The Lion King? What a Milei Presidency Could Mean for Argentina’s Agricultural Sector

In mid-August, Argentines headed to the polls to vote in the country’s presidential primary election. When the dust settled, most observers were shocked to find that the largest share of the vote had gone to anti-establishment candidate Javier Milei. While many pundits believed that Milei would be a competitor, the degree of his success came as a surprise to most.

 

By carrying 30.2% of the national vote, Milei’s La Libertad Avanza party bested both the incumbent leftist Union por la Patria party, which secured 27.2%, and the center right Juntos por el Cambio coalition, which claimed 28.3% of the vote. Milei demonstrated surprising strength across the entire country, winning the largest share in two thirds of Argentina’s provinces.

 

Once considered a political outsider, Milei’s support in the primaries has galvanized his candidacy and forced stakeholders to seriously consider what a Milei presidency could mean for Argentina. In today’s post, we’ll take a look at Milei’s agricultural agenda and explore his proposals for the sector.

 

The Man Behind the Sideburns

 

Javier Milei was born and raised in Buenos Aires. He is an economist by training and considers himself a Libertarian. In a recent interview with “The Economist”, he indicated that the 2008 financial crisis converted him into a ‘recalcitrant neoclassicist’. Milei bemoans Argentina’s bloated government and many of his presidential proposals are targeted at reducing the size of the state.

 

Milei compares himself to a lion and his bombastic personality has helped to secure his place in Argentina’s public eye. He is an unabashed admirer of Brazil’s far right former president, Jair Bolsonaro, who perpetuated several anti-democratic theories in the country. While Milei has promised to govern through the legislature rather than by decree, his attitudes carry echoes of authoritarianism.

 

Despite, or perhaps because of, his eccentricity, many Argentines find Milei to be an appealing alternative to the traditional political parties which they blame for plunging the country into prolonged economic crisis. But while his proposals grab attention, they are often short on substance, and he has provided few details about how he hopes to achieve his goals. Other potential barriers also exist. Even if elected, Milei is unlikely to have much support within the congress or at the provincial or municipal level, which could undermine his ability to move his controversial proposals forward.

 

Nothing Like Business as Usual

 

Milei’s political agenda hinges on rebooting the Argentine economy by reducing government intervention. He has pledged to slash public spending by at least 15% by eliminating subsidies, drastically cutting the number of public employees, and outsourcing expensive public works through a bidding process for private companies. He also intends to reduce taxes, privatize state companies, and reform the education and health care systems. But perhaps his most electrifying proposal is to dollarize the Argentine economy.

 

Agriculture has not formed a central part of Milei’s political agenda. However, he has repeatedly emphasized that he views agriculture as a fundamental part of Argentina’s economic engine, and that he plans to reduce the restrictions which have increasingly strangled the sector in recent years. He famously said that under his administration farmers will become so rich that they will begin financing the government.

 

Under Milei’s administration, the Ministry of Agriculture would be eliminated, instead becoming a subdivision of the Ministry of Economy. He also intends to eliminate land ownership restrictions and reduce bureaucracy within the sector. More specifically, Milei has released six tenets that make up his Agricultural Reform agenda. They include:

 

1.     Eliminate different exchange rates when transacting through the central bank;

2.     Eliminate export taxes and restrictions without exception;

3.     Negotiate the elimination of gross income tax;

4.     Eliminate all international trade restrictions including quotas, permits, and authorizations;

5.     Sanction a seed law; and

6.     Plan to improve infrastructure through private initiative to develp roads, routes, ports, etc.

 

Agriculture groups are generally supportive of many of Milei’s policies, but they express deep seated skepticism over his ability to implement them as proposed. In some cases, the proposals seem to raise more questions than they resolve.

 

In particular, the harmonization of exchange rates and the elimination of export taxes could provide great relief to the country’s agricultural producers and could pave the way for increased competitiveness for Argentina’s agricultural products on the global market. However, the government relies heavily on the prevailing currency regime and revenues from export taxes - especially soybean exports which are taxed at an eye popping 35% - to service its own debt and fund government programs. It is difficult to envision how these programs could be unwound without devastating consequences for the larger economy. Notably, Milei has provided remarkedly little detail about how he intends to do so.

 

With regard to the gross income tax, this tax is administered by the provinces and the national government does not have jurisdiction to eliminate the tax. In order to achieve this goal, Milei would have to rely on support from the provinces, which it is unlikely he possesses.

 

Trade is likely to become a particularly contentious point under a Milei administration. On its face, the elimination of international trade restrictions may sound appealing, but such a move could again have unintended consequences. Several agricultural sectors and adjacencies have benefitted from the protectionism that Argentina has provided in recent years and the abrupt removal of these restrictions could deeply harm these sectors. In addition, this tenet fails to recognize Argentina’s obligations as a party to various trade agreements, the details of which have been painstakingly hammered out over years and sometimes decades of negotiations. Milei has also proposed dissolving Mercosur and has indicated that he will not foster further commercial relations with China, potentially upending some of Argentina’s most important trading relationships. 

 

The remaining tenets of Milei’s plan have more universal support. In particular, the seed law, which, while controversial, has the backing of many of Argentina’s agricultural organizations who agree that the law is necessary to increase Argentina’s access to biotechnology innovations. Finally, the country’s infrastructure is in serious need of investment, as anyone who has driven over a bumpy rural road in Argentina would emphatically agree.

 

The Devil is in the Details

 

Argentina is an undeniable agricultural powerhouse and despite the many challenges that sector has faced in recent years, it has continued to be a key contributor to the broader economy. Even so, most would agree that the sector has almost limitless potential if sound policies were put in place to facilitate such growth.

 

As stated, Milei’s proposals would certainly provide a new era for Argentina’s economy and the agricultural sector, but as with most things, the devil is in the details. For these policies to be effective, it is imperative that they be based on sound analysis and implemented in a thoughtful manner. So far, Milei has not sufficiently demonstrated this to be the case.

 

After establishing himself in the primaries, Milei’s next political contest will come on October 22, when he faces off against Patricia Bullrich of the Juntos por el Cambio party and Sergio Massa of the Union por la Patria party. If no candidate receives either 45% of the vote, or 40% with a margin of 10%, the election will advance to a runoff between the top two contenders on November 19.

 

Milei has already created waves in Argentina’s political arena. Only time will tell if Milei is the medicine that Argentina needs or just the latest chapter in the country’s long and complicated political history.

Monica GanleyComment