Macri got here into workplace, introducing shock insurance policies that didn’t end up properly ultimately.
There have been sure macroeconomic imbalances on the finish of Alberto Fernández’s administration that wanted decision—imbalances that persist and haven’t been addressed but. The evaluation of trade charge points remains to be legitimate, and it requires a revision of the international trade clamp (a set of restrictions on entry to foreign exchange in Argentina), which was carried out in 2011 and remains to be in impact. There remains to be no clear coverage on how they may construction native currencies alongside the greenback. Faced with these challenges, as a substitute of dismantling the Central Bank of Argentina, they appointed Santiago Bausili, well-known out there sector, because the Bank’s President. This displays a sure pragmatism and, in a means, hints at a bent or focus in the direction of dollarizing the liabilities of the Central Bank and finally dollarizing the entire economic system.
So, whereas I can see some shock insurance policies in different political areas, at the least by way of the economic system, the continuity of sure figures throughout the sector might point out a practical strategy. The negotiation of exterior debt with the IMF is probably going taking part in a task in how this macroeconomic choice aligns with continuity measures.
CG: How do you this authorities will navigate renegotiating the exterior debt and the nation’s relationship with the IMF?
MC: Negotiations with the IMF are all the time difficult, however we have to take into account the precedents. Back in 2018, the Macri authorities took on the biggest debt within the historical past of the IMF, which was additionally probably the most important credit score assumed by the federal government in the whole historical past of Argentina, amounting to $45 billion. In that sense, I consider that additionally it is within the IMF’s finest curiosity to resolve the matter and preserve good phrases with Argentina.
During Alberto Fernández’s authorities—which I used to be a part of—Martín Guzmán, the primary Minister of Economy, renegotiated the debt with the IMF in a means that served Argentina properly, in my opinion. The restructuring didn’t contain austerity measures; it allowed for debt refinancing with none labor reforms or privatization of state-owned corporations. It curbed spending with out being regressive. Unlike instances in different elements of the world, Guzmán initiated the negotiation by approaching non-public collectors with an evaluation of restoration and sustainability based mostly on maturities, and later negotiated with the IMF. This was a brand new technique, and it proved profitable. In distinction to a few of the present insurance policies being promoted, we consider that this system negotiated by Martín Guzmán aimed for a gradual adjustment, one which trusted how varied components had advanced in Argentina, whereas additionally together with the problem of decreasing IMF surcharges on the agenda.
Now, the IMF clearly needs the numbers so as to add up and doesn’t care about what occurs to the folks within the nation. For this authorities, Milei’s most up-to-date mission goal—led by Luis Caputo and Chief of Staff Nicolás Posse—is to renegotiate the preliminary maturities of the debt that Argentina holds with the IMF, totaling $1.95 billion. Nevertheless, the impression of the brand new inside measures proposed by Javier Milei, at present being mentioned in Congress, nonetheless should be assessed, as they might additionally have an effect on negotiations with the IMF.
Among these measures are reforms to folks’s pensions and the discount of social plans, which collectively represent a good portion of public spending. There are additionally proposed reforms to healthcare methods, in addition to every thing associated to decreasing electrical energy and transportation subsidies. These reforms not directly have an effect on the connection with the IMF insofar as they intention to scale back public spending with these changes, aspiring to realize their fiscal deficit discount targets. Depending on which variables they contact, whether or not these targets are achieved by means of elevated employment or by means of much less consumption and fewer financial stimuli, the impression might fluctuate. In any case, the IMF will clearly commend Milei if fiscal deficit discount is achieved. I don’t assume they care the way it’s completed so long as the numbers present enchancment.
CG: On the opposite hand is Argentina’s presence in sure international financial boards. How do you interpret Milei’s current speech on the World Economic Forum at Davos?
MC: I believe it stems from a misguided and outdated prognosis of the present state of affairs—one thing from one other period. For occasion, there are points of his speech which I believe now not maintain. He claims that the West has failed economically, however he doesn’t supply another. If he’s referring to the financial mannequin of Southeast Asia, then that’s not a mannequin he appears to admire. In that sense, we see a little bit of a contradiction and a world of classes that harken again to the Cold War, as if there have been nonetheless a pointy division between East and West. The world is at present multipolar, with actors rather more atomized and a extra conflicted globe, however the reply to our issues is unquestionably not a campaign towards socialism, as he presents it. I additionally assume the prognosis is mistaken on Argentina’s self-awareness concerning its nationwide and worldwide function. In a Latin American context, a rustic like Argentina is way from insignificant, however it isn’t a systemic participant within the broader context of the worldwide economic system.
An vital development in right now’s worldwide stage is the numerous weight held by the non-public sector. Meetings like Davos have grow to be crucial, particularly for influencing discussions on debt restructuring. The nation wants to grasp that it isn’t solely engaged in relationships with state actors; there’s a non-public sector that now holds as a lot affect as some states in varied areas. However, this doesn’t imply Milei ought to solely concentrate on non-public entities as impartial and self-sufficient items. Many developments, equivalent to these occurring within the electrical automobile sector, have been pushed by in depth state improvement agendas and investments. Someone like Elon Musk can reward entrepreneurial initiative all he needs, however his progress in varied sectors has been significantly facilitated by the state. In that sense, when Milei’s discourse celebrates entrepreneurs unilaterally towards the state, I can’t keep away from perceiving contradictions. I consider he misunderstood the Davos viewers, which consists of each sorts of actors—entrepreneurs and state representatives.
CG: I discover it fascinating how Milei is already hinting at an alignment with the United States and Israel, whereas additionally distancing himself from Brazil and China. How do you assume these adjustments have an effect on Argentina’s presence in a bunch like BRICS?
MC: The Argentine authorities has already formally introduced that it has declined the invitation to affix BRICS. Consequently, Argentina will now not be a part of a bunch that’s key in parallel diplomacy to establishments of the worldwide North. As I discussed earlier, it will clearly profit a rustic like Argentina to be concerned in additional worldwide boards, particularly financial ones. Participation in these boards can foster helpful diplomatic and energy dynamics, which may even affect help for varied agreements.
In Alberto Fernández’s authorities, for instance, we labored extensively within the G20. Many of the agreements we reached there have been then prolonged to the IMF or the UN. All of that bespoke work contributes to constructing relationships with different states. In that sense, I consider it’s a mistake to not take part, and I additionally assume Milei is grounding this type of distance in a misguided prognosis which ends up in a diplomatic overreaction. Even the US State Department has affirmed that it will by no means ask international locations to not be a part of BRICS.
Looking at Milei’s withdrawal from potential membership, I believe his opposition was extra strongly triggered by Iran’s current inclusion within the BRICS discussion board than by a proper distancing from China. But even so, it’s nonetheless an error—Argentina wants to enhance commerce relations with Brazil and China, its principal companions.
We nonetheless want to attend and see what occurs to Mercosur, since formal conferences have but to happen. The Minister of Foreign Affairs, Diana Mondino, lately met with members of that discussion board to barter a free commerce settlement with the European Union—that is regardless of Milei stating final yr that Mercosur ought to be abolished as a result of it was a faulty customs union. Statements by Mondino are extra nuanced; she speaks about “modernizing” Mercosur and says that the 4 member international locations should cut back the variety of customs obstacles between them. On one other entrance, concerning the Organization for Economic Co-operation and Development (OECD), Argentina will certainly insist on becoming a member of—the query there may be whether or not the OECD will settle for its entry or not.
I consider Argentina mustn’t have to decide on between one discussion board or one other. It may have a presence at each. However, it’s been Milei’s political choice to decide on between the 2. In my view, this choice appears to stem from an exaggerated line of motion that had by no means been explicitly requested. Argentina has by no means earlier than had to decide on between China and the United States.
In reality, now we have traditionally had an excellent monetary relationship with the Chinese authorities by means of their swap settlement with the Central Bank of Argentina, which has been essential for these international locations’ financial relations. At the identical time, the settlement with the IMF has additionally been crucial. This reveals that we are able to preserve very appropriate agreements with the United States that aren’t incompatible with retaining good relations with China.
CG: Can you elaborate on Argentina’s relations with China and Taiwan?
mc: Argentina has all the time adhered to the One China precept. In our area, solely Paraguay has expressly acknowledged Taiwan as an impartial state. Since 2012, the connection between Argentina and China has advanced, marked by elevated investments in infrastructure. Just between 2007 and 2020, Argentina acquired $10 billion in investments from Chinese corporations, primarily targeted on vitality, mining, and the monetary sector.
Historically, Argentina has maintained a powerful and optimistic bond with China. The commerce quantity between the 2 international locations has been a key factor. As our second-largest buying and selling accomplice, the potential for having a credit score line for business transactions has been essential. This association has allowed us to bypass the direct use of the greenback in foreign money exchanges—therefore our progress in commerce quantity. Additionally, China has performed a major function in supplementing Argentina’s worldwide reserves by means of the swap settlement. Additionally, there are main infrastructure initiatives in Argentina which might be funded by China, together with railways and dams in Santa Cruz. Many of those investments are associated to logistics for exports and, typically, concentrate on infrastructure improvement.
Sure, if one appears to be like on the locations the place China has been directing its main pursuits over time, the function that Argentina performs in Chinese investments has considerably diminished. However, Argentina nonetheless stays among the many high three recipients of direct international funding in Latin America. In that sense, I consider that this shift in opinion concerning China has not labored properly; it’s evident that Argentina doesn’t stand to realize from shedding the Chinese market, and even merely from going through the chance of shedding it.
CG: Let’s speak in regards to the case of Brazil, Argentina’s principal buying and selling accomplice. How do you see this relationship growing with each governments holding such divergent political positions?
mc: Under Alberto Fernández, the nationwide authorities made efforts to strengthen Mercosur. We believed that Mercosur wanted to be modernized and made extra environment friendly, whereas nonetheless safeguarding this important alliance between neighboring international locations. I believe that Lula will now be the guardian of that relationship, liable for preserving Mercosur as a framework, although I believe he doesn’t need to discover the potential for creating alternate regional establishments in the meanwhile.
As to our direct relations with Brazil, the scenario is now clearly completely different from the time when Bolsonaro was in energy. Back then, even with no pleasant relationship, many connections have been well-kept. Since Brazil is a strategic and historic accomplice, we can’t afford to lose sight of our mutual identities. But Milei has already proven that he can take a extra confrontational stance. He has already withdrawn Argentine ambassadors from Nicaragua, Cuba, and Venezuela, and he’s at present in a dispute with Petro, although solely on social media for now.
CG: Milei has arrived at a juncture the place his ideological counterparts, equivalent to Donald Trump or Jair Bolsonaro, are now not in energy. In Latin America, there was a interval when left-leaning insurance policies converged amongst governments in international locations like Venezuela, Argentina, and Brazil, finally resulting in regional establishments like UNASUR (the Union of South American Nations) and BancoSur (the Bank of the South). Do you assume one thing comparable would possibly occur if Milei finds regional counterparts which might be constant along with his libertarian insurance policies?
mc: I haven’t seen any indications that Milei needs to create one thing much like what existed throughout the so-called “pink tide.” It doesn’t imply it couldn’t occur finally, however from what I see within the case of somebody like Milei, who’s a considerably anti-institutional character, is that it will be tougher for him to develop the same regional establishment. He is extra skeptical of all these multilateral environments, not not like Trump and Bolsonaro. The three share a diplomatic tendency to withdraw from varied multilateral boards.
Milei’s bilateral relations usually lack pragmatism, though he has demonstrated some realism on sure macroeconomic points. We will see how some points of worldwide politics realign, however I consider that Argentina ought to neither stay in worldwide conflicts nor overreact to them.