← Hidden Forces
Hidden Forces
Is a Libertarian Revolution Underway in Argentina? | Bowtied Mara
00:46:55
In of Hidden Forces, Demetri Kofinas interviews Bowtied Mara about Argentina’s political history, its economy, the local real estate market, the energy sector, and President Javier Milei’s efforts to revive growth, combat inflation, and...
Loading summary
Transcript59 lines
- [00:01]
A
What's up everybody? My name is Demetri Kofinas and you're listening to Hidden Forces, a podcast that inspires investors, entrepreneurs and everyday citizens to challenge consensus narratives and learn how to think critically about the systems of power shaping our world. My guest in this episode of Hidden Forces is Bowtide Mehra, the author of an excellent substack on which he posts about his experience living and working as a Dutch expat in Argentina, as well as his thoughts on Argentine politics, history, the country's economy, its local real estate market, energy sector, and much more. Mara and I spend the first hour discussing Argentine political history and the sources of its economic decline, including comparisons between it and the United States during those critical decades of the 1930s and 40s. We also talk about Juan Peron and the importance of Peronismo in Argentine politics, what makes someone a Peronista, and why Javier Milei's brand of libertarianism in his election as the 59th President of Argentina represents a break with the country's history of oscillating between Marxist and fascist governments and dictatorships. In the second hour, Mara and I focus on Milei's master plan, his priorities upon coming into office, his political goals, and the strategies and tactics he is using to to achieve them. We discussed some of the specific policy changes that have already been implemented through his use of emergency powers, including changes to Argentina's system of price controls, export tariffs, privatization schemes, and other measures meant to liberalize the Argentine economy from decades of bureaucratic red tape and regulatory inertia. We also discuss Argentina's so called crawling peg and attempts to converge the official peso USD exchange rate with the unofficial or blue rate, introduce competing currencies as well as efforts to abolish the Central bank of Argentina. If you want access to that part of the conversation and you're not already subscribed to Hidden Forces, you can join our Premium feed and listen to the second hour of today's episode by going to HiddenForces IO. Subscribe all of our content tiers give you access to our Premium feed, which you can listen to on your mobile device using your favorite podcast app, just like you're listening to this episode right now. If you want to join in on the conversation and become a member of the Hidden Forces Genius community, which includes Q and A calls with guests, access to special research and analysis in person events and dinners. You can also do that on our subscriber page and if you still have questions, feel free to send an email to infoiddenforcesio and I or someone from our team will get right back to you. And with that, please enjoy this incredibly timely and invaluable conversation with my guest, Bowtide Mera. Bowtide Mera. Welcome to Hidden Forces.
- [03:07]
B
Thanks for having me. Demetri.
- [03:10]
A
I'm so excited to have you on. I told you. I'm very hopeful that this episode will help bring even more new readers to your substack because it's really the only. I don't know what judge I am, but it's the only English language substack I have found that deals with Argentina, and it deals with it very well. And we're going to get into your perspective as a foreigner living in Argentina and what I think you bring to the table. But before we get into any of that, I would love to learn a little bit more about you, Mara. What can you tell us about who you are, what led you to immigrate to Argentina, how long you've been living there and why you've remained there for as long as you have.
- [03:48]
B
So, yeah, I'm a literary studies major originally from the Netherlands, and my focus has always been on Spanish language and culture and literature. And I was also doing Portuguese classes on the side besides my master's. And there I kind of found the gateway to move to Latin America, which was my ex wife. She was doing a sabbatical in the Netherlands there for like six months. So we met, we got married very quickly in Sao Paulo. And luck had it because I was already a very big fan of Argentina and Brazil. Luck had it that she was studying at the Universidad de Buenos Aires, so at the Buenos Aires University. And we moved directly to Buenos Aires now, you know, we split up after three years or so, but I stayed there and I've been living here for the last 20 years. Got married again later to an Argentine. We have two kids and, you know, very, very happy living in Buenos Aires.
- [04:45]
A
Not to spend too much time on this, but I am curious to ask you this question. I lived in Italy out of college. I went and worked there. It was an exhilarating experience to just get up and leave and go to a foreign country to work and learn the language and the culture. What was that experience like for you? And would you say that you're a more adventurous person by nature than most people?
- [05:04]
B
Well, I'd say definitely different than most of my peers at the time because I had already lived in Spain for nine months. I did six months in Madrid and then three in Salamanca, and I kind of got the same, like, old world vibes. In Spain, as I did in the Netherlands, basically, you know, the European kind of open museum vibes that everything is already settled, there's nothing left to do. And I'd already traveled through Mexico, through Brazil and Argentina, and I was kind of like, I need that Latin American energy in my life. And that was also one of the reasons why I felt like I really needed to live somewhere where there was still, like, so much to be done and, you know, to be constructed and not everything was just settled by the state. Basically.
- [05:49]
A
You know, the scene that came to my mind was that scene in the Truman show where Truman tells the teacher that he wants to be an explorer like Magellan. And the teacher grabs the globes and says, too bad there's nothing left to explore, obviously, because the whole world was constructed. They wanted him to be limited mindset, don't expand your horizons. I think there's something in our DNA. I'm sure a lot of that's been lost over the years, but there's something in our DNA that craves adventure, craves exploration. And it's always inspiring to talk to people that have said yes to adventure. So you're one of those folks. And that's one of the reasons I'm excited to speak to you today. Besides the subject of today's conversation, which is Argentina. Let's move on to your substack. I'm just curious to understand what originally drew you to wanting to write. What was your original reason for starting a substack?
- [06:34]
B
Originally, after a few years, I started a marketing company here, an online marketing company, first local, and then I got into all kinds of bureaucracy issues that Milei is fixing now. Then I switched over to US clients, mainly because it was just too much of a pain doing business here. And through that, I kind of discovered how beneficial it is that you can make money online in one of the greatest economies, which is the US and not having to live there, and you can still continue with your life down here. So that sort of got me on the road to start writing about more in a sovereign individual kind of style. Like, okay, how can you set yourself up for success in a different country without losing your access to capital flow, clients, et cetera. So that was the first setup. And then afterwards I started writing more and more about Argentina's history. And that was the moment when Milei also got elected at a certain point. So it was kind of like the perfect setup to write more about politics, economy, all related to Argentina. So my blog kind of morphed into really an Argentina specific blog. Even Though it's still the subtitle, still Geoarbitrage, but I might change that to just Argentina at a certain point.
- [07:52]
A
I love that term, geo arbitrage. Is that something you came up with or had you heard it somewhere?
- [07:56]
B
No, it's a pretty standard term, usually in kind of the digital nomad sphere, where they just do geo arbitrage in a cheaper economy and while they earn in dollars or in euros, et cetera, and they just move to Thailand or Bali, et cetera. Well, Bali is not cheap anymore.
- [08:14]
A
That anarcho capitalist lifestyle is very exhilarating and enticing. And I know a lot of libertarians and anarcho capitalists live in Argentina who made their way there over the years. One person who I know well, fairly well, is Doug Casey. I'd interviewed him multiple times on my old TV show. I'd had a chance to hang out with him in private, hear his war stories, whether it was dealing with dictators in Africa or some of his travails in Latin America. And there's something really exciting about, I think for a lot of people in Argentina who adhere to these types of philosophies, there's something really exciting about the entrance of Milei onto the political scene because he is very much in that vein. He's an Austrian economist. So we're going to have a chance to talk about him in depth because that's really the Current Affair story of the day. But before we do that, I'm just curious to ask you, in your view, what is the correct approach for someone living in a developed country with no real knowledge of Argentina to take when trying to understand its political economy? How things work over there relative to how they work over here or how they work over in Europe and how they got that way. How would you answer that question from your perspective to the best of your ability?
- [09:29]
B
So, yeah, the best way would be through practice and a lot of suffering in terms of setting up your own business and trying to start that up here. You will see that it's a completely different world in terms of how long procedures take, how hard it is to get a bank account, how invoicing works here. You can't just scribble your invoice on a piece of paper like you would in the Netherlands or in the US and that would be valid. Now, everything has to go through a centralized IRS system here. So it's a very controlled economy also because there's, of course, the taxation levels are pretty high. And that's also why almost half of the economy is in the shadows. So a lot of people are not on the books as real employees. They get their money under the table, et cetera. That's very normal here. And that is something that took me a while to understand. For my Dutch mind, it was kind of like, why don't you guys just do everything in white as you're supposed to? Because otherwise nothing's going to work here. And then after a few years, I completely understood. Just like they were looking at me every time I would send an official invoice and they would be looking at me. It's like, why are you doing this? This is only a benefit to the state. You're not benefiting yourself here, and we don't even need your expense. And only later I understood why they did that. Because basically, if you would really pay all the taxes and tariffs, etc. On top of, in certain industries, on top of your invoices, you would almost come out negative. That's how many stacked and layered taxes there are here. So it's completely understandable that so many businesses and individuals try to circumvent that by other means.
- [11:03]
A
So a few comments there. I don't remember the exact quote or where I had heard it, but it was something along the lines of, in a country like Argentina, whether it's a failed state or just a country with layered bureaucracy, or a banana republic or something analogous, life becomes in some sense an illegal act that in order to live, you have to constantly break the rules. You have to constantly break the laws. My wife, as you know, is Argentine. She grew up in Pergamino. She had a business in Buenos aires in her 20s, a fashion business in her 20s and early 30s. And she ended up having to leave because it just became impossible and incredibly frustrating. And I've heard her stories as well on this. Again, I'm not a historian of Argentine politics. As I mentioned to you before we got on the microphone. What I know about Argentina, my loosely held beliefs are largely informed by peripheral knowledge that I've gained from reading other books that either mentioned Argentina directly in the context of discussing something else, or my understanding of what Argentina's economy was like in the early 20th century. Highly commoditized, export driven economy that depended on a lot of foreign direct investment or foreign capital. My knowledge of that, combined with what I understood that happened to the world, to the developed markets, to these commodity driven export economies in that period of time, leads me to believe that although it's a complicated history, the 1930s in particular was especially important for understanding the trajectory and the economic term that Argentina took. Again, you and I talked about this a little bit. Argentina was not an industrialized economy like the United States, which impacted their ability to use Keynesian economic policies to generate a flywheel of capital investment and demand pull that would drive the economy and get growth started again. Perhaps that also explains why they turned more to a populist, quasi fascist, quasi Marxist model in various points in its history, without depending or expecting you to give me some kind of long historical treatise, either what is your understanding of that history that's relevant, or perhaps more to the point, what is your understanding of what Argentines say? What is their story of why their economy and their political system has been such a basket case over the last more or less 100 years?
- [13:22]
B
Well, I think there you touch on the dichotomy in Argentine society up until this day, which is basically there's one part of the population that is convinced that Argentina was the biggest powerhouse in terms of GDP per cap capita, et cetera, around the turn of the 20th century, through agricultural exports, resources, et cetera. And then there's the other part which says like, you know, that was only concentrated in the hands of a few, which is also partially true. And that's why there was no industrial base. So a lot of people just didn't have any jobs and were living kind of misery, et cetera, which was definitely the case as well. So it was like those two things were coexisting at the same time. And one of the main issues was that Argentina always had like a really heavy dependence, especially towards the end of the 19th century on great Britain. And Great Britain was like the number one investor in Argentina. And if you move through the docks here and you walk past those cranes, et cetera, they're all from the uk and you can still see that they were made in Leeds. It's very interesting history. And you see that throughout the many cities in Argentina. And also the railroad network, for example, was completely set up by the English. And there were just many years, I think two or three years where Argentina was the number one foreign investment country for the uk. So there was an enormous amount of capital and basically that capital was allocated to optimizing agricultural flows, et cetera, from Argentina. Meat, but mainly grains. And at a certain point around the Great Depression, the focus of the UK started shifting towards more towards the us so they did try to have some other trade deals, et cetera, at that time. And Argentina ended up signing some non, not very beneficial deals with the UK actually, you know, giving them full monopoly on freezers. Et cetera. And then they still had to sell their stuff more cheaply because otherwise they would get it from the US So that was kind of the beginning of the end for that era. And that's also when a lot of political turbulence started and around the Second World War. So in 43, there was a coup here, a military coup, which Juan Domingo put on, formed part of. He was a Minister of war and of the social benefits, et cetera. And then after the war, in 46, he got elected democratically, and then he started a real turnover in terms of almost like a kind of Roosevelt kind of change for Argentina. Way more focused on social policies and trying to get the industrial base from the ground. That's also the excuse that is used for Peronists when they say, like, yeah, okay, he did invite a lot of war criminals, but they also had a lot of knowledge, etc. But there was definitely a sort of affiliation there because Peron basically based his whole philosophy on Mussolini's model. So there's a big collaboration between the state and big business, and it's a model that forms monopolies. And he also introduced a lot more trade tariffs, etc. And protectionism to make sure that Argentina would get its industrial base off the ground. And he also started spraying around social programs and really making sure that people could retire, etc. Even though they might have not worked their whole lives, the female vote came into play, etc. So a lot of social changes, which is why so many people still remember him as a positive change. And he was ousted from power after his second term in 55. And it was actually a really nasty turnover because the military bombarded the Plaza de Mayo. You can still see the bombshells. And a lot of people died. They hit a school bus and it was like a complete massacre. So then he fled to Franco Spain, and he stayed there for about 20 years. And on and off. Argentina had democracy and then mainly military dictatorships during that time. And in the 70s he came back and he was elected in power again democratically and stayed in power until his death one year later. And that's basically when the current problematic really reached its high point in Argentine society, where it was the prequel to the military dictatorship. So you had in 74, Peron died. And during that time there was already a really big internal war going on between more Marxist followers of Peron, which were the Montoneros and the erp. It was kind of like guerilla Marxism. And then the more traditional Peronists, which was much more on the Right wing side and they didn't want to have to do anything with Marxism, which I think Perdon was also more of that leaning because he actually created the aaa, the anti communist alliance that was kind of a secret police that started arresting people, torturing, et cetera, and taking those Marxist elements out of society. And that aspect was later revitalized by the Fidela dictatorship. And we know that that was all very horrible. But that part is essential, I think, to understand what happened in the 21st century. Because basically on and off there were some trials. In 85 there was a big trial, they all got condemned. In the 90s President Carlos Menem signed. He basically pardoned everybody. So he pardoned the guerrillas and he pardoned the military. And then afterwards, during the start of the 21st century, the Kirtanist governments picked it up again and say like no, these people have to be brought to justice. And they started that process all again. And now we're at a point where the new kind of Malay youth, because they're all very young, usually they're really like xennials or you know, 14, 15 and up to, you know, below 30. Because in Argentina you can vote starting at 16. So a lot of these, that's something that the Kirshner nation also promoted and it went through. So actually it kind of backfired on them because they wanted to give young people the option to vote, but they ended up voting completely against their model. And that's basically what we're seeing now. So these young people are kind of tired of that 50 year old history in the 70s. And they say look, we've talked enough about terrorism and the military dictatorship. It's all awful, let's just focus on the future. But it's still a very present theme everywhere in terms of socially talked about and in terms of history. And who thinks which version of history should prevail basically.
- [20:03]
A
So a lot to talk about here. Before we move on, I want to make some comments, feel free to respond to them and some questions. One of the comments has to do with the social contract again going back to this crucial period, the 1930s. I've highlighted this on other shows. It wasn't the only time we had this as well. During the administration of Theodore Roosevelt and the trust busting era, there was a long period of rewriting the social contract in America. And so much of that was driven by the accumulation of power by the industrialists, the capitalists and the pushback by labor and the need to find some kind of compromise. This is also informed by the later Cold War with the Soviet Union and socialism, European socialism, was in some sense a response to that, to try to walk a middle line. Peron had his own way. I think he called it the third way, or.
- [20:52]
B
Yep, it was basically a combination of those two.
- [20:55]
A
Right, the third position. Maybe it was. I think it's also relevant to note, and I think this is really important because there are important lessons here, in my opinion, for the United States. Very important lessons, which is why I want to stay with this for a moment. I think one is that American democracy has been especially resilient, in part because it's so foundational to the Republic itself. I don't know enough about Argentine democracy to really understand how comparable that is, but that may perhaps explain partly why Argentina underwent a coup in 1930, whereas the United States in 1933 resisted. Famously, Smedley Butler resisted and blew the whistle on the Wall street push to overTake FDR in 1933. How much of that was happenstance, that it could have been the other way, or just sort of the serendipity of history, or was it really something that spoke to just how strong American democracy is? I don't know, because these are questions that we're grappling with today as we go through a difficult period, a long period, and will our democracy endure? What compromises will we make, et cetera, et cetera? So interesting to think about again. Happy to hear your thoughts on that. So that's sort of just a comment that I wanted to make. And I also wanted to draw another parallel that I want to ask you about, which has to do with this renewed debate in Argentine society about the 1970s, who the true victims of the political violence were and who the perpetrators were? Were the perpetrators Marxist terrorist groups like the Montoneros and other armed guerrilla groups like the erp, or were they the government and government aligned factions and parapolice organizations like the aaa? The parallel I see here is the recent debate between those who supported or make excuses for Luigi Mangione, if we're going to stay with the Latin accents, versus those who sympathize with the assassinated United Healthcare CEO Brian Thompson, with perhaps the key difference being that in Latin American societies, this conflict between Marxist and capitalist factions has endured long after the demise of the Soviet Union, whereas in the United States its revival is relatively recent. Does any of this resonate with you? And is there anything about this framing that you think is relevant to our understanding of Argentine history as well as to the cultural conflicts that continue to play out between Milei's Supporters and his detractors.
- [23:20]
B
Yeah, I think sometimes it can become a little bit too extreme where supporters will justify anything on social media, and sometimes it's just not justifiable. Of course, the state enforced violence was horrible during the 70s, and nobody can applaud that in any way, shape or form. And it's also very different, of course, when you have little guerilla groups blowing up police stations, et cetera, versus a whole state apparatus going after dissidents, basically, and getting a lot of the wrong people most of the times. So just students, et cetera. So it's definitely a very thin line where you can talk about, okay, but let's also talk about the other victims. But I do understand their point of view where it is like, nobody, during the last 20 years at least, everybody is always focused on people who were disappeared, et cetera, the stolen babies, etc. During the dictatorship. And all the victims of the guerillas, basically, which were also families and a lot of civilians too, got blown into pieces. Nobody ever focused on them in the official narrative. So kind of like this is the first administration that gives them some. Shines some light on them. And of course, from the opposition's perspective, it's absolutely horrible because they're kind of justifying the dirty war narrative where there was a war, and they don't really accept that terminology. But I can understand from both sides what kind of their view is on that. And the fact that there was so much upheaval going on from 73 or even the start of the 70s up until the dictatorship. And why the dictatorship was validated by society was that it was like a complete chaos and there were bombs going off, military outside of schools, et cetera. So at a certain point, these people were, you know, in general, society was just sick of it and thought, well, okay, you know, if need be, we'll just allow the military to take over and we're just done with it. And I think that's also one of the reasons why the. There will be a support for anything that's capitalist. It doesn't matter what it is. So, for example, among many of Milei's followers, you will, you know, hear anything is pro Israel. It's all good, because that's more part of their capitalist mindset versus Kirstenarist followers that will wave Palestinian flags, et cetera. So you see that in a lot of different layers on a lot of narratives that are going on right now. And they won't diverge from any of those narratives. It's like, no, because if we give them an inch, like Milei says, then we'll get socialism back. And that's something that we absolutely want to avoid. So basically, I think that's the main mindset for Milei followers and non followers. And for non followers, it's basically anything that they can grab to prove that Milei is psychotic Maniac is basically they will do, because in their mind he's really dangerous. And Argentina could move into the direction of a dictatorship. So a lot of things that overlap with Trump and the democrats in the U.S. i think, except you guys missed the. The really violent internal history that was the case here 50 years ago.
- [26:30]
A
That's right. We're definitely going to talk about Milei and his crazy sort of routine and act, and how much of it is an act, how much of it isn't. Why, if it's an act, does he engage in it? I do want to ask a couple more questions about Peron, but before we do that, just one general question about. It's a couple of questions, but it all falls under the category of politics, of political systems, comparative politics. What is important to understand about how Argentine politics works? What type of political system do Argentines have? What are the important things to understand about it? How many political parties exist in Argentina? And then maybe now or later we can talk about the Libertarian Party, because it seems that it wasn't a very big party in Argentina until Milei took over as president.
- [27:16]
B
Yeah, yeah, definitely. I mean, he started in the political arena in 2021, and before that there was basically no real Libertarian Party. The first Libertarian Party was started in 2013, but they hardly got any votes. And it was very pro Bitcoin, et cetera, but it was not very successful in terms of getting votes. And then Milei came on the scenes around 2014. He started appearing in a lot of different talk shows, and the numbers just went insane whenever he was on. So he got more and more airplay. And that's how most of the younger people got acquainted with Libertarian thought, or at least some of the Austrian school that he would talk about in those programs. And he would always say that what the current government is doing makes no sense, etc. And he would explain why. He would give free classes on city squares here and there and in the interior, and he would just explain Austrian economic theory. And that really resonated with a lot of people because they hadn't really thought about it that much. And if you see the public school curriculum, it's not something that is taught at all, like, you know, monetary policy, et Cetera is something that, you know, most politicians prefer not to talk about because then they can keep spraying society with money and papering it over. So that's a big shift, I think, from that Milei was able to accomplish. But yeah, even when he was voted in as a representative, as a deputy in 2021 in the lower house, I think there were only like five seats or so. And these people that have the other seats are also, you know, not really. Some already went away and joined with others, et cetera. So the cohesion of the Libertarian Party in Argentina is still very much in its formational instance right now. And you can see that also in how Milei treats people that do not follow the program. Exactly. They get, you know, the boot and they get Afuera. Yeah, exactly.
- [29:16]
A
Tell our listeners, some people may have seen this. Tell them what the context of this is so they know and they should go up and look up the video.
- [29:23]
B
Yes, the Afuera video, the original one is basically Milei in front of a whiteboard with all kinds of ministries, and he has like the whole row of ministries and every ministry that he pulls off is like basically out. So a fuera. A fuera. And he pulls like. I think at the time There were like 18 or 20 ministries during Alberto Fernandez, the previous president, and milei kept around 8 or 9. So basically he nuked half of all the ministries. And of course, those people didn't get fired immediately. They were brought under if they had long term contracts, they were brought under into other ministries, etc. But overall, after a year, I think around 60,000 people have been let go from the national government, which is huge and is also one of the reasons why they achieved a surplus besides cutting a bunch of programs, et cetera.
- [30:14]
A
Yeah, what a character. I mean, what an incredible unending source of entertainment. In a way, Trump also is a very entertaining character, part of his appeal. Both have a very different style and entertain in very different ways. And it's important that they entertain. We're going to talk about why it's important in the Argentine case. So just to tie this up, Argentina is a constitutional republic, It's a representative democracy. They have a presidential system. It seems a lot like the US Is there any key difference from a sort of operational point of view between the two countries?
- [30:43]
B
I think the key difference is probably the autonomy that states have in the U.S. it's also the case in Argentina for the provinces, but less so because.
- [30:53]
A
The provinces get a lot of money from the federal government.
- [30:55]
B
In Argentina, yes. Basically the structure is this that the provinces that make the most money distribute it over the rest of the provinces. And some are highly negative. So this is also a system that Milei wants to do away with, because what he wants is competition between provinces and have them sort it out on their self instead of leeching on the most productive provinces.
- [31:18]
A
Yeah, hopefully we'll have a chance to talk about that. So I just wanted to wrap up these questions about Peron and then we'll start getting deep into Milei, the challenges he faces, the progress he's made, et cetera, et cetera. You mentioned who Juan Peron was and why he was such an important and controversial figure. What I find confusing when looking at Argentine political culture is this concept of a Peronista, because Peron, as you mentioned, was quasi fascist. He was heavily influenced by Mussolini's Italy and the policies enacted there that he tried to reintroduce in Argentina. At the same time, the cursors are also described as Peronistas and they're communist or sort of leftists. So what do we really mean when we say that someone is a Peronista? And what do you mean when you say Milei needs to do XYZ things in order to avoid a pushback or a reacquisition of control by the Peronista faction in Argentina?
- [32:20]
B
It's morphed kind of into a chameleon type movement in terms of. It can have many faces and many ideologies. Basically the core thing is to say that you follow Peron or that you're Peronista, and then it can have any shape or form.
- [32:34]
A
Is it really that cynical?
- [32:35]
B
Or.
- [32:36]
A
I mean, is some of it also that you need to be a populist? Although again, Milei is a populist, but that doesn't necessarily make him a Peronista. So, like, is there anything else to hang your hat on?
- [32:46]
B
Well, in terms of populism, I'll just pause there. The populist element in Argentina is the only way you can win the elections, basically. If you're not a populist in the way you portray yourself, it's very hard to become popular amongst Argentines and you have to be a charismatic figure, otherwise it's just very likely not going to.
- [33:04]
A
Work because the institutions are so weak.
- [33:07]
B
Yeah, and it's basically, it's what appeals with voters and they really vote the person, not so much what they say.
- [33:14]
A
Again, an important lesson for Americans to understand what happens to a country when people lose faith in its institutions and its institutions crumble. Yes, we can all sit here all day and identify reasons why people are correct in having lost faith in institutions. But that in and of itself, I don't think is an argument for why we should continue to try and lose faith. And it's a very dangerous, slippery slope to go and you end up in a country that looks like this.
- [33:40]
B
Yeah. And to go back to Peronism, if you see what it's morphed into, basically the factions, the Marxist factions supporting Peron in the early 70s were also fighting the right wing factions. They won in the early 21st century. So basically Kirtanism is a continuation of that movement and that mindset. And that's also why they focus so heavily on bringing the military dictatorship to justice, etc. And they are a lot more Marxist in their social policies, et cetera.
- [34:11]
A
Deeply and deeply corrupt. A deeply corrupt.
- [34:14]
B
Deeply corrupt. And whereas, if you compare it to the 90s, Carlos Menem was also a Peronist, but he was very much open market. He wanted to open Argentina up to the world. He pegged the peso to the dollar and he brought inflation down to 1% or almost 0% at some point, which is also something that many Kirstenists reflect on today and say, like, look, that never works. We're going to end up with another 2001, which was one of the biggest crises in Argentina's history, because in the end, if the peso is too valuable, then it's going to explode at some point. Now, the big difference between milei and the 90s is that in the 90s, they still had the deficit problem. So, you know, in the end they had to print more pesos than were backed by dollars. And that's when everything just, you know, exploded. So if Milei is able to maintain the surplus over time, then, you know, this model could actually work, you know, depending on a lot of variables.
- [35:09]
A
But yeah, okay, we're going to have a chance to talk about that. Also, Mara, which, when I say talk about that, I mean the exchange rate and what Milei's policies are with respect to it, with respect to the fiscal deficit or fiscal surplus and the desire to build up the dollar reserves in the system. Why does he want to do that as part of his larger strategy? I think we certainly talked a bit about who Milei was. I don't think you mentioned necessarily where he came from. What do we know about Milei's upbringing, where he grew up, his family's economic standing. What, if any, of that is relevant to who he is and the story that people tell about him?
- [35:47]
B
Well, I think it is relevant. He's kind of like a normal middle class upbringing in the city of Buenos Aires. He started studying economics and then afterwards started publishing books about inflation and economics together with one of his partners, Diego Giacomini, which is also a funny story. He's a good economist as well, but Giacomuni is much more on the side of you never associate with the state. So basically they wrote a couple books together. Once Milei positioned himself as a politician and deputy, Giacomini distanced himself from Milei and he's most vocal opponent right now in terms of whatever he's doing. So for my articles, etc. He's a very interesting source because he's not always right, but at least he offers a really diametrically opposed version of what Milei says he's doing. And then also from a libertarian lens. So it's very interesting to get those two perspectives. And usually the reality is somewhere in the middle.
- [36:48]
A
Does that highlight a broader tension that exists within libertarian circles between those who are more willing to compromise their ideology in certain areas in order to gain political expediency versus those that are sort of like hardliners?
- [37:01]
B
Yeah, I think there's basically three segues. There's the hardliners that will just support anything that the current administration does, then the more anti state libertarians that say, like, look, Milei is now part of the system. So, you know, it's basically the Ron Paul voters that wouldn't vote for Trump just because, you know, they didn't see him as a full libertarian, basically. And then there's a third faction, which it's not a really big percentage of the votes, but it's always, I think, the most, well, dangerous vote in terms of very hardliner conservatism. More of like a Catholic wing, conservative voter base, which is also where the anti abortion comes in, et cetera. The LGBTQ discussions, which Milei doesn't really go into that much, except for his recent talk at Davos where he did. But for them, that is the most important part of the agenda and that is something that the Vice President, Victoria Villarroel, represents.
- [38:01]
A
What exactly? Just to clarify, what exactly is the agenda of his administration and what is his view on these topics and how does this relate to his economic philosophy? I'm not entirely following it.
- [38:13]
B
Yeah. So the social part of this program is something that I think Milei has never really thought about that much, but it keeps coming up every now and again to basically show that Milei is very conservative, etc. And is more of like the Old guard conservatives that would assign more importance to anti abortion, et cetera. But his vice president, Victoria Villarrell, she really embodies that part of the voter base and more of like a traditional Catholic view of policies that would need to be pushed through.
- [38:43]
A
You're saying she's a social conservative?
- [38:45]
B
Yes, yes, exactly. Yeah, that would be the right term.
- [38:47]
A
So they're both social conservatives based on what you're saying. It's just that she's more socially conservative than he is.
- [38:53]
B
Yeah. And he hasn't forced that kind of view on his program per se, but they would really like to push that through.
- [39:00]
A
I see. So he's socially conservative, but he's a libertarian, which means it's hands off. Whereas she's more of an activist in her socially conservative views.
- [39:09]
B
Yeah, yeah. And he's more of like, you should do whatever you want to. I'm not going to stand in your way, but the state shouldn't promote it.
- [39:16]
A
So it's interesting you mentioned Ron Paul earlier. You made a comparison saying that the hardcore people were more like Ron Paul, people that didn't want to vote for Trump. I actually want to dig in there a little bit deeper because Milei seems almost like everything I know about Ron Paul and I know quite a bit, and I know very little about Milei, but the little I do know, they seem to be basically the same. And they're certainly not in terms of personality types, but in terms of their philosophy. In terms of the comments about abolishing the central bank, certainly not around dollarization, but I think that speaks to one of our mutual friends comments around the dollar, which is Brent Johnson having to do with the fact that Americans really take the dollar for granted, but the rest of the world actually loves the dollar. So it seems hard for Americans to understand why Milei would want to dollarize. But I don't see a lot in common between Trump and Milei when it comes to their economic agenda. Quite the opposite, in fact. Milei is a libertarian, whereas Trump isn't.
- [40:12]
B
Yeah, no, I think that's correct. But for that part of the voter base, he isn't libertarian enough and taxes aren't coming off fast enough, stuff like that. So it's more like nitpicking on certain policies than anything else.
- [40:27]
A
So this is probably a good opportunity to get into all of that. Let's start with the social reaction again. We've talked about some of these questions. I have a lot of questions, some of which you inadvertently hit on in part as we started to go through this interview. So the AUDIENCE will forgive me if we kind of repeat ourselves a little bit here, but how has Argentine society, and especially Milei's opponents, reacted to his election and the initial implementation of his policy measures? And then I want to get into what those policy measures have been.
- [40:55]
B
I think one of the biggest changes that we saw right away was that he was able to maintain control over the whole social unrest factor, which is something that did not happen during Mauricio Macri's presidency. He was voted in 2015 until 2019, and basically there were protests every single day, you know, people vandalizing public buildings, etc. And it was really like kind of a chaos when he came to power, and with Milei, that just completely changed because he was very much a hardliner. And he said, like, look, you can protest, but not on the street. You cannot block traffic. And that has been one of his peer points.
- [41:32]
A
They've actually arrested people that do that, haven't they?
- [41:35]
B
Yeah, and they were released right after. But it was sort of like, to show, like, okay, yeah, if you do this, then this can happen to you. And of course, that gave way to cries about, oh, dictatorship, et cetera, because everybody was used to being able to block streets, and now it was all different. But besides that, they also discovered that a lot of these protests were actually funded by social programs. So basically what a lot of these protesters would do is that if you don't come to protest, we will take away your social program. That would be done by these point men. Or they would say, like, hey, if you want to get some more money, we can make sure that you get this social program, but you have to go to these marches. So they started digging through all of these items, and they saw that the amount of disability pensions that Argentina had, we should have had a war for the amount of people that had a disability pension. And it turned out that many, many of those disability pensions were just fake and they were just getting money to go to protests. So they've been gradually undoing all that. And with that, a lot of the social unrest went away, basically because it's not funded anymore. I think that's a really big change.
- [42:43]
A
It seems that that is also part of the strategic approach, right? Yeah. Because I suppose, again, there are people that are experts in interest group politics that can think about this stuff more intuitively. But it seems that the way this tends to work in these types of political economies is that there are entrenched interests that just benefit from business as usual and the use of the patronage system to grease the wheels of political expediency that become so entrenched that you have to struggle to take them out. They're so embedded and that seems to be a very heavy lift. So how has that been going? As you see the efforts that are being made by his administration? How far along is he, how well does he appear to be going? And do you see some significant pockets of inertia ahead of him that give you another political observers pause about just how much progress he's going to make?
- [43:44]
B
Well, I think the 2025 midterms this year in October are going to be a pivotal moment for Milei because right now for people to understand is that he won in 2023, but he doesn't have a majority in neither Congress or the Senate. So he has to get into coalitions with the Pro, which is basically Mauricio Macri's party, in order to get most of this stuff through besides his emergency powers, which he does have. But he cannot. There's a lot of taxation, et cetera, that he cannot push through with emergency powers and he has to go through the Senate. So I think once he secures enough seats in the October midterms, I think that will be a huge shift in terms of how fast things can go, even faster than they're going now, and the depth of the changes, because then he can really start legislating and not just governing by executive order, which is what he's been doing now.
- [44:40]
A
So, Mara, I'm going to move us to the second hour where the focus is going to be Javier Milei's master plan, his priorities upon coming into office, his final goal, and his political strategy and tactics to achieve that. In order of operational importance, I want to talk about what policy changes he's made already, including labor reforms, price and rent controls, import substitution policies and export tariffs, deregulation of the airspace to allow for new carriers to service domestic routes, privatization schemes and other measures meant to liberalize the Argentine economy from decades of bureaucratic red tape. We're also going to talk about the crawling peg and efforts to converge the official peso USD exchange rate with the unofficial or blue rate and why that's important. We're going to talk about dollarization and efforts to abolish the Central bank of Argentina and much more. For anyone new to the program, Hidden Forces is listener supported. We don't accept advertisers or commercial sponsors. The entire show is funded from top to bottom by listeners like you. If you want Access to the second hour of today's conversation with Mara, head over to HiddenForces IO and sign up to one of our three content tiers. All subscribers gain access to our Premium feed, which you can use to listen to the rest of today's conversation on your mobile device using your favorite podcast app, just like you're listening to this episode right now. Mara, stick around. We're going to move the rest of our conversation onto the Premium Feed. If you want to listen in on the rest of today's conversation, head over to HiddenForces subscribe and join our Premium feed. If you want to join in on the conversation and become a member of the Hidden Forces Genius community, you can also do that through our subscriber page. Today's episode was produced by me and edited by Stylianos Nicolaou. For more episodes, you can check out our website at hiddenforces IO, you can follow me on Twitter ophinas, and you can email me at infoiddenforcesio. As always, thanks for listening. We'll see you next time.