Argentina’s right-wing president-elect gave the first indications Monday of how he plans to start shaking up South America’s second-largest economy: with a slew of privatizations.
Populist Javier Milei, a libertarian economist and self-described “anarcho-capitalist,” won a presidential runoff election on Sunday with 55.7% of the vote. He said Monday that he would move quickly to privatize the country’s state-owned media outlets and look to do the same with other public companies.
“Everything that can be in the hands of the private sector will be in the hands of the private sector,” Milei told Bueno Aires station Radio Mitre.
Experts immediately questioned how far Milei would get in fulfilling that vision without the support of Argentina’s National Congress, where his party holds a relatively small share of seats. However, some analysts said his resounding election victory could give him leverage.
“The decisiveness of the victory — a doubt until yesterday — allows him to signal to all parties who is in control of the transition and the formation of the Cabinet,” said Mariano Machado, principal analyst for the Americas at Verisk Maplecroft, a global risk intelligence firm.
Milei also signaled that he intends to act on some of his most controversial ideas from his campaign for slashing the size of the state and reining in Argentina’s triple-digit inflation. They include reducing the number of government ministries by half, to eight.
He said he still wanted to close the Central Bank of Argentina, calling it “a moral decision,” but appeared to put his plans for replacing the local currency, the peso, with the U.S. dollar on the back burner.
“In conceptual terms, the central axis is to close the Central Bank, and subsequently, the currency (will be) whichever one Argentines choose freely,” he said, characterizing a potential change in the national currency as “a second-order issue.”
Milei predicted it would take him up to half of his presidential term — “between 18 and 24 months” — to decrease inflation, which polls showed was the biggest concern for Argentine voters as consumer prices have increased 140% over the past year.
“Working to reduce the size of the government and eliminate taxes,” Diana Mondino, a lawmaker from Milei’s Liberty Advances party who is widely seen as likely to be Milei’s pick for foreign minister, wrote on social media. She posted a photo showing the newly elected president meeting with several key allies.
State-controlled energy firm YPF, the country’s largest integrated energy company, is another entity the president-elect thinks should be privatized but only once its finances are shored up so it can be “sold in a very, very, very beneficial way for Argentines.”
Milei claimed the company’s balance sheet deteriorated after a majority stake was nationalized during the government of former President Cristina Fernández de Kirchner, who is now the outgoing vice president.
Monday was a public holiday in Argentina so financial markets weren’t open, but the stocks of Argentine companies that trade in New York soared. YPF saw its share price increase 40% after Milei talked of its privatization.
There was anticipation about what would happen in the parallel currency markets Tuesday considering the value of the peso plunged after Milei rocked Argentina’s political system when he won the most votes in August primaries, which was the first time many saw him as possibly Argentina’s next president.
Milei’s privatization plans “in large part clash with the Argentine constitutional model,” warned Andrés Gil Domínguez, a law professor at the University of Buenos Aires. Congress would need to pass a law authorizing any such moves, he added.
As a relatively new political force, Milei’s Liberty Advances party only has seven senators, less than 10% of the total, and holds 38 of the 257 seats in Congress’ lower house.
Although support for his policies would increase if he allies himself with members of the main center-right opposition coalition, which backed his candidacy in the second round, “they don’t have a sufficient number to be able to impose things,” Mariel Fornoni, of the political consulting firm Management & Fit, said.
Milei could theoretically try to privatize companies by emergency decree, although Congress could shoot such actions down by arguing that they weren’t actual emergencies.
“In this scenario, the issue will surely be litigated with an uncertain outcome,” explained Gustavo Arballo, a law professor at the La Pampa National University.
There are other ways Milei could get around Congress.
“What can indeed happen is a gradual or abrupt defunding of these state-owned enterprises, creating a scenario where their operations would be heavily constrained,” Arballo said.
A potential privatization of YPF would be even more complicated. Even though the state holds 51% of its shares, the state-owned stake is divided 51%-49% between the federal government and Argentine provinces, respectively.
“It is complex to think about how the engineering of that privatization offer would be done, which in any case, could not affect the 49% owned by the provinces,” Arballo said.
