Peronists Rising

Argentina's undead political caste is back, dagger in hand...

“Is this a dagger which I see before me,
The handle toward my hand?”

~ Macbeth by William Shakespeare

Joel Bowman with today’s Note From the End of the World: Buenos Aires, Argentina...

“I had a dream – no, a nightmare! – that we voted the Peronists back into power. And it wasn’t their return that was the worst part... but that we had done it to ourselves.”

Our dear friend, a porteño who has endured his unfair share of that dismal political regime, appeared genuinely rattled by the thought... as though, like Shakespeare’s tragic lead, his vision might turn to portent.

Is it possible that the free-market experiment here in Argentina is already feeling the dagger plunge into its heart?

Is it conceivable that misty-eyed voters have begun longing for the good ol’ days of rampant deficits, nosebleed hyperinflation, empty shelves, and a basket-case economy closed off from the world?

¡Sí, señor! ¡Por qué no!

Indeed, if any country is capable of “snatching defeat from the jaws of victory,” as our old friend Rick Rule puts it, it’s Argentina. For generation upon generation, citizens have watched their political caste feast on the national bounty, while they, the voters, starve in the streets.

And what might be the fallout of such a daft “own goal”?

Kuka Risk

Here’s Kirchnerist mouthpiece Javier Timerman acknowledging the “Kuka Risk” by admitting that, if Javier Milei loses the elections in 2027, Argentine financial assets would plummet as foreign investors exit en masse.

“There’s no Plan B. Wall Street doesn’t believe there’s a reasonable opposition. Even if it’s Macri, investors will want to leave Argentina... If Peronism wins, the assets will surely drop by 70%.”

Just imagine… warning listeners about what might happen if your own political team were to be elected! Welcome to Argentina…

Still, elections are a long way off down here on the Pampas (not until October 2027, or about a year and a half away), but already nervous voters are beginning to doubt the miracle on Pampas.

Indeed, major polls show the president’s approval ratings slipping noticeably, from the mid-50s a year or so ago to the mid-30s today.

Smelling blood in the water, Milei’s political opponents begin to circle, including former president Mauricio Macri, whose center-right PRO party has begun distancing itself from some of Milei’s policies, prompting rumours the ex-leader might stand as part of a greater, anti-Milei coalition in next year’s general elections.

Naturally, the popular press have piled on, ever eager to see The Establishment for which they live and breathe and peddle their putrid lies returned to its rightful position atop the political hierarchy.

Their hoary charges of corruption, economic calamity and social injustice may have little basis in observable reality, but that is hardly reason to abandon the narrative. After all, politics is less a measurement of reality than of perception.

But what about that fundamental tension, between the “real” and the “feel”? A quick look under the hood...

Realz vs Feelz

Inflation, which is down roughly 90% under President Javier Milei’s administration, remains at an uncomfortable ~32% per year. Better than the ~300% bestowed on the country by the ousted Peronists, to be sure, but in need of another 90% drop to resemble the OECD average (of roughly ~4%.)

Even so, the latest data, from the National Institute of Statistics (INDEC), shows inflation for April coming in at 2.6%, the lowest read since November. It’s also the lowest April read (excluding the pandemic lockdown of 2020) since 2017... and a long way from the monthly high of 25.5% – almost 1% per day – when Milei took office.

Importantly, though less reported by the bloviating presstitutes, real wages are actually outpacing inflation. In March, Argentine salaries grew by 3.4% month-over-month and 36.4% year-over-year. Other metrics, from tax revenue to consumer spending to general economic growth, especially for the nation’s surging exports, point to a stronger economy overall.

On the export side, the latest data shows that revenue for March reached the highest monthly level in the country’s history, while total exports for the first quarter of this year also notched a record of USD$24.1 billion. That’s up around 16% year on year, driven by massive growth in the key sectors of agriculture, energy and mining.

Still, it’s not easy for the man on the street, who responds not to what he reads while sifting through the economic data... but to what he hears in the taxicab... what he reads in the news... and what he feels in his bones.

Inflation, as mentioned, is still too high. (Today’s wholesale inflation figures came in hotter than expected, largely due to increases in global energy costs – see Strait of Hormuz putting upward pressure on prices from one End of the World to the other).

Meanwhile, at 7.5%, official unemployment remains elevated. And barely a day goes by when one dumbstruck newswire or another doesn’t lead with a tear-jerking “human interest” story about a local business forced to shutter, all thanks to Milei’s “ruthless” free market policies.

Oh look, here’s one, from the perennial misery mongers over at Reuters:

Argentina’s auto parts industry feels the pain from Milei’s shock therapy

BUENOS AIRES, May 5 (Reuters) - Inside a small, family-run auto parts plant on the outskirts of Buenos Aires, production lines sit quiet.

The factory is running below capacity as the firm, Suspenmec, ​struggles to compete with an influx of cheaper imported parts, many from China, after Argentina sharply eased trade restrictions.

President Javier Milei’s aggressive economic reforms - including slashing import barriers and presiding over a stronger peso - have helped stabilize the economy. But for many small and mid-sized manufacturers long shielded from foreign competition, the adjustment has been sudden and painful.

Coddled ≠ Protected

While it is certainly true that local manufacturing is struggling, particularly in areas in which this market enjoys no comparative advantage... and that many domestic businesses are coming under pressure from international competitors as Milei slashes import/export controls and reintroduces the country to the 21st Century... stories like the one above tell only part of the story.

It is, after all, local consumers – including small and medium businesses – that now enjoy access to a world of cheaper products and higher quality goods. Those same local businesses are now able to use capital they would have had to outlay on more expensive, unreliable parts, expanding their own operations, hiring more staff, paying down debt, etc.

As Milei himself noted during his keynote speech at an event hosted by Banco de Valores (Valo) at the Malba museum this past week:

“We’re making trade agreements with as many places as we can. In that way, we expand the size of the market, boost the division of labor, and that will generate greater productivity, more jobs, and greater well-being.”

If higher prices and lower-quality goods – such as result from coddled, “protected” markets – were the path to success, Argentina’s decades of economic isolationism would have yielded a dynamic economy and a veritable cornucopia of wealth.

Instead, it was precisely this hermitism that left the country economically ossified, politically corrupted, and fostered the kinds of outcomes that haunt the dreams of honest porteños working for a better future.

More to come in future Notes From the End of the World...

Cheers,

Joel Bowman

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