Taking the Chainsaw to Argentina's Bureaucracy | Federico Sturzenegger

Summary

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Hidden Forces: "Taking the Chainsaw to Argentina’s Bureaucracy"

Guest: Federico Sturzenegger (Minister of Deregulation and State Transformation, Argentina)
Host: Demetri Kofinas
Date: February 10, 2025

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Episode Overview

In this rich and candid episode, Demetri Kofinas sits down with Federico Sturzenegger, Argentina’s Minister of Deregulation and State Transformation under President Javier Milei. The conversation explores how Argentina, a nation once among the world’s wealthiest, devolved into economic and political dysfunction — and how Milei’s radical reforms are targeting decades-old structures of vested interest and bureaucracy. Sturzenegger gives a personal account of Argentina’s institutional stagnation, the real roots of Peronism, and the bold deregulation program now underway. He explains why he believes this moment represents the first genuine threat to Argentina’s entrenched elites in 50 years, and how these lessons may inspire reformers in other countries.

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Federico Sturzenegger’s Personal & Professional Background

[03:09 - 06:30]

• Grew up in La Plata, Argentina; father was a university professor.
• Studied economics locally, then earned a PhD from MIT, guided by Paul Krugman and Rudy Dornbusch.
• Academic experience at UCLA and Harvard Kennedy School.
• Held policy and industry roles: Chief Economist at YPF (oil company), Dean of Business School at Universidad Di Tella.
• Political experience spans President of the State-Owned Bank of Buenos Aires, elected Deputy in Congress, and President of Argentina’s Central Bank under President Macri.
• Returned to academia before joining Milei’s government, driven by a passion for public policy and transformation.

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Understanding Argentina's Dysfunction: Entrenched Interests & the Illusion of Instability

[06:30 – 13:20]

• Despite surface-level instability (e.g., inflation, defaults), Argentina is “too stable”: major union and business leaders have remained unchanged for decades, perpetuating a rigid status quo.

• The Peronist party functions as the conservative force, protecting entrenched interests by leveraging state mechanisms for resource transfer.

• Example: Social aid was funneled to intermediaries who took a cut and mobilized protestors, financed by the very state they protested against. Milei’s government cut out intermediaries — roadblocks (“piquetes”) vanished overnight.

• Notable Quote:

  “If the government is financing the demonstrations against the government itself…The system that Argentina has built basically appropriates resources from the population at large.”
  (Sturzenegger, [10:41])

• Main lesson: Disrupt resource flows to these groups and have the will to challenge the power structure.

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Historical Roots of Argentina’s Decline

[13:20 – 22:50]

• Resources are not enough: good institutions are key. Japan is rich with few resources; Argentina is the opposite.
• Reference to Acemoglu and Robinson’s Why Nations Fail:

  “If what has to be done is not done, it’s because someone doesn’t want it to be done…the ones who don’t want it are those benefiting from the status quo.”
  ([15:11])

• The turning point: Late 1960s military ruler “Onganía” emulated Perón, rapidly handing out privileges to unions and business elites, creating a self-reinforcing, rent-seeking regime.

  “This guy kind of set up this system… After his presidency, Argentina stopped growing.” ([18:06])

• The legacy: Ingrained legal privileges and a political configuration where real structural change has proven nearly impossible—until now.

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The Nature of Peronism

[20:18 – 22:50]

• Peronism is not an ideology but a vehicle for vested interests.

  “It’s the party of the elites and the vested interests... It’s been very intelligent in reinventing itself, but the core interests are always the same.” ([21:08])

• Cited The Little Prince metaphor: The label “Peronism” is a box — people see what they want, but inside it’s always elite interests.

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The Argentine People, Pandemic Response, and the Appetite for Change

[22:50 – 29:17]

• Argentine citizens behave like those elsewhere — “people respond to incentives the same everywhere.”
• The disastrous pandemic response: Argentina’s government imposed lengthy quarantines, politicians received the first vaccines (excluding the public), and turned down timely offers from Pfizer, costing thousands of lives.
• Mass emigration:

  “In the last 10 years, 2 million Argentines left the country… Because we’re an economy which has not grown for the last 15 years. And who has left? The young have left, across all social classes.”
  ([26:10])

• The result of growing poverty, authoritarianism, and hopelessness:

  “A significant change is necessary.” ([28:19])

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Culture, Government, and the Myth of Argentine Exceptionalism

[29:17 – 35:58]

• Discussion on whether Argentina’s “anarchic” or “libertarian” tendencies are unique:

  “I don’t think we should dwell on this idea of exceptionalism... we’re just a plain example of a society captured by interests.” ([29:17])

• Decades of propaganda taught Argentines that government is the solution — until the system collapsed under its own weight.

  “The state is the problem... Argentines are totally fed up with that. They realized they had bought into a scam.” ([31:10])

• Statistical case for Milei’s approach:
  • Government spending reduced by 30% in year one — a 5% GDP decrease.
  • Poverty has dropped from 54% to 36%.
  • Economy projected to grow 4% in Milei’s first year.

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President Milei’s Media Phenomenon & Its Political Impact

[36:13 – 41:38]

• Milei communicates directly via social media and media appearances, making deregulation a mass cultural event.
• His style is confrontational and unapologetically candid.

  “When you go on TV and say, I’m going to shut down half the government, and people cheer, you realize people have realized they have been deceived.” ([36:48])

• His impact reaches beyond Argentina:
  • “He has reparameterized what politicians feel is possible.”
  • Fiscal surplus achieved quickly — transforms expectations for reformers in the region and globally.

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Spillover Potential & The End of Keynesian Illusions

[41:38 – 49:11]

• Interest from Latin American leaders in copying Argentina’s bold reforms.

  “Everybody’s looking. Javier after one year is more popular than ever, defying conventional wisdom that big fiscal cuts carry big political costs.” ([42:36])

• Host cautions: Popularity hinges on continued economic growth.
• Sturzenegger dismisses Keynesian arguments for big government:
  • The Keynesian multiplier ignores crowding out. The real effect is neutral, or even negative, because government spending diverts resources from private uses.
  • Argentina’s dramatic fiscal adjustment (+5% GDP cut in spending, +4% GDP growth) is “unheard of” and invalidates claims of inevitable recession from “austerity.”
  • If a government reduces unproductive spending and cuts taxes, private sector allocation is superior—Argentine example shows large reductions in poverty and growth.

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Specific Policy Measures: Deregulation, Red Tape, and FDI

[49:11 – 56:58]

On Macroeconomics and Exchange Rate [50:00]

• Sturzenegger defers monetary and exchange rate questions to the finance ministry, but outlines basic points:
  • Fiscal surpluses and monetary stability have brought macro “normalization.”
  • Ending money printing, restoring confidence, and stopping capital flight have stabilized the currency.
  • “We just kind of added some normalcy... Coming from non-normal to normal situation.” ([52:55])
  • Dramatic fall in inflation: Wholesale prices up just 0.5% last month, versus 25% a year ago.

On Foreign Direct Investment [53:36]

• Fiscal stability is “the most important measure to attract FDI.”
• The “Regime for Large Investments” creates targeted tax and regulatory incentives, notably in mining and energy.
  • Example: Argentina is the world’s second-largest shale gas reserve; contract of $7 billion/year just signed.
  • Sectors poised for boom: energy, mining, agriculture, cattle, software, tourism.

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The "Chainsaw" Approach & Future Milestones

[56:58 – 60:58]

• The core mandate: Shrink the state, run fiscal surpluses, and dismantle regulatory barriers.

• Focused on “Chainsaw 2.0”: Re-examining every arm of government with a libertarian lens, cutting functions unless essential.

  > “Now we’re going into every agency… asking people, what are you doing? If they’re not essential, the area gets shut down.” ([59:47])
  

  • Bureaucracy and red tape are “a big cost for companies” and must be eradicated.
• The team is committed to the long-term logic of reform, regardless of election cycles or headlines.

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Lessons for the United States & Inspiration from Elon Musk

[60:58 – 67:07]

• Discussion of Argentina’s possible inspiration for U.S. reform, especially the Trump administration’s “Department of Government Efficiency” and Elon Musk’s interest in overregulation.

• Key principle: Not just efficiency, but questioning the necessity of government itself.

  > “It’s not so much a department of government efficiency. I don’t want to make the government efficient—I want to ask if government should exist here at all.” ([62:55])
  

  • “The best part is no parts.” (quoting Elon Musk, [65:08])
  • Deregulation should err on the side of removing functions, rereview only if critical.
• Boldness is essential—reformers must “over-deregulate and walk it back if needed, rather than fall short.”

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Notable Quotes & Memorable Moments

• On systemic problems:

  “Argentina's problem is that it's a country that is ​_too stable_​... The same union leaders, same business community for 40 years.” ([07:17])

• On Peronism:

  “Peronism is the party of the interest groups. It's the party of the system... The core interests that are protected are always the same.” ([21:08])

• On cutting intermediaries:

  “When Milei came... money was transferred directly to people—the piquetes disappeared.” ([10:41])

• On reform philosophy:

  “We’re using the state to undo the state.” ([61:25])

• On challenging reformers:

  “Maybe you think you cannot adjust current intervention 3, 4 points of GDP. Well, maybe you can. Maybe you’re just not bold enough.” ([66:17])

• Final advice:

  “The best part is no parts. We need to ask: do we need this part of government at all? Many times the answer is: you don’t.” ([65:08])

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Timestamps for Key Segments

• [03:09] Sturzenegger’s upbringing and career beginnings
• [06:30] How entrenched interests and “stability” undermine Argentina
• [10:41] Social aid and piquete example: resource capture and reforms
• [13:20] Argentina’s decline and the institutional legacy of Onganía
• [21:08] The true nature of Peronism and its adaptability
• [24:50] The pandemic, mass emigration, and the appetite for radical change
• [31:10] The scam of state dependency, poverty, and the turn to Milei
• [36:48] The power and risk of Milei’s direct style and “chainsaw” imagery
• [42:36] Is Argentina setting an example for the region?
• [44:04] The Keynesian multiplier debunked—Argentina’s counterexample
• [50:00] Macro stabilization: currency, capital flows, and inflation
• [53:55] FDI, mining, energy prospects, and specific policy moves
• [59:47] “Chainsaw 2.0”—cutting government to the bone
• [62:55] Lessons for the US: not just efficiency, but existential review of government functions
• [65:08] “The best part is no parts.” – bringing Musk’s lesson to state reform

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Conclusion

This comprehensive episode offers an unvarnished look at Argentina’s systemic dysfunction—and the audacious reforms now underway. Sturzenegger lays out both the logic and the effectiveness of Milei’s “chainsaw” approach, dismantling the legal and bureaucratic infrastructure that has empowered elites at Argentina’s expense. By asking not just how to make government efficient but whether it should exist in specific domains, the administration is challenging assumptions far beyond South America. Reformers worldwide are watching closely—will Argentina’s “Chainsaw 2.0” herald a new paradigm or prove a fleeting experiment? Only time will tell, but as Sturzenegger says, “Being bold enough to try is the first step.”

Transcript

[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 Federico Sturzenegger, the current head of the Ministry of Deregulation and State Transformation under Javier Milei's presidency in Argentina. Federico and I begin the episode with a discussion about Argentina's political and economic history in the 20th century, comparing the development of its industrial model, capital markets and political system to that of the United States. We delve into President Xavier Milei's initiatives to overhaul Argentina's political economy, including market reforms, changes to labor laws, industry regulations, and price controls. We discuss the progress being made thus far, the challenges that remain, and the Malay government's broader mission to transform the Argentine state and to fulfill its mandate of restoring economic prosperity and freedom to a nation that was once among the wealthiest and most providential countries in the world. If you enjoy this podcast and it brings valuable insights to your life and business, consider joining our premium feed where you'll gain access to subscriber only podcasts, transcripts and intelligence reports at Hidden Forces. Subscribe 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 infohiddenforces IO and I or someone from our team will get right back to you. And with that, please enj this comprehensive and invaluable conversation with my guest, Federico Sturzenegger. Federico Sturzeneger, welcome to Hidden Forces.

[B]

Hello. How are you in Dimitri.

[A]

It's great having you on, Dr. Sturzenegger. How do you like to be referred to? Dr. Sturzenegger, Mr. Minister of Deregulation.

[B]

No, honestly, I'm not very keen on titles and things like that, so you can just call me Federico.

[A]

Okay, well, I'm very excited to have you on. As I mentioned, my wife is Argentine and I actually told my mother in law this morning that I was interviewing you and she was very excited to hear about it. She wants to know all about how it goes. Of course they keep track of what's going on in Argentina. Everyone's very interested at the very least to know how things are unfolding, the progress that you're making. We're going to have a chance to talk about that. But before we do, you've had quite a distinguished career working in the private sector, academia and in government, including a stint as the head of the Central bank of Argentina. Can you tell us a little bit more about your background and also where did you grow up? Give us as much of your history as possible.

[B]

Well, I mean I grew up in a middle income family in Argentina. My father was a university professor, studied economics at city I grew up, which is the city of La Plata, which is south of Buenos Aires, and then did a PhD in economics at MIT. So in 87, with 21 years I left Argentina to do my PhD. I had two great. Well, I mean MIT is fantastic. No, but I had my two advisors were Paul Krugman and Rudy Dornbush, two very famous international economists. Dornbush was kind of my main advisor. I learned most of my economics from him. After that I spent some time as an assistant professor of economic at UCLA in Los Angeles. So I spent something and then I came back to Argentina for the first time as chief economist of ypf, which is the largest company Argentina, which is the national oil producing company. But actually my passion is more public policy. So after a while I realized I wanted to do something more related to public policies. And so I went back to academia, this time in Argentina as dean of the business school at Universidad Itela. So I spent there quite a number of years.

[A]

What years were these we're talking about?

[B]

These were between 98 and I was at YPF between 95 and 98 and then between 98 and 2005 I was Dean of the business school at ditela though in 2001 for a few months I went to work in government. And then in 2005 I was hired as a visiting professor of public policy at the Harvard Kennedy School of Government. I had just done a paper on which somehow had had an impact on a particular field in international finance. So, so I, I moved to Harvard there and you know, it happens, you know, so it's, you're doing well and you say should I stay abroad? I want to come back to my country. In 2007, I believe it was in Macri Mauricio Macri won as the race for mayor of the city of Buenos Aires. He asked me to come back. I really didn't doubt it. So for six years I was a president of the state owned bank of the city of Buenos Aires, which is a very large commercial bank. After six years I got a little bit bored. I think we had A very successful tenure there. And I decided I wanted to run for Congress. So I. I wouldn't say I became a politician because I'm more of an academic, but I kind of decided I was going to try that. So I ran an electoral campaign. I was elected to sit in the Chamber of Representatives of Argent, which I spent there two years. And then I went. Macri won the presidency, finally won the presidency. At the end of 2015, he appointed me president of the Central bank of Argentina. And I held that position for around two years and a half. And then I left and I went back to academia, this time at Universidad San Andres. Also I resumed my teaching at Harvard University until. Well, until Javier Milei won the presidency. And for six months of the president, I helped him kind of from outside. And in the middle of the year he asked me to join the government as Minister of Deregulation. And. Well, here we are talking about all this.

[A]

How complete is your picture of the Argentine political economy and all the red tape and interest groups that inform and drive its outcomes, in your view?

[B]

Well, I don't know how complete it is, but it's certainly a view which has been, I would say, enrichment by the fact that I participated in two previous governments, and these are governments which had significant difficulties. And I think that has given a significant learning of what is required for a government to be successful in Argentina. I mean, you know, Argentina. I say, I'm going to say something that maybe you'll find a bit surprising, maybe those who know a little bit of Argentina and are listening will find surprising as well, which is that Argentina problem for Argentina is that it's a country that is too stable.

[A]

Interesting. You mean what from its national security position, its rational resources, its. Exactly.

[B]

You ask yourself what do you mean by stability? Because as you were just doing, because you say Argentina has huge inflation, has defaulted so many times. So I mean, if there's a country with on the surface looks unstable is Argentina. So why do you say it's stable? Well, I illustrated very, very easily. If you look for example of the union leaders in Argentina, the union leaders have been the same people for the last 40 years. And when I say the same people, I'm not saying, oh, there's a strong truck drivers union, I'm saying the leader of the truck driver use is exactly the same person today, he's four years older, but it's the same, exact same person for the last 40 years. When you talk about the business community in Argentina, you say the top business leaders, and we change in time, we go back 10 years, we go 20 years, you'll find exactly the same person. So I see Argentina is kind of a very well established status quo society. It's with very ingrained interest. This interest have used the state to build a legal system that protects them. This, let's say interest groups have a very, I would say, able and efficient political arm, which is the Peronist party. So I say the Pyrenees Party is the conservative party of Argentina, because it's the party which is going to protect ingrained interest and it's going to use the law to generate a mechanism to transfer resources to this interest group. So when a government comes trying to break this, it basically kind of has to face the power of this very strong status quo, which has the resources, has the resources, provided the rents that they appropiate by the use of the state in their own benefit. And I think this has given me a perspective of why previous attempts to change this structure have failed and why I think Javier Milei has a better chance of success. And if you allow me, maybe I'd like to illustrate it with an example. So for those of us who are listening, and if they visited Argentina over any time over the last 20 years, I'm sure they come to the city of Buenos Aires and they faced a significant amount of social turmoil. I mean, you would, you know, you would have something that we call the piquetes. The piquetes was roadblocks, you know, I mean, if you, Dimitri, have come, your wife is Argentinian, your mother in law, I'm sure, would tell you about this all the time. I mean, it's. You would come to work a particular day, you didn't know if you could go back home because the public transportation is going to be shut down and you name it, okay? And this looked like a very strong social movement, which is kind of signaling that something is very wrong with the Argentine economy. But look at the mechanism of this. I mean, the government used to provide social aid, correct, for the poorest, the most needed in the society. But rather than giving the money directly to the people, which would be the most natural thing to do, they are the ones who need it. The government gave the money to some guys which were intermediaries. So these guys took the money and then these guys distributed this money to the needed. Now what happened is that these intermediaries, first of all, they took a cut, correct? So they took a cut of the money so they would retain some of the money, they would have control of these people because they would decide who would get the money and who would not get the money. They would ask these people to roughly around five days a month to go and do these piquetes which created this turmoil in the city of Buenos Aires and in the country at large, to request the government to give them more money. I don't know if I'm illustrating the absurdity of the situation. If the government is financing the demonstrations against the government itself. When Milei came together with his Minister of Human Capital, they decided that they were going to transfer the money directly to the people. And nobody had dared do that because nobody had a good idea of what would happen in terms of will there be social turmoil, will there be protest? I mean, people didn't know me, ladies, I don't care, the people who are going to get the money. And basically they took away. They took this intermediation away. What happened was that in no time the piquettes disappear, the roadblocks disappear, because the system was financing the roadblock. And this for Argentines over the last year has been a tremendous improvement in the quality of life, correct, in terms of the reliability, in terms of not suffering the aggression industry. Now, why am I giving you this example? Because I'm trying to illustrate that the system that Argentina has built basically appropriate resources from the population at large. In this case, these intermediaries got these resources from the government. And then basically they use these resources to generate a scheme by which they perpetuate these benefits over time. You have to be conscientious of one thing first. In order to break the structure, you need to somehow attack the financing sources of these interest groups, as was the case with this picaderos. And then you have to have, let's say, the courage to do it and the will to live and the conviction to do it. So I think this. You asked me about my view of Argentina. I think this would be my main view. I mean, the main view is you have a society which has been appropriating resources from the population through different legal mechanisms, and that we need to undermine the structure. We need to destroy that architecture. An important part of reducing the resistance to change is basically touching the financing sources of these interest groups.

[A]

You touched on a number of things that I would love to address directly. But just given our time constraints, perhaps we can weave them into a discussion about Argentine history. Because I want to try to understand, to the best of my ability, how Argentina ended up in the quasi dysfunctional state that it has persisted in for such a long time. Because when you said that it was a stable country, my initial interpretation of your comment was that it was an observation about Argentina's geography and its natural bounty and resources, which I think are rarely discussed. I don't think it's a stretch to describe Argentina as providential. It's a country with a uniquely advantageous set of natural advantages, including geopolitical advantages like the Andes mountain range to its west, the Atlantic to its east, and the Arctic to its south. That perhaps partially explain why it's been able to endure so much internal turmoil. There are only a few countries in the world that I would say that about the United States being one of them, with its river systems, its arable lands and resources, and natural border security. Given that these two countries share so much in common, what explains the radical divergence in their economic and political outcomes? Given that per capita GDP at the start of the last century was roughly equivalent and Argentina was at the time one of the wealthiest economies in the world?

[B]

Yeah. Well, I would have several comments to do. The first is that a country can be very rich in the resources, but if its institutions are not conducive to economic growth, then the country will remain poor. Correct. And you may have other countries which are very poor in resources but have good institutions and they may become very rich. I mean, Japan has no natural resources and it's a rich society. Argentina has a lot of resources and has got bad institutions and is poorer. And in fact, I think there's this very famous book by Acemoglu and Robinson which they got the Nobel Prize, I think, last year. Correct. And why nations fail. And they say nations fail because the standard configuration is that interest groups take hold of the political structure of the economy. They try to appropriate rents. In some cases, they do more damage than others. And this is the reason they say countries fail. I mean, because why wouldn't we all be as rich as Switzerland? I mean, we see Switzerland, we see Denmark, we see Japan. I mean, we see the institutions. I mean, the recipe is there. Correct. What has to be done is known. I mean, there's no secret here. So if what has to be done is not done is because someone doesn't want it to be done. Okay. And the ones who don't want it to happen are those who have an interest. And that's not happening. I'll give you an example. Argentina. I'm going to tell you something that you may be surprised if I tell you, for example, that the unions take a cut on all the workers in Argentina, which is around 3% of their monthly wages.

[A]

I only know that because I've heard you say it Before.

[B]

Okay, okay. But wow, you say that. How can that be possible? How can a society accept that non unionized people, people who don't want to be represented by unions, they have to contribute around 3% of the wage to the unions? Of course, there's a legal system which basically forces that to happen. The question is, how did this come about? And I think it was. Of course, it's a lengthy process which to some extent it's a little bit of a vicious circle that once you get into a road, you kind of start consolidating. I think I do have a turning point in my. Which I think was very dramatic. In fact, it's very dramatic in the data because after the episode, I'm going to tell you now, Argentina stopped growing, which is that at the end of the 1960s, there was a military ruler. And this military ruler somehow dreamed with being like a second Peron. You know, Peron was kind of a more mythical figure. He had been president in the mid-40s and the late-40s, and he was kind of an icon here. So this military ruler, he said, I want to kind of emulate, I want to be like him. So he started granting to different interest groups a lot of resources. And imagine he was not a democratic, he was an authoritarian government. So he could change laws at will. Correct. He could get a few people in a room, say, just write this, draft this law, and he would issue the decree. And it's for us in the Milei presidency to issue a law. I mean, the basis law. We were discussing it in Congress for seven months. Correct?

[A]

So.

[B]

So no checks and balances from a civil society. No check and balances from society. This guy kind of set up this system. So the system was.

[A]

So this was just to clarify, this was the beginning of rule by emergency decree and emergency authorization.

[B]

This was an authoritarian and military dictatorship with this general who thought that he could kind of move out from a democracy into being a political figure by granting favor. So he basically strengthened the unions. He basically implemented a series of protective projects, regimes for our industrial production, close the economy, I mean, a lot of things. So after his presidency, Argentina stopped growing. So Argentina, in the 50 years following this presidency, Argentina grew half a percent per year in per capita terms over this period. So it was one of the poorest growth performance in the history of the world during this period. And also the system that he created generated so much transfer of resources to these interest groups, for example, the unions, that changed completely the political configuration and cemented this status quo society that I was discussing before and honestly, I think Javier Milei is the first real serious threat to this system in 50 years. So I think that's what makes this particular time so exciting.

[A]

Okay, so I'd like to also go back a little bit further, back to at least the early 20th century, because I want to understand a few things about Argentina's economic development model. One, it was a primarily agricultural society. Why, in your understanding, Argentina failed to industrialize? So much so that it took then Juan Peron, trying to institute policies like import substitution and industrial policy to try and force the country to industrialize where its northern neighbor, the United States, had done it so much earlier.

[B]

Well, I would say that Argentina was having a successful process of industrialization. And then what happened is that after World War II, the economy was closed very significant by the Bernie's administration there. The original Peron administration, I think that basically closed the economy and created. Was part of this system of closing the economy and making the Argentine economy less efficient.

[A]

So something I don't understand, I actually did an episode in Argentina right before you as part of this exploration of the country's political economy. I don't entirely understand what makes someone a Peronista, because you have Communist Peronistas, you have fascist ones. What makes it so that Cristina Kirschner is a Peronista and so was Carlos Menem, who is a neoliberal. What is the sort of connection there?

[B]

I think, as I told you, Peronism is the party of the interest groups. It's the party of the system. And this system is very able in changing the skin of how it labels and brands itself. Okay? But the power comes mostly from the resources that it receives from these interest groups. Okay?

[A]

It's the system of the elites. It's there to maintain the status quo.

[B]

Exactly. The Peronist is the party of the elites and the party of the vested interests. And that's why I say it's the Conservative Party. But it's been very, you know, it's been very intelligent in basically kind of reinventing itself, you know, and changing its guises and its form. But the core of the interests that are protected are always the same. Sometimes I refer, when they ask me, what is a fairness? I refer to this book by Saint Pierre Exuperida, Little Prince. And in the first chapter of this book, there's a father with his son, and his son asks his father to draw a sheep. So the father draws a sheep and says, oh, no, this is too tall. And then says, oh, this is too short, or this is too big, or this is too small. So then suddenly the father draws a box and puts some little holes on the box. And then the son says, what are you drawing here? I may ask you to draw a sheep. Why do you have me a box? And then the father says, no, your sheep is inside the box. And the sun says, ah, it's perfect. Okay? So basically what I'm saying is, you know, these guys, they kind of, okay, this is a box, and just think of it whatever you want, but that's a fake, because in reality, they are the party of the elites. Okay? And they're. Because they're the party of. The vested interest to fight against them has resulted. So difficult. No, that's why you need a leader like Javier Milei who's. Who's willing really, to challenge the system in order to change it. So I think we can really move to talk about Javier Milei and his presence.

[A]

Sure, we can talk about that. One more question that isn't related to history, but you inspired it with your response, which is, okay, so we talked a little bit about what we need to understand about Argentine history, its political system, its caste system. What do we need to understand about the Argentine people that would make them particularly amenable to some of the proposals that you put forward? How do we understand what they want in the context of your efforts?

[B]

I think Argentines are. I'm an economist by training. To think that the basic principles that motivate people and that people respond to incentives are really the same everywhere around the world. I think Argentines are no different in any sense. And Argentines, when they move out of the country, they perform very well, and they're very creative and they're very successful. So I think it was something that has really happened in the last few years. Our last government was, I would say, a very dark government. Okay. Was a government that, when the pandemics hit, we were forced to be indoors for more than a year, was one of the largest quarantines in the world. It was a government that, when the vaccines came, the politicians vaccinated themselves first. While we were all in sites, they were doing their personal parties, the pictures leaked out. And when Pfizer offered to sell Argentines in November of 2020, the beginning of the pandemics, and Pfizer offered 12 million doses of vaccines to Argentina, one of the first countries that were offered the vaccine. Because Argentina had been a significant participant in the trials of the vaccine, the government declined the vaccine. So you have to be kind of a very strange government then in the middle of a World pandemic. You're offered first in the row, the vaccines, and then you decide you're not going to buy it. And I mean, they basically were going to receive the vaccines from Putin or from a local lab. Those never showed up, those vaccines.

[A]

What explains that?

[B]

Well, you guessed. I mean, was it kind of business that was behind this? It was a geopolitical interest. I mean, certainly it was not the health of the people that was being taken into consideration. The fact that the alternative that supposedly they had relied on never appeared. Eventually they bought the Pfizer vaccine five months later. There are estimates in academic estimates that the delay in the purchase of the vaccine sent around 20,000 Argentines to an untimely death. And then basically what they did is they basically started printing money like crazy when they realized that they were going to that I would say the general mood of the people was so negative, and they basically skyrocketed inflation and therefore poverty in the last year of their term. And I think all this can be resumed in one statistics, of course, you said your wife is Argentinian, so you understand the statistics I'm going to say now, which is that over the last 10 years, 2 million Argentines left the country. And so your wife probably was one of them. I don't know.

[A]

Well, she left back in 2013, if I remember correctly.

[B]

2013.

[A]

1313.

[B]

That's what I'm saying. In the last 10 years, 2 million Argentines left. Because we're an economy which has not grown for the last 15 years. And who has left? The young have left, and the people who have left that people from all the, say, social classes. I mean, the sons and daughters of the rich have left, the sons and daughters of the middle class have left, and the sons and daughter of the poor have left. And I think this kind of accelerated dramatically with the previous government, with the macroeconomic instability, with the authoritarianism that was exercised during the pandemics. I think a lot of us realized that, and I certainly feel myself in that group perfectly. We realized that if something very dramatic did not happen in our country, we were going to age seeing our kids and grandchildren over the swamp. And, you know, like, you can think of the Syrians or you can think of the Venezuelans or you can think of the Lebanese. And so I think this is the reason why massively, Argentines decided to vote for a radical change. For someone who said, I want to change this system because this system has basically not delivered growth in the last 50 years. Well, remember I was telling you about this general on Ghania which did this change in the late 70s. Well, you may be surprised to hear this, but when this guy was president, Argentina was a country which was significantly richer than Spain. In fact, I was 10 years old and Argentina was a country which was richer than Spain and the poverty rate was 5%. And now the poverty rate that Javier milei inherited was 50%. So I think the utter failure of this status quo society, the dramatic increase in poverty, the authoritarianism that it was expressed in the previous government, the exiles of the young of Argentina, have all coalesced into convincing the Argentines that a significant change is necessary.

[A]

Thank you for that answer. That was again raised a lot of interesting questions that I'm going to refrain from asking because I want to keep us on target here. The reason I asked you about the Argentine people is because I found I'm Greek and American, I have dual citizenship. And when I first went to Argentina, my experience of being in Buenos Aires felt very much like being in Athens in the 1980s. I got also a sense that that Argentines were similarly anarchic, that somehow sort of more libertarian ideas are naturally amenable to the Argentine in a way that maybe they aren't for other societies like the Japanese, for example. First of all, do you agree with that framing and is there anything that flows naturally from that observation or that we should conclude about the form of government that would work best for a certain type of culture, like what's most amenable to a culture like Argentina?

[B]

No, I don't think I agree. I mean, I think, as I said before, I think Argentines are pretty much the same as everywhere else I was telling you. I mean, Argentines leave Argentina and then fit perfectly well in all different sorts of societies. We're very creative people, I mean, think we're very able people and I think we deserve the same kind of government and the same government of the Western world is what's going to work for us. So I don't think we should dwell into this idea of the exceptionalism. I think it's wrong and I think it's dangerous line of avenue to think that the Argentines are special in any way. I think we're basically just a very plain and simple example of what Acemoglu and Robinson describe and why nations face which is a society which has been captured by interest. And I mean we could think of, according to Simolo, most countries in the world suffer because the dynamics of power basically take you there. Argentina, just one simple, plain example of that which is particularly dramatic because as you said Argentina is a country with tons of resources and potential. So there the failure of the society kind of shows more dramatically.

[A]

Well, to be clear, I didn't mean it as a negative. So let me ask you this. It seems to me that certain countries, the United States, for example, the people are much more independent minded than other conformist societies. I brought up the fact that I'm Greek, I made a joke, it's not that funny. But during the crisis in Fukushima, when the reactor was going off, I said if this was happening in Greece, no one would go back to Fukushima. No one would go back if the government told them to go back to where the reactors were. So there are just certain cultures that are more conformist and other cultures that are more independent and skeptical of authority. Now, how much that also has to do with their historical experience dealing with government. But that's just to clarify. That's what I meant and I would just.

[B]

Can I say something about that?

[A]

Sure, yeah, absolutely.

[B]

I think it's interesting because I think Argentines for 50 years have heard the following phrase. If you have a problem, the state is the solution, the government is the solution. I think that's the message which was very convenient to establish for the elites because it basically allows the growth of the state. And the growth of the state eventually is going to be working in the benefit of that. I'll give you an example in just a second. Benefits of the elites and not so much of the people. And Javier Milei is basically giving exactly the opposite message. He says the source of your problems is the state. Far from being the solution, it's actually the source of your problem. So I think it's interesting, I'll give you just one example. A few months ago we, the previous government had set up very significant operation to provide loans to the needed in Argentina. The small credits, you know, micro lending to a large chunk of the population. And so they set up a whole system to do that. And when you review the system, the idea of this was to create kind of a number of loans, correct. To these people that could actually kind of, they could pay, they could grow, they could repay. You grow this asset class. Well, the amount of credits that the system had built after let's say 10 years was equivalent to 0.15% of the money that was put into the system. So that means that 99.85% of the money had gone to waste. Where did it go to waste? It goes to finance the political structure which was running the micro loans, or it went to lousy loans that were never repaid back. I mean, the argument that the state is going to save you actually ends up being very functional, very going to be useful for those who want to build this political structure which they're going to use in their own benefit. Okay? So I think Argentines are totally fed up of that. And I think they've realized that that's the case. They realized that they had bought into a scam, that they had been deceived, and that they were using the government for their own benefit and not for the benefit of the people. So I think people now are basically supporting. And this is why I think Milei has maintained a very high support ratio during his first presidency because he's basically implementing this agenda of reform and change and reduction of the size of the state. It's very interesting because we've been reducing the size of the government very significant. I mean, milei, in his first year, he reduced government expenditure 30%. It's kind of unheard of when you do an international comparison. In one year, he reduced the government expenditure by 5 points of GDP. And far from generating a recession, the economy is going to end his first year in the presidency with a growth of 4% of GDP. So he's going to have reduced size of the government by 5 points of GDP. And that has allowed the economy to grow 4% of GDP. So it's amazing what I'm telling you, because this means that in his first year he's basically enhance the ability of the private sector to spend by nine points of gdp. Five, because he's reduced government expenditure and that has allowed him to reduce taxes. The most important tax that he reduced in his first year of the presidency is the inflation tax, because part of that spending was being financed with money printing. This is the reason Argentina has seen over the year a dramatic decrease of poverty rates from 54 to 36. So imagine that dramatic reduction in poverty because all this state was being financed primarily with a tax on the poor. So what Javier has is I'm going to use this. He uses this expression, which I'm sure you've heard, which is the chainsaw which other governments now are kind of picking up. So I'm going to do the chainsaw to the state. This will allow me to reduce taxes. Most of the taxes I reduce are taxes on the poor. The poverty rate is going to fall. People are going to be able to spend their money on their own. And I think this explains the popularity of Milei during his first year. And also I think it explains why people are supporting this Change of view. I mean, your question started with kind of more the culture and the view of people relative to government and policies.

[A]

So I want to spend the balance of our times talking about specific policy measures that have been undertaken. But one more sort of culturally relevant question, since you brought up the chainsaw, Milei's character, his reputation has exceeded the boundaries of the Argentine state, correct?

[B]

Yes.

[A]

He is a media phenomenon. How important is that to him achieving his objectives? In other words, the entertainment factor, the way that he connects directly with the voter base in Argentina via social media. What role does that play?

[B]

I think he's had an impact. I'll tell you why I think he has an impact. I mean, in the case of Argentina, he has a very direct style. And people are convinced.

[A]

Well, he has that amazing video where he's in front of the board and he says.

[B]

This is his most. I mean, I know how many hundreds of millions of reproduction he has, but I think he was very bold. He was basically going against the system. Correct. I mean, when you go on TV and you say, I'm going to kind of shut down half of the government, and that's popular, you realize that people are realizing that they have been deceived. Correct. By the government. But I think that his confrontational, open and open to debate everything in the case of Argentina has been very interesting. For example, when we presented our base law to Congress, we put on that law a lot of issues that no one had dared discuss in Argentina for decades. And he said, and maybe the issue was perhaps was not really significant from the point of view of resources, but was very interesting from a conceptual point of view. And so I think that kind of was, to all of us, was a little bit like a relief, you know, that you can discuss everything, then you can opinate about everything. And when Javier has gone abroad, I think this is a personal impression that I have, is that he's been able to say things that perhaps a lot of people would have liked to say for many years. People thought that maybe saying those things were not politically correct. And then comes Javier, which says it kind of very strongly. And I think that to some extent, for some people, is a little bit liberating. Correct? It's like saying, oh, we can discuss about these issues. I can opinate about these issues. And I think this to some extent is, I think, an additional factor why he has captured the imagination of so many people. But I think at the same time, I mean, you're from Greece originally, correct? So you'll not be surprised about anything that you See in Argentina, but in the case of Europe, we've had a few years ago this druggie reported. Actually it was last year, I believe. Correct. And it was okay.

[A]

Yeah, that's right. On European competitiveness.

[B]

Exactly. We have this overregulation here in Europe and Europe has really reduced its growth relative to the US Very dramatically. In the US also there's a sense that there's over regulation. I mean, the IMF says overregulation is one of the most important issues that we're going to be discussing into the future. Personally, a lot of the political candidates in Latin America are taking a very significant view of what Milei is doing. Because another thing which I think is interesting of Milei is that he has re parameterized what politicians feel is possible or not possible. I'll tell you this example. In Argentina, there was no economist who thought that you could achieve a fiscal surplus in the first years of government. And for example, I talked to say a presidential candidate in Colombia which asked me about what's happening with Milei and I said, well, Milei basically got a fiscal surplus in his first month. And then he says no. But I was thinking that maybe I can reduce the fiscal deficit, one point of GDP in my first year. I said no. Why do you think that maybe you can reduce the 4 points of your deficit in one year? Correct. I think Javier has open the scope of what is possible and not possible with his boldness and his audacity and his forthcomingness in the way that he debates things. So I think all that kind of has is a little bit the reasons why he's had such a big impact outside of Argentina. I mean, if you say how important is that? I think your question is how important is that for his success domestically? I would say, look, his success domestically hinges on his two main ideas. And what is his two main ideas? The first one is Argentina is going to have a fiscal surplus. That that fiscal surplus is going to be obtained through a reduction in government expenditure. So the reduction in government is going to allow to continue reducing taxes as he's been doing this first year, because he was so successful in reducing expenditure. And his second idea is economic freedom. I mean, the idea that people operating freely are going to generate prosperity and growth. So I think his success hinges on that now that he becomes a world figure, that the fact that he's a world figure generates supports from other presidents, other economies, open, specific. For example, Milei has suggested that he wants to do a free trade agreement with the US and maybe his relationship with Trump opens the door to that. We'll see if that's the case or not, but I think so. There may be benefits from the fact that Milei is such a significant figure abroad, but we tend to believe here that his strength is the fact that he has put a little bit of order into the fiscal disorder that Argentina maintained for so many years, and that he said, implementing a deregulation program, which I think is also very surprising to many by its depth and speed.

[A]

So it's interesting because a lot of his ideas sound quite familiar to me, having been a follower and a supporter of Ron Paul in the United states during the 2008 election cycle. But Ron Paul was a very different personality type than Milei, and so he has many of those same libertarian ideas. He's an Austrian economist, but he has them in a sort of populist wrapper. And that seems to work in Argentina, and it's generated a lot of interest abroad. And one of the other things that I hear from investors is exactly what you said, which is they're curious to ascertain whether or not there could be a sort of domino effect of these types of policies across the rest of Latin America. Is that something that you, having had these conversations with other presidents and politicians and other Latin American countries, do you think that the more success you guys have in Argentina, the more likely this is to spill over to other countries?

[B]

Definitely. I mean, because everybody's looking. I mean, Javier is after one year of presidency, his popularity is at the peak during his presidency. And imagine, I mean, this defies conventional wisdom. No, I mean, someone would have said, look, if you reduce government expenditure 5% of GDP, you're going to have to pay a political cost. Maybe it's the thing that has to be done, but you'll pay a political cost. Well, he's paid no political cost because in the case of Argentina, that reduction in government expenditure has allowed him to reduce taxes. I mean, people love that. Correct. And they prefer that rather than the government putting the money in their pockets and taking their money and deciding how that money is going to be spent, people much better prefer to spend that money themselves and what they think is better for them.

[A]

As long as the economy continues to grow, presumably.

[B]

Exactly.

[A]

That is one of the biggest risks that you face. Right. Politically speaking, a recession, if it's big enough, would have a negative impact on its popularity there.

[B]

You also have a. That's why the president kind of is so negative about Keynesianism, because he says, Keynesianism, at the end of the day, is a construct which Any economist, a student of economics, which has kind of moved beyond the first course, knows that it's not true because it's a partial equilibrium argument. It's not the general equilibrium argument.

[A]

What specific thing is not true that you can stimulate endogenous demand growth by stimulating through fiscal spending or.

[B]

Yeah, I'll explain. When you study economics, you face immediately this idea of the multiplier, the Keynesian multiplier. The Keynesian multipliers basically is a formida that if the government spends, then it's going to generate an expansion of the production and then the expansion of production is going to generate income for people and then people are going to spend that money and then it's going to be like a domino a little bit, and then you have a multiplier effect. I mean, the positive impact of government expenditure is several times larger. The increasing government spending itself. If you just take that part of the story, then you say, gee, I mean, spend, spend, spend. It doesn't matter what you spend on, but spend because it has the multiplier effect. In fact, Keynes used an expression that I'm sure you've heard that said it doesn't matter what people do, just make them do holes and then they dig.

[A]

Holes in the ground that'll employ people.

[B]

So now that's totally wrong from a theoretical and empirical point of view. It's a great argument for big government. Why is it wrong? Because when the government spends money, the government has to get the money from somewhere. So now let me do this following exercise. The government is going to spend some money and it's going to have its multiplier effect. But in order to spend the money has to tax both of us to finance. The fact that it taxes both of us basically means that we have less money. Correct? Because we're giving this money to the government, so the government spends it. And when we have less money, then we spend less. So we have a multiplier effect in reverse. Correct? We spend less, then we generate less income for other people and then it's a dominant negative domino effect. So it's absolutely clear when you do a general equilibrium of the economy, not a partial equilibrium, which is that you take into account the effect of the government spending, but then you take the account of how that money is obtained and the finance the effect of the financing of the government spending, then you realize that the multiplier is zero, okay? And if you look at, for example, at Milei, so. But it's a fantastic construct for big government, okay? So for example, when Milei comes Melee doesn't believe in this at all. So people say, oh, if you're going to reduce government expenditure 5%, you're going to have this huge negative multiplier, you're going to have this huge recession. And Milei says, no, no, because if I reduce my government expenditure 5% of GDP, then that means that I'm going to be able to reduce taxes on people by 5% of GDP, and then people are going to spe spend what the government doesn't spend, and it's going to have no effect on the economy. Furthermore, he would argue the fact that people spend the money much better than the government because the government typically kind of just does transfers and waste and invest poorly the money that it has to invest, then the economy is going to grow. What happened the first year of Milei's presidency, Government expenditure was cut 5% of GDP. The economy ended up growing 4% of GDP. So. So I think again, I go back to the first year of Milei's presidency has defined a lot of the conventional wisdom in politics, both in terms of the economic effects of the policies, but also of the political effects of the policies. Because we have someone who has done perhaps the biggest fiscal adjustment in modern history. I can tell you, because I've looked at the database of the IMF of all the countries since 1950 onwards, and you're not going to find anything like what Javier has implemented, and yet his popularity has soared.

[A]

Not to get stuck on the Keynesian point, because I largely agree with you. And just to further that point, if the government stimulates a particular sector of the economy, it drives capital investment to that section, and it can cause imbalances in the allocation of capital, structural imbalances, and the more it spends, the more those imbalances grow. So though, could not one make a case for Keynesian spending in certain circumstances, where, for example, you have an exogenous shock to the economy that causes a collapse in demand and shutting down of factories, unnecessary layoffs, et cetera. In other words, if we were to say for a moment that the government could arrest its spending over time, that there are cases where Keynesian spending could.

[B]

Make sense, if you have a labor market where you have 30% unemployment like the one Keynes was seen in the US in the 1930s, and then certainly there's labor market is not working, then maybe there's some scope there. But if you take a country like Argentina, which is close to full, and also remember that in Argentina, half of the labor force is informal. So in order to build a Keynesian story, you have to have a labor market which is not really kind of working very well. And we may all prefer to have everybody formal in the labor market, but the informal labor market tends to generate market clearing. And so Argentina doesn't have a high unemployment rate. It means that it's pretty much using most of the resources. And when you do that, then you spend in one place. It means you have to spend less in another place. You put money here, you take it from somewhere else.

[A]

Well, presumably also, and this is why I was actually asking you questions about the comparisons between the US economy in the 30s or the early 20th century, but especially the 1930s and the Argentine economy, because also I would imagine that these policies would work better in a highly industrialized society, one with capital, heavy industries and with strong endogenous demand, where you can generate a flywheel of reinvestment, which obviously wasn't the case in Argentina. It was a heavy commodity exporter and agricultural society, which was again, that was sort of my question. So let's just focus in on a couple of specific policies that you are currently implementing so we don't miss out on that. What has to do with this desire to converge the exchange rates, the unofficial or blue rate, exchange rate of the peso to the US dollar and the official rate. Talk to me about that strategy. What is the thinking there and what progress have you made and why is it important?

[B]

Well, I tend not to talk about the macroeconomic aspects of the government because that's the turf of the finance minister. So you are welcome to interview him anytime on that. And I focus mostly on my regulation agenda. But no, what I can tell you is the stability of the exchange rate and the value of the exchange rate has to do, on the one hand, with monetary policy, the exchange rate is the price between the peso and foreign currency. So if you print a lot of pesos, the value of the peso is going to fall. If you don't print pesos, then the value of the currency is going to remain stable or may even appreciate. Correct. And basically, since Milei came to the presidency, the central bank has not given a single cent to the national treasury. The national treasury doesn't need. Because the treasury is running a surplus. Correct. And so, I mean, again, it's Economics 101. It's what would happen in any country in the world if in the US starts printing money, or in France they start printing money. They're going to have their currencies depreciate and. Or if the euro and. And the opposite will happen if you Stabilize. So now what happened is that when in the previous government, it goes to that convergence question that you were asking me. Okay, the previous government, the situation was so bleak, as I use the term, it was a dark government. Correct. And people just wanted to leave and capital wanted to leave. When every single extra resource wants to leave the country, that typically depreciates the local currency. Correct. Because everybody's trying to buy the foreign currency to exit. And so the dollar wages in Argentina had really kind of became very, very low. But that was kind of not the exchange rate that corresponded to a country which produces 160, 170 million tons of grains. Correct. So it was just a result of such a devastating government that capital was exiting. So what happened with Milei is that that when Milei came to power, those things start normalizing. Correct. Some countries may come back in, but definitely not everybody's trying to run out of the country. And that certainly changes the equilibrium value of the exchange rate. So I think the convergence that you were mentioning, in which you know that the nominal exchange rate ended up falling more to a more normal level, not to a level that was more reasonable. If you look at the history of Argentina. So I would say we just kind of added some normalcy. We're coming from a non normal situation to a normal situation. In the non normal situation, the exchange rate, the value of the dollar for Argentines was very expensive because everybody's trying to get out of the country. And when you eliminate that pressure because you've added some normalcy, then the exchange rate has appreciated, but it has really kind of converged a value which is pretty much in line with, I would say, the historical trends of Argentina and real productivity of the country. I think it's just a process of macroeconomic normalization. We've seen also in the reduction of the inflation rate, which has been absolutely dramatic. Just to give you an idea, wholesale prices, which rose around half a percent last month, a year ago, were rising at 25% per month. So. So I think it's just that what.

[A]

Is Javier Milei's government doing to encourage foreign investment, and in particular foreign direct investment? And what progress has your administration made thus far to convince foreign capital that Argentina is not only open for business, but that the changes you're implementing today will last past your administration?

[B]

Well, I mean, I think first of all, the most important thing to attract foreign direct investment is to have a fiscal surplus. Because when the government is always on the verge of desperation and a default is basically reneging on a contract, you're not going to invest in a country which is permanently reneging on its contracts. So in order not to renege on your contracts, you have to have a more solvent position. So I think the fiscal stability and the fiscal surplus is because the most important measure to attract foreign direct investment. Also in the basis law, we introduced a regime which was called the Regime for Large Investments, which basically establishes a little bit a lower corporate income tax, low access to the foreign exchange rate market, other taxes which are low, which is a little bit where we want to take our tax structure in the future. But it really kind of anticipates that kind of fiscal framework or more beneficial fiscal framework to a number of activities which somehow imply very large commitments of money. For example, mining. Argentina exports one tenth of the mining of Chile and we share the same mountains. Correct. So that's kind of an absurdity. And so if you have an activity which requires kind of dumping a lot of money on the ground that you can't move around, then we've instituted this regime. And this regime has already generated a lot of interest and some investments. And the other thing that I think I may want to mention is that Argentina has the second largest reserves of shale gas in the world. The first is China, the second is Argentina, the third is Texas. I mean, just so that you can compare the relative size, the US has had really a re industrialization as a result of the cheap energy which has come from this energy boom that they've had in Texas and the region. Argentina has more than that. Okay. And it has this very easy place to get these resources out. The only reason it has not happened yet is because Argentina was a country which was in default. It was a country which had totally unreliable. And so already we're in the middle of an energy boom there. Okay, I'll just give you an example. Argentina exports say $60 billion in exports a month ago or a few weeks ago. Ypf, which is one of the largest oil producers, has signed a deal to export shale gas for 7 billion a year. Just one contract. Correct. So this gives you an idea. So it's more than 10% of our exports in just one contract of the many that could happen in that region. So I think energy, I would say, is perhaps one of the first items where you're going to see an investment boom. I think that's happening. I think mining is the second one. As you've mentioned yourself before, we have a very modern and vibrant agricultural sector. We have a very vibrant cattle industry, we have a very vibrant software industry. Tourism, I think is an area which you're going to have significant investments as well. So, anyway, it's a pretty diversified thing, but I think energy and mining are going to take the lion's share of the investments in the next few years.

[A]

Two more questions for you and then we can wrap it up. The first one is about looking forward. What are the important milestones for you and for this administration, not just in policy, but also, I know you have elections coming up. Up. What are the important milestones that will show whether you are continuing to hit your benchmarks and succeed in the direction of travel that you've chosen?

[B]

The President tells us in Cabinet something which I think it's kind of pretty cool. He says, I was mentioning before, we have these two main ideas. Reduction the size of the state, having a fiscal surplus. With this, we'll be able to reduce taxes. We want to have a smaller state and a bigger private sector. So. So the job that we have to do from the government is resizing the government, okay? Focusing on the core competencies, doing it efficiently, doing it cheaply, charging lower taxes, okay? That's one idea. The other idea is economic freedom. It's kind of let's get the state out. Not the state in terms of the taxes and spending, but the government in the middle of every transaction that we have to do, telling, you can do this, you cannot do that, and you have to present this paper and you have to do this, this thing.

[A]

So rent seeking.

[B]

Oh, no, I would say the bureaucracy and the red tape, you know, which is a big cost for the companies. So, for example, you, you want to set up a fruit packing thing, okay? So the Food Administration says you have to do the A, B, C and D, and then you do ABC and D. And then an inspector has to come and check you out. And maybe he's. It's a year before he comes, and you have your capital there, you're losing money, you're desperate, okay? So we're changing that for somebody saying the Food Administration is A, B and C. Well, now it's going to be A and B, correct? Or A. And then if you have A and you tell us you have B, start working, okay? And we can go and eventually check if you have A or not. But I mean, we can't have the state as a way of telling you of inhibiting you from doing the business or telling you how to do the business. Now, I mean, we have regulation, which we're scrapping now, but basically tells you if you want to sell cherries to the U.S. how has the package to be okay. And when can you do that cherry pick speaking? I mean, it's ridiculous. Okay, so the President tells us, guys, you have to do these two things. And you focus on these two things. And don't listen to anything, don't listen to anybody. Don't look at the dollar, don't look at country risk, don't look at the elections. We believe that this is what has to be done for Argentina. So this is what we're going to do. And because we are intimately convinced that Argentina is going to be more prosperous with a smaller government and a less interfering government, okay, this is what we have to do. So we're pretty kind of focused. And I would say, for example, that Milei has this image, which is the chainsaw. You know, the chainsaw machine.

[A]

Yeah, absolutely. Of course, everyone knows this image.

[B]

So anyway, so he was doing campaign with the chainsaw, okay? So we've implemented the chainsaw. In the first year, we cut government expenditure 30%. And I think that the work of the chainsaw is, I would say, almost accelerating because now we're going into. In fact, I come from a cabinet meeting where we were discussing this. I mean, and basically now we're going into what we call the Chainsaw 2.0. Okay, which is basically, we had an exercise in cabinet with a president where we discussed what should a libertarian government do and what should a libertarian government not do. So we kind of said, okay, these things we want to do, these things we don't do. Now we're going to every agency and every area of government and we're asking people, what are you doing in. And if they're in the nose, the area gets shut down, Correct? If it's in the. Yes, it's okay. So I would say that there's a. We're very focused. We're very focused on our path, we're very focused on our ideas. We're going to implement it, we're going to continue executing them, and we're convinced that that's the path for prosperity. So. So I think that's the steps. But it's not like we are being rushed by any milestone or anything. We're just kind of doing our job every day.

[A]

So my last question for you has to do with lessons for the United States. As we established, every country is different. Every country has its own particulars. But the United States under Trump has set up this informal department, the Department of Government Efficiency. As I understand it, Elon has your number. Has he given you a call? Has there been any advice shared? And what Lessons. Do you think Argentina's experience and your experience as lawmakers could have for the United States?

[B]

I mean, the President has spoken a lot with Elon and there has been an exchange of tweets and things like that. No, but I'll tell you my view about this. I'm a big fan of Elon, and if you read his biography, I mean, the latest biography by Issac Son, you perceive that Elon was very concerned about overregulation. And I think particularly in SpaceX. Okay. SpaceX was a company which was very constrained by very stringent regulations in that industry. Permeates very well from the book that he thinks this is a big problem. Okay. So it's not that over regulation is something that he just saw that we were doing something. Now, it is true that he had several conversations with Milei, and Milei told him what we were doing here, which is something which is a little bit paradoxical because what we're doing here is using the state to undo the state. We're using the source of the problem to kind of try to bring a solution to the problem. And I think that after Milei explained how we were working here, and this is just a speculation that maybe Elon made the connection, say, well, maybe we can use the US Administration to do this job of deregulation and cleaning slate, which everybody honestly believes has to be done. Okay. Even though, as we mentioned, I think this problem is much worse in Europe. Correct. Because in Europe, you have a problem that you have a two layer, because you have the regulations of the countries, and then you have the regulation of the eu and the regulation of the EU do not substitute. They go on top of the regulations of the countries. You have a two layer of regulation or of over regulation. So I think there has been maybe some inspiration or not certainly as being a minister of the regulation. It's always a little bit scary to be in the same line of business as Elon. Okay. Because he makes you look pretty slow very quickly. But on the other hand, I think it's fantastic that he's doing this because I'm sure we're gonna get a lot of ideas of what he's doing that we will be able to apply. And hopefully in the same that he maybe got some information from us that this is something that can be done. But as I told you, it's not only Elon. I think there has been a lot of interest all around the world on this, let's call it experiment regulation, which is a novel thing. It's very interesting because when we were discussing this and the President was trying to convince me to come into doing this task. And at some point we tinker with the idea of implementing something that we call the Minister of Modernization, which a lot of countries have. And I said, I don't want that name because I don't believe the government is the vehicle for modernization. I think that the government is the a vehicle for backwardation, not for modernization. Okay, so it would be a backwardation minister, not a modernization minister. I think the idea of deregulation captures much better and perhaps the only thing that I may mention as a thought or maybe a lesson that I can share from our experience here is you face this over regulation, this bureaucracy, this red tape. Correct. And your first impulse is to say, how do I fix this? Remember I mentioned that you were asking A, B, C, and then, well, maybe you can only ask A, or maybe we can only ask A and B. And that simplifies things and makes it easier. Okay, certain cases this is what you have to do. But in many other cases you have to ask you a deeper question is why am I asking A, B and C? What purpose does it serve to ask for A, B and C? Who am I trying to protect? What am I trying to achieve? So it's kind of not so much a Department of Government Efficiency. I don't want to make the government efficient. I want to ask myself if government should exist here. Maybe it's the Department of Government existence. I want to ask the question whether the government here should be there at all or not. And I can refer to a quote by Elon Musk there. He says the best part is no parts. So I would say I think we have to take this phrase to government. We need to ask this question, do we need this part or not? And what you'll find is because government has been built and has been grown many times as a result of interest, people interested in this garment doing this many times. The answer to the question is that you don't need the part. And I think this is not only what I said at the beginning, which is that you have to open the scope of what but is or not possible. Maybe you think you cannot adjust car intervention 3 points of GDP, 4 points of GDP. Well, maybe. Think that maybe you can. Okay, you're just not being bold enough or you're not being audacious enough. So I think that's something very interesting from the Milei experience. But also this idea that you may ask yourself these questions, do I need this part? Does this part of government serve any purpose or not. And you will be, Dimitri, surprised of how many times you can't answer the question of why we're asking for A, B and C. And then what you do there is you just scrap it completely. And then you start making things much simpler. Okay. And I think you have to be very aggressive there and at the same time be also open to going back your steps. I mean, I rather kind of over deregulate and then say, oh God, I made a mistake in this 10, 15, 20% of cases than kind of cutting short of the effort. So I think all those are things that are interesting to see someone doing those in practice because I think it inspires and allows other people to try them.

[A]

Minister Struseneger, thank you so much for your time. You were very generous. This was a very educational conversation for me and I'm sure for our listeners as well.

[B]

It's been a pleasure to share this time with you. So all the best and we'll keep in touch.

[A]

Thank you. And we will be following your progress. Thank you very much.

[B]

Thank you. Bye bye.

[A]

If you want to listen in on the rest of today's conversation, head over to HiddenForces IO, 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 out our website at hiddenforces IO, you can follow me on Twitter at kofinas and you can email me at infoiddenforcesio. As always, thanks for listening. We'll see you next time.