Milei’s Argentina: The Libertarian Populist Experiment
A discussion with Iván Carrino on The Rasheed Griffith Show
Full Transcript Below
Show notes
How do we categorize the Milei administration and its policies? Today on the show, we're joined by Argentinian economist Iván Carrino in a deep dive into political movements throughout the country's history, from the authoritarian economics of Juan Domingo Perón to the controversial interventionism of the Kirchners. Can Milei's own brand of Libertarian populism work to revitalize Argentina?
Argentina has fallen from lofty heights, and all eyes are on Javier Milei to right the ship. Once having the highest GDP per capita in Latin America, Argentina is now eclipsed by Chile, Panama, Paraguay, and Uruguay. We explore the ideologies over successive governments that have eroded Argentina's stability, namely the mantra of "spend, spend, spend" that has ballooned the country's deficits in what has been deemed a decadent approach to economics.
Iván takes us through the evolution of "La casta," a seemingly ever-changing metaphor used by incumbent political parties to provide direction for public outrage, which Milei's administration has flipped yet maintained its effectiveness to the voters. Milei's most recent victory, "Ley Bases," a collection of laws aimed at fiscal correction through privatization, shows there is hope yet for his congressional capabilities, which were in question in no small due to the hyper-conservative ideologies of his colleagues. The same ideologies could clash with Milei's strident Libertarianism.
And what of his aspirations for dollarization in the early days of the campaign trail? They are on the back burner for now. Milei's current objective is balancing Argentina's fiscal budget and controlling inflation. Then, once those precious US dollars can be shored up to back the peso, dollarization may finally return to the fore.
Iván Carrino on X (formerly Twitter) and YouTube
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Full Transcript
This transcript was automatically generated by AI and lightly edited by our team. We don’t catch every error, so if you spot one, send us a message/email via shem@cpsi.org.
Rasheed: Hi everyone. And welcome back to the show. Today I am joined by Iván Carrino, an Argentine economist and very prolific commentator on all things, socioeconomics in Argentina. This will be a very insightful conversation and I hope you enjoy it.
Let's dive in.
Iván, thank you so much for joining me today on the podcast.
Iván: Thank you very much, Rasheed, for having me here. It's a pleasure.
Rasheed: So I want to start with some more conceptual questions. Is the economic decadence in Argentina unique in Latin America or is it as similar as other countries?
Iván: As far as I'm concerned, I think it may be compared to Venezuela, but the story of Venezuela, is a more recent story.
But if you look at Argentina, we used to be comparable to countries like Australia, the United States. We ranked in the first 10 positions in the income per capita ranking back at the beginning of the 20th century. And once you compare our per capita GDP to those countries through history then you see a long timeline of decay.
Basically, the other countries on the list have all grown at a faster pace than we did. And that's how we started falling further and further down in those rankings. If you look at the last 20 years, it’s a very similar scenario to what is currently happening to Venezuela.
For example, if you look at the 80s, that's around 40 years ago, particularly at per capita GDP of Argentina, and you compared it to the per capita GDP of Peru, Chile, Mexico, all of the countries in our neighborhood, Uruguay or Paraguay also. Then you will see that they have all closed the distance. Some, like Chile, for example, are now even better off economically than Argentina. It’s the same story for Uruguay. We used to be number one in per capita GDP in South America. So that can be considered quite tragic.
Rasheed: So very often people usually attribute the decay of Argentina to Kirchnerismo. Is that a fair assessment, in the sense that I struggle to figure out coherently what counts as Peronism or Kirchnerismo?
Is it just a word to use, or is there a particular political theology or philosophy within those concepts that you can attribute some kind of decay to?
Iván: It's interesting that you ask. Many people have asked themselves before, and it's a matter for historians, sociologists, and political analysts. You can find many books written about what Peronism is and what it stands for, but this question has many aspects.
I will try to go through all of them. First there’s Peronism, the political movement that followed the leadership of Juan Domingo Perón, president of Argentina from 1945 until 1955 and then again in 1974. He was president of Argentina three times, but in the middle, between 1955 and the seventies, he became proscriptive.
He didn't even live in Argentina as he was force to leave due to the violent conditions. He was also very authoritarian when he was in power; chasing or going after the press, civil organizations like the church, for example. And of course, he was a very interventionist when it came to the political economy. The economic policy of Juan Domingo Perón was at least in the beginning, very re-distributive and very distorting He banished the agricultural sector to promote an industrial sector with subsidies and protectionist policies. When it comes to foreign trade, there was this idea that was very prominent in Latin America after the thirties, where it was thought that the way to riches had to do with import substitution and that you needed to achieve that import substitution via protectionist tariffs. This Peronist idea started that kind of policies here and they lasted for many years. But it was a general concept across Latin America, industrialization by import substitution, it was very popular. When we talk about economics, in political terms, Peronismo was, I don't know how to explain it because I'm not a political analyst but, it captivated the masses. And then the masses didn't have a clear ideology.
It was more like a cultural movement, a very nationalist movement. So it appealed to national sentiment. So it could be left-wing. It could be right-wing. It could be center-wing. It was more of a mass movement and not only an ideology. And I wanted to say that because when you ask about Kirchnerism, then there is a difference.
In the 70s, when Perón came back to Argentina, there was this highly violent context. There were guerrillas, and armed groups that wanted to take over democracy, and many of them were very left-wing. Of course, they were inspired by the Cuban Revolution, but they were a part of Peronism. But that was not all of Peronism.
Those were the most radical leftists inside the Peronist movement. But there were also other parts of the movement, for example, unions, and worker unions, who were not that left wing, they were not communists and they were not that hardly socialist. So there was this tension between them and they would fight.
They would have armed fights among them. There was a famous episode in Ezeiza where our national airport is, and there was a battle there between these factions of Peronism. When you talk about Kirchnerism, they are the heirs, so this left-wing part of Peronism influences them. It made a lot of sense that the left-wing Peronist heirs had so much power after 2001, and 2002 because Argentina had a great economic crisis after a period in which some policies, which you can consider more orthodox, were a bit more pro-market under President Menem.
They were considered to be a failure. So then these politicians, or Nestor Kirschner basically, and then Cristina Fernández de Kirchner they were able to talk to these guys, to all of these people in our country. The voters already thought that liberal or neoliberal or pro-market policies were a disaster for our country and that they would have never worked. So then the left-wing area of Peronism had its time, but a couple of years before Menem, who implemented all of these pro-market ideas and policies was also from the Peronist party. So that's why it's so difficult to talk about Peronism because you have Menem who used to be very pro-market in some areas. And then you have the Kirchners they were the opposite in terms of what they did with the economy.
Rasheed: Could we characterize the core appeal of Peronismo to what we now call populism?
Iván: Oh yeah. Maybe I forgot to mention that word, but it's key. It's key. I think it's an idea.
I don't know if it's true, but if you talk about populism worldwide, I bet you will find someone who might say something like this. You have an example of populism in Argentina with Juan Domingo Perón, there are many examples worldwide. But of course, Perón was a populist in terms that he created the idea of an oppressed people and an oligarchy.
The oligarchy were the rich people who became rich from the agricultural sector of the economy. And all the rest were the oppressed people that he came to set free. This strategy was replicated by other leaders inside Peronism. Menem, I don't know if Menem did that too much, but certainly, the Kirchners and Cristina Fernández can be called populists also.
Rasheed: Is it fair then to call Milei also a populist?
Iván: I think he has a populist ingredient in his political strategy, in his ways. It's very interesting. I've talked about this a bit. I started working as an economist in 2012. All of the people I read, the intellectuals I followed, were pro-market, classical, and liberally-oriented.
They would argue that the remedy against populism was liberalism, pre-market capitalism, the division of powers, and classical liberalism, to have a democracy, but to also have checks and balances, Think of the founding fathers of America. But also you can read, for example, Rothbard's paper, I think it was published in 1990 or 1992 and the title is "Right Wing Populism" or something like that. And he favors an approach to politics that needs to be populist. It is not enough to have free market ideas. It is not enough to be a libertarian, according to Rothbard. You need to also appeal to the masses and you need to have a populist approach in the sense that you need to talk to a certain part of the population that you will label as an oppressed people. But who is oppressing them? It's not the rich people from the agricultural sector that oppress the people as in Peronism. Now Milei calls them "Personas de Bien", which means "people of good".
We could say, good people. You're a good person which means you're a hard worker. You own your business. You have a little shop and it's the state or government that doesn't allow you to produce. It's the corrupt unions. It's the corrupt politicians. How you are framing your message is populist.
So I don't have a problem in calling Milei an experiment in libertarian populism. And for me, at least it raises more questions than answers. I've started to question myself, how bad is that? Because of course, if you take it to the extreme, it could be very conflicting with democracy, for example.
To give you a concrete case, at the beginning of the government, Milei launched a decree. It's called the Urgency Decree or DNU. In that Urgency Decree, many regulations and laws were overturned and eliminated by decree.
And of course, many libertarian intellectuals, very honest people also, intellectually honest people, free market, libertarian, classical liberal, were very worried about it because they were thinking, “This is not the way to go. You need to respect the institutions. You need to go through Congress, et cetera.”
But others would say, yes, that is true. Ideally, the process is respected, but also this decree goes in favor of freedom and liberty. It goes in favor of basic individual rights. So we now have conflicting viewpoints on this. When I scrutinize this populist strategy, I start thinking that maybe given our cultural, and political context, perhaps we don't have many other options. Macri was a former president of Argentina seven or eight years ago. He was free market-oriented. He tried to be very polite. He tried to compromise a lot and the experiment failed. So we're in a different experiment now, which is not compromising. It’s about being very loud, being very populist when it comes to the people against the casta. Let's see how it works.
Rasheed: So that term just used "la casta", Milei is very now synonymous with that term. It's now a very popular meme online as well. And so last week in Buenos Aires, I was walking around casually speaking to people in cafes about politics in Argentina. I would say, surprisingly to me, most of the people I spoke to, young people, say, yeah, I voted for Milei.
I asked them why, and the usual response was nothing economic. It's always something like, "The people are always lying to us, but I feel like he's telling us the truth". That's usually the response they give me. And they always use the term, la casta. However, that term doesn't cohere that much to me.
I'm curious who comprises la casta?
Iván: That's a characteristic of populist movements. You need to ask Milei today, and then you’ll need to ask Milei again the next day. You need to ask again on Monday because of course, it depends on the definition of the leader. For Perón, the casta was the rich people with the farms.
In Spain, in 2015, I guess, or even earlier, 2011, there was this guy, Pablo Iglesias, and he said the casta was the Partido Popular - so the right-wing politicians and the mass media. Milei was inspired by Rothbard in this sense, but also for example, there was this Argentinian economist who came before Milei. He also jumped to politics a couple of years before. His name is José Luis Espert. He published a book, which was called "Argentina Devorada", which means something like Argentina under attack or already demolished. And what Espert wrote was that Argentina was decadent.
Argentina was poor because we had horrible politicians. We had horrible businessmen, leadership, and also horrible unions. So those were like the three components of the casta. Milei is denouncing something along similar lines. So the casta is the traditional politicians, which it's interesting.
People in the streets are saying I voted for Milei because he doesn't lie. Or you will also hear I voted for Milei because he's very angry at politicians.
Rasheed: Yes.
Iván: Or I am also angry at politicians because they are lousy. They didn't give me the results that they promised. They lied. But also these are very compatible, at least with part of the pre-market narrative.
Politicians in Argentina have always been very interventionist. They have always favored re-distributive policies. They have always favored inflation and budget deficits. They have always favored price controls. If I were a libertarian, I would say 80 percent of politicians in Argentina, can’t give me good results. They will take this country to poverty. And that's basically what happens.
So that's where populism, liberalism, and the casta find this common ground. So basically if you have some journalists, the mass media unions, it depends on the unions, if they are against the government policies, they will be the casta. But if you have a union leader who supports changes, he will be very welcomed in government, or at least in some areas of government. But it is a way to do politics. It's hard to define in sometimes casta, but it is a way to do politics. And so far it has proven to be quite effective.
Rasheed: So before we transition to more macroeconomic conversation, I want to ask a final question about ideology.
Is it correct to say that Milei's party is fully libertarian? So Milei is libertarian concerning economics, that's not in question. But I remember an interview recently, I guess a now infamous interview, is Diana Mondino, who is currently the Minister of Foreign Affairs, Worship and International Trade in Argentina, and she gave a very weird analogy of freedom when she was comparing gay marriage to "having lice in your hair".
Or even Milei's strident support of Bolsonaro in Brazil or Trump in America, neither of whom anyone would characterize as being libertarian in any real way. So is the libertarian view fully embodied in Milei's party as we think it is?
Iván: That's a very good question. Going back to this Rothbard essay on right-wing populism, one of the points that he highlights is to promote freedom, but to be effective or to have, to be successful in the political arena is to connect to some national standards or sentiment, national sentiment.
And when you do that, then you find that free market ideas are in general favored by conservative people. And at least in the history of Argentina, you can find, that there was a partnership or people who were very conservative in cultural terms, in diversity issues, gay marriage, abortion, divorce, women’s rights.
People who have conservative views there, tend to be in favor of free markets in general, right? Because I know this is not universally like this, but here it has been the case. And there is also another thing. You know, in the U.S. this is called “wokeness”. We have always called what now is being called wokeness, progressiveness.
You are a progressive, you are a bit left-leaning, but you will also have a more tolerant approach to diversity, gender, etc. For example, in recent years, we have had a very high surge of radical feminism. There was this very important movement, at least on YouTube, on Twitter, and on social media. You can think of it as an answer to this radical feminism, but it was very conservative.
So you have some speakers, intellectuals, and writers who are very conservative and they are very successful at least outside of the mainstream media. So I'm thinking YouTube, for example, there's a guy named Agustín Laje. He studied political science. He's a writer, writes many essays, and is very conservative.
He has terrible views on gay marriage and adoption by gay couples. And also his co-writer, Nicolás Márquez, is even worse. He's not as popular, but he's even worse. And Milei knows them. And before becoming president, before he became a member of Congress, also, he would be the main character.
He would be leading stages, book presentations with Agustín Laje and with Nicolás Márquez and recently, two weeks ago, the Minister of Worship.
He's one of the members of the cabinet. He talked at an event organized by the Spanish party Vox. Also, Milei gave a lecture there. But this guy said that he made regretful comments on the divorce law, gay marriage, and abortion. And he said that we had a lot to learn from the times when Spain conquered Argentina.
It's a medieval mindset, very conservative, very right-wing. So you cannot call that libertarian at all. It’s not libertarianism. It’s not classical liberalism. It’s not equality against the law. Having said all this, I would say that as far as the concrete measures of the government itself, it has been libertarian so far. And if it hasn't been libertarian enough, it's because there are things that are still not being removed, and some price caps are there, and we have the exchange control, but there are no policies involving going back to gay marriage, abortion law, divorce or anything else in civil law.
So in concrete terms, the government is not going forward with those types of ideas. But it has indeed been true for some years before Milei became president, that now some discourses, some very conservative ideas, I would say, may be booming a bit, at least in social media, etc.
I think it's happening worldwide too.
Rasheed: You mention Agustín Laje. I have one of his books right here. "La batalla cultural: Reflexiones críticas para una Nueva Derecha", and in the inscription, it has recommendations from Ben Shapiro from the U.S., Santiago Abascal, president of Vox in Spain, Eduardo Bolsonaro, the son of Bolsonaro, former president of Brazil, and Javier Milei.
Iván: Yeah, of course. There you have it. Yeah. Agustín published a book called "El Libro Negro de la Nueva Izquierda", which translates as the Black Book of the New Left. It’s anti-feminist. Some intellectuals told me that it creates a caricature of what feminism is, and that makes it easier to attack it.
I have also read it a couple of times, and I think many conspiracy theories in there that are not proven at all. They are just postulates by Agustin and they create this link that they can't prove between some issues. But the worst part of that book is written by Nicolás Marcus.
It's a book written by the two of them, but they are not signed together. So there's a first part by Laje and there's a second part by Marcus and Marcus' part is, I'm not kidding, I invite everyone to read it, it's a pamphlet against homosexuality. And this was published in 2016, it's crazy.
It doesn't bother me. It's a pamphlet. But, it's very aggressive. It uses words that don't have any class. It's rubbish. I'm not gonna be fooling around. It's essentially garbage. There's nothing proven inside. It’s all bogus arguments. It's not serious, but for many people who are already conservative, it can appeal to them, but it's not to be taken seriously.
And so far it’s had no effect on the government. There are no policies against the individual liberties of people.
Rasheed: But doesn't that cause some kind of unease to you? Because if you have to govern with these people, then it's always a give and take. At some point now they're giving, but at some point, they're going to have to take something.
Iván: Yes, but I think it will be very hard to change these things. They are very accepted in society. I think at least where I live in Buenos Aires, is a progressive city. It’s very open, very multicultural, very tolerant. Everyone is free to do as they want. And no one has a problem with that.
It could be different in other provinces. But to give you a very concrete example, at the beginning of the government, I know two or three months after Milei became president, a deputy from the Congress, from Milei's party, advanced a law project banning abortion. She was not backed, not even the members of her party.
And when Milei was asked about it, he said, "I'm totally against abortion" because you know what he thinks about that, "but that's not part of our agenda". That's not one of the priorities of government. And I think this is very funny. Milei is surrounded by many of these very conservative people, but he's not married and he loves his dogs and many very conservative people don't like that. And so I love that is happening because they have to support a president, who is living his life as he likes. And I will defend him. I will be the number one defender of his way in his personal life against any conservative that wants to make him feel bad about it or ridicule him because politics is very dirty in this sense. Because you had many people from the left criticizing Milei for having no wife and for having five dogs or four. We don't know. I think there are four. And how is that relevant to your views on tolerance or inclusion, et cetera? But also from the right wing, from the very conservative people in the right wing, I know they don't like the style of life that Milei has.
You don't have a wife. You don't have kids. You just have dogs and you say you love them, but they have to remain silent there because he's doing what he has to do and that’s focusing on the economy and managing the public affairs in a more pro-market way. That's all that should be asked. He's the president and that's what he needs to do.
Rasheed: Okay, now let's turn to the economy. Federico Sturgeonnager, who is the former president of the Central Bank of Argentina under President Macri, recently made a comment where he said that I can explain Milei's economic policy to you in two words: fiscal surplus. How accurate is this assessment?
Iván: It's pretty accurate.
I think it's a great synthesis of the main goal of this government. And I also think it's a great idea and a great policy for Argentina. Cristina Fernández de Kirchner said that in Argentina, every economic recipe has failed. It didn't work. There's something special in Argentina that economic principles don't apply.
Principles from the left, principles from the right, principles from the middle. They just don't work. That's not true. From the perspective of Milei, in the perspective of many pro-market economists in Argentina, for many years, this thing has never been tried and needs to have a budget surplus or at least to have equilibrium.
According to free-market economists, the 2001 crisis, the terrible crisis in Argentina after the neoliberal project, we can say, was a failure of the second government of Cristina Fernandez. She needed to impose exchange controls and that's the failure of government. Also the failure of Mauricio Macri, who had a free-floating exchange rate, but in six months, the dollar went from 20 pesos to 40 pesos.
That was the end of his government, and also the failure of Alberto Fernandez who finished his government with 200 percent inflation annually. All of those episodes can be explained by a budget deficit that becomes unable to be genuinely financed. If you look at history and that the last six episodes of the macroeconomic crisis in Argentina are explained by the budget deficit, then what you need to do is very easy.
You need to order that, you need to create a surplus. You need to go and look for a budget surplus or fiscal balance. That's what Milei has in mind. Milei is very eccentric. He's a character in this sense. So I'm going to tell you a story here. Some years before Milei was famous from 2015 to 2016. He was on TV. He lectured on many stages. He went around the country. And he created content for social media but in a very organic sense. It's not that he had a YouTube channel, for example, right? But he, I don't know, one day someone said, "Hey, Javier, let's sing a song". And Milei and three other economists were singing this song.
That song said everything that politicians in Argentina did was spend and spend, and that this spending was the fiscal rule of Argentina. So what is the fiscal rule of Argentina according to Milei? Spend. What explains the failure of Argentina? Politicians spending too much money. Now he comes to power and what does he do? He tries to balance the budget. And that's the main focus of the government so far it has been achieved against all projections. That's the plan, reducing spending and trying to balance the budget.
Rasheed: Last week in Argentina, the Senate approved a law, which in English, I guess I can translate as the Law of the Bases and Starting Point for the Freedom of Argentines, or pretty much referred to as Ley Bases in Spanish in the media, was approved, as I mentioned, and it was celebrated as a massive achievement of the Milei administration. I also recall that you even had a tweet calling the vice president a hero because she cast a vote, the deciding vote, in favor of their approval. Why was this such a big deal in Argentina last week?
Iván: Okay, so it was a great deal because of two points.
Point number one is that originally the law had around six articles. All of them were aimed at liberalizing the economy, reducing regulations, reducing distorted subsidies, and also creating some taxes reinstating a tax that was reduced by the former administration. To win an election, it was a very demagogic point there that it was destroying to be reverted now, but it was a law for liberalizing the economy and generating more competition in Argentina.
What has been approved is a very small part of a bigger project. However, that small part passed. It’s very mild, very tiny labor market reform. It also has a special regime for investments where you make a guarantee to investors that you will protect their property rights no matter what for the next 30 years. And it also has the approval to privatize some state-owned companies. Of course, in the original law, there were around 45 companies that were going to be privatized. And now you probably have five or six. It is a very mild version of the law, but still, it has some liberalizing points.
So that's the first important issue. But the second important point of why this law was so needed is because it shows that the government, Milei, even though he's in a large minority in Congress, in both chambers, managed to be successful. He got a victory. His law passed Congress finally. And I think that clears some doubts that markets were having regarding Argentina and the Milei project. They’re thinking, “He promised fiscal austerity. He promises liberalization and he promises that property rights will be respected. That's all fine and well. But will he be able to do this in a country like Argentina? I don't think so.” Now with this law, investors are more optimistic that he has a chance to deliver. So I think that's the second and most important point on the approval of the Ley Bases.
Rasheed: Milei promised dollarization as a key point of his campaign. I remember watching TikTok after TikTok of Milei saying, "I will close the central bank immediately". Half a year later after the inauguration, it's still quite open. What happened?
Iván: It's another funny story because there's another economist here. He's very well known. He's famous. We have many famous economists here because since the economy works so badly, then professional economists become very in demand. And there's a particular characteristic of this man whose name is Carlos Melconian. Let's say Carlos now. He appeals to the average guy. He speaks in very plain language.
And he once said this. “To dollarize Argentina is the same as inviting me to dinner. You tell me that we are going to have pasta with bolognese sauce and you don't have pasta or bolognese sauce. So we can’t even though you invited me.”
This was a metaphor to say, you cannot dollarize if you don't have dollars to rescue the pesos. Before Milei came to office, Emilio Ocampo, who was an economist advising Milei, had written a book on dollarization and he had a plan to dollarize. You didn't need the dollars at the start. you could dollarize in a process where you announce dollarization, and over several months, let's say nine months, a year or two you gradually continue to roll out the process. Things today are not there.
Emilio Campo is no longer an advisor. You have a different minister of the economy. Some weeks ago, Milei was invited to a dinner where he had his lecture and Carlos Melconian was in the audience. Milei made fun of this thing about the pasta and the bolognese, et cetera, mocking Carlos, and Carlos was angry and left the room.
The funny part is that he didn't dollarize. Because the pasta was not there. So I think that Milei hasn't abandoned the idea of dollarization. I think he wants to dollarize. He wants to close the central bank. I think that's a goal in his policies, but I think that he wants to have the dollars to do so first.
And to have the dollars, he needs to reduce the amount of pesos that have to be transformed into dollars eventually. So that’s what the central bank is working on: reducing the number of pesos that need to be converted into dollars and also trying to get more dollars to eventually dollarize.
So I think the plan is there but it will take time, of course.
Rasheed: I spoke to Emilio on this podcast last year, and I still think his idea was correct. And he thinks that you don't need to have the full way to dollarize the entire economy day one Ecuador took two years and you don't have to do it all on day two or day one in your view, where do you follow that?
Do you think he actually should continue to wait? Do more surplus, do more cutting and then dollarize? Are you saying should happen as soon as possible?
Iván: I have this view. That I favor dollarization. I think it's a remedy for the disease of inflation. I think it's effective. I also find that if you have a hard currency, not only if you are dollarized, you need to have flexibility in other parts of the economy. If you have a hard currency and your labor market is very rigid and has a lot of competition, then it could lead to higher unemployment, for example. If you have an external shock and you don't have flexible prices, the market will adjust by quantity.
So you will have either unemployment or either a harder recession. So I do favor dollarization, but I understand that some points could be negative. If you don't liberalize everything, can Argentina be committed to liberalizing a lot? I know Milei wants that, but still, it's not hard to transform this country into the freest country in the world.
So having said that I'm in favor of dollarization, but I think that it's not urgent. I also read Ocampo’s plan. I think it was very serious, but probably what happened there was that when presented to investors, and to the people who had to create this financial tool that would take the liabilities of the central bank and put them in some financial trusts et cetera, people didn't understand it well. Perhaps it was too sophisticated. So the plan that is being carried forward now is more simple. The central bank is trying to get reserves and international reserves, and they are trying to shrink in real terms, the liabilities of the bank. It's more easy to understand for investors, I think. So I don't have a solution in these terms. It's really hard to be there making decisions. I just try to understand what's happening. I do favor dollarization, but I am also, I don't know, I see reality. And I know that there are many countries, many countries that don't have inflation. That they grow, that they have sustainable economies, and they don't dollarize. And they didn't dollarize. For example, Chile, right? So, that's what I would say.
Rasheed: When you were trying to describe to someone a model of what Argentina could be like in terms of market freedom, what do you usually use as an anchoring example? Is it Chile, Panama, or something else?
Iván: Yeah, I think I would think of Chile a lot. I think it's a country that has liberalized the economy comprehensively.
Tariffs went down, they have free capital flows, mobility, they have a free exchange rate, a free-floating exchange rate, they have a very flexible labor market and it has delivered very good results. So if you are from Argentina, you need to learn from the lessons of Chile. Of course, I know Panama is a country that grows, it grows sustainably.
It has done it for many years. They have a dollarized economy. They have very low levels of inflation, but you could also think of Peru which has made outstanding growth in the last 20, 30 years, basically no recession, I think only in 2020 because of the pandemic. But after that, you have 25 years of steady growth with low inflation, and low unemployment.
Also flexible labor markets. So I would look at Peru and Chile. Yes. At least in Latin America, I think they're good examples of free market economies and they have a much smaller government and the government deals with fewer tasks than ours. For example, they don't have a public pension system. All we have is a public pension system.
We used to have a private pension system, but it was expropriated by the government with, uh, Cristina Fernández de Kirchner, and now all we have is a monopoly by the government in pensions. So that also creates a huge difference between Argentina and Chile or Peru, for example.
Rasheed: So you mentioned labor markets quite often.
I don't think people grasp the difficulty of the lack of flexibility in Argentine labor markets. Could you explain why you keep emphasizing the need for more liberal labor markets?
Iván: Yes. So here, the United States is a good example. It's, I think it's number four in terms of the labor market freedom. I think it's one of the freest labor markets in the world.
And let's be very crude. If you're a businessman in the States or a businesswoman, you can fire your employee from one day to the other. Just that. Goodbye. See you later. And you fire him and you don't need to go through any bureaucratic process. You don't need to compensate extra for your work, at least in general terms.
I don't know the particularities, right? So you can do all that. It's very easy. It's very easy to break a labor contract and you would say, Oh, but that, that's terrible, that that's savage, that's inhuman, that's not humane, right? But the interesting part of this is that America has one of the lowest levels of unemployment in the world.
And it's a very high economy in terms of producing jobs. Why is that? Because the easier you can go out of a contract, the easier you make contracts. In Argentina, firing an employee it's very difficult. Firing a public employee, it's impossible because the constitution forbids you, you can't do it.
It's forbidden by the constitution. So if laws make it very difficult for companies to reduce the number of workers they have, they will think twice or even three times before hiring someone, because if the relationship doesn't work. You cannot break it easily. You will have to pay a lot of costs. So that creates rigidities or inflexibilities in the market that results in higher unemployment or what happens in Argentina, a very big rate of illegal employment, right? So there are around 30 percent of the labor force in Argentina that they just work in without a contract and outside of the legality. So that's the point.
Rasheed: Final question, how optimistic should we be about Milei's success in transforming Argentina to be the freest country in the world?
Or put differently, what is your probability assessment of Milei's administration?
Iván: Okay, let's start with the points against. Milei has a really small strength in Congress, 30 members of the Chamber of Deputies. And I think seven members in the Senate, extreme minority. So we could go very badly there.
Also, he's reducing or adjusting the budget, but many people say that's not going to last because unions are very powerful and you will have to start spending more again, et cetera, et cetera. Also, the inflation will go down, but then it can go up again because you will have to abandon the exchange controls and that will imply a devaluation.
So I want to say there are many points against, there are many problems that can arise in the short or the medium term. But there is one thing that is being made that no one has tried before, at least not in the last 40 years which is balancing the budget and bragging about that bragging, right?
Because he's saying, I am doing this and I'm proud to do this. And I will never abandon my goal of balancing the budget. We never try that. And it's key for stabilizing Argentina's economy. I think that the probability of success is higher than many people will think if only because of that. And I would add another point.
After all these 10 or 15 years of stagnant economy and huge levels of inflation, our wages in real terms and nominal terms are on the floor, on the ground. So Argentina, it's like a buy. It's a buy option. You're thinking, this country he's starting to stabilize the macro problems. The government says that it will respect property rights and wages are on the floor.
So investors could that environment and think it's an opportunity. “Maybe it's our opportunity to go to Argentina and make a profit.” When you put those things together, this could go well. Of course, there are many scenarios where it doesn’t, but I think that there's an argument to be made that this time could be different.
I think it could be different. Yes.
Rasheed: Iván, thank you so much for joining me today on the podcast. This has been an excellent conversation.
Iván: Thank you very much, Rasheed. It was a pleasure for me to be here.
Rasheed: That's it for this episode. For updates about the podcast, please subscribe to our Substack blog found on cpsi.media. You can also read our newsletters and long-form content on Caribbean policy improvements.