Can Government-centric Economies in LatAm Convert into Market-centric Investor Darlings?
Download a PDF of this articleWhen the Chileans elected Gabriel Boric into office, back in December 2021, many heard a death knell for free markets. Even Chile, the regional referent of the Chicago-University style economic policies1 that many see as radical laisez faire, had chosen the government-centric political alternative.2 In 2018, so had Mexico.3 In 2019, so had Argentina.4
Was that game-over for free markets in Latin America? 2022 brought the question into sharper focus when both Colombia5 and Brazil6 fell for the more government-centric discourse.
In that context and considering the country’s long affection for a government-centric economy, no one foresaw Argentina electing a new president who openly shouts to the world that a free market economy is the only way to embrace growth and development.7
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Milei’s Game Plan to Transform Argentina
Milei won the presidency of Argentina in November 2023, by fundamentally diverging from the traditional playbook, candidly stating that government spending must be strongly reduced8 and blaming politicians for the deterioration of the country.9 Despite contradicting conventional election strategies by explicitly stating that he would cut government spending, he captured almost 56% of votes to unexpectedly ascend to power and pursue change.10
Transforming Argentina doesn’t come about easily, though. Milei’s biggest battle is happening in early 2024 with a massive reform he attempts to get through congress and the judiciary,11 two areas of government where his political party has little strength.12 This initiative is fueled by Milei’s big win in the presidential elections and the popularity he still has13 among the Argentine people. Will that support last long with annual inflation ascending beyond 180% and a possible recession on the horizon?14 The first semester of 2024 will be critical for Milei’s reform plan in Argentina.
The first semester of 2024 will be critical for Milei’s reform plan in Argentina.
Fundamental Realities Shaping Argentina
Milei asserts that Argentina needs three decades of liberal policies to become a global power,15 a radical transformation that prompts skepticism. While time will reveal the validity of these aspirations, there are immediate realities shaping Argentina’s landscape that businesses in Latin America should consider.
Argentina’s legal and cultural frameworks concentrate power in the presidency. Despite the relevance of congress, provincial governors, and the courts, the president plays a pivotal role in shaping the nation’s trajectory.
Milei swiftly attempts to amend hundreds of laws and regulations,16 emphasizing the urgency of change towards decreasing the role government in Argentina’s economy. Even if only a fraction of those amendments survives scrutiny, a significant shift in how the country operates could occur.
Another consideration is whether altering the legal framework alone is sufficient for meaningful change. Rules, subject to presidential decree, can be easily reversed. Furthermore, changing a society’s beliefs and behaviors ingrained over decades poses a formidable
challenge.
Investing in Today’s Argentina
Investors, however, stand at a unique juncture. If Milei succeeds in modernizing Argentina, current investments may prove to be at historically low prices, offering an opportune moment to engage with the evolving market.
Privatization of public companies may offer significant upside to investors, strategic investments in promising sectors of Argentina’s economy such as mining, agriculture, energy, oil and gas, or infrastructure also could yield fruitful returns.
Lastly, Argentina’s history of leaning towards a government-centric economy for more than seven decades raises skepticism. Past attempts at change by President Menem in the 1990s17 and President Macri in the 2010s,18 fell short. The question remains: will Milei’s efforts mark a departure from this pattern?
Will Milei succeed in his mission to depart from a government-centric economy?
Our Takeaway
Argentina’s President has launched a real blitz to reshape the country into a market-driven society. Whether Argentina pivots away from its government-centric philosophy in 2024 remains uncertain. Regardless, Milei’s government will undoubtedly be a focal point in the months and years ahead, making Argentina a case to closely monitor for any company interested in Latin American business in 2024.
[1] Sebastian EdwardsT, “The Chile Project: The Story of the Chicago Boys and the Downfall of Neoliberalism,” Princeton University Press (last accessed January 16, 2024), https://press.princeton.edu/books/hardcover/9780691208626/the-chile-project
[2] See supra note 1.
[3] Azam Ahmed and Paulina Villegas, “López Obrador, an Atypical Leftist, Wins Mexico Presidency in Landslide,” New York Times
(July 1, 2018), https://www.nytimes.com/2018/07/01/world/americas/mexico-election-andres-manuel-lopez-obrador.html
[4] “Argentina election: Centre-left Alberto Fernández wins presidency,” BBC (October 28, 2019), https://www.bbc.com/news/
world-latin-america-50203727
[5] Joe Parkin Daniels and Edinson Bolanos, “Former guerrilla Gustavo Petro wins Colombian election to become first leftist president,” The Guardian (June 19, 2022), https://www.theguardian.com/world/2022/jun/20/former-guerrilla-gustavo-petro-
wins-colombian-election-to-become-first-leftist-president
[6] John Otis, “Lula beats far-right President Bolsonaro to win Brazil election,” NPR (October 30, 2022), https://www.npr.org/2022/10/30/1132561987/brazil-election-lula-da-silva
[7] John Cassidy, “Fundamentalism of Argentina’s Javier Milei,” The New Yorker (November 21, 2023), https://www.newyorker.com/news/our-columnists/the-free-market-fundamentalism-of-argentinas-javier-milei and Susie Violet Ward, “Milei Backs Freedom And Property Rights In Argentina’s Political Shift,” Forbes (December 12, 2023), https://www.forbes.com/sites/digital-
assets/2023/12/12/milei-backs-freedom-and-property-rights-in-argentinas-political-shift/?sh=17ec82521ccb
[8] Mar Centenera, “Milei, at his inauguration: A $20 billion cut to the public sector and more poverty in the short term, El País (December 11, 2023), https://english.elpais.com/international/2023-12-11/milei-at-his-inauguration-a-20-billion-cut-to-the-public-sector-and-more-poverty-in-the-short-term.html
[9] Maximilian Heath, “Argentina’s Javier Milei: the radical who could blow up political status quo,” Reuters (November 16, 2023), https://www.reuters.com/world/americas/argentinas-javier-milei-radical-who-could-blow-up-political-status-quo-2023-11-16/#:~:text=Milei%20has%20railed%20against%20the,inflation%20and%20intends%20to%20shut
[10] See supra note 8.
[11] See supra note 10, and “Argentina court suspends Milei’s ‘mega-decree’ labor law reforms,” France 24 (April 1, 2024), https://www.france24.com/en/americas/20240104-argentina-court-suspends-milei-s-mega-decree-labor-law-reforms
[12] Patrick Gillespie, “Milei Blitzes Argentina’s Congress With Far-Ranging Reform Bill,” Bloomberg (December 27, 2023), https://www.bloomberg.com/news/articles/2023-12-28/milei-blitzes-argentina-s-congress-with-far-ranging-reform-bill, and Brian
Winter, “Javier Milei Races the Clock,” Americas Quarterly (January 10, 2024), https://www.americasquarterly.org/article/javier-
milei-races-the-clock/
[13] See supra note 12.
[14] Manuela Tobias, “Argentina’s Inflation Hits 211% in 2023, Fastest Gain in Three Decades,” Bloomberg News (January 11,
2024), https://www.bnnbloomberg.ca/argentina-s-inflation-hits-211-in-2023-fastest-gain-in-three-decades-1.2020954
[15] “Javier Milei on the economy: ‘If you give me 35 years we could be like the US’,” Ámbito (October 1, 2023), https://www.ambito.com/politica/milei-la-economia-si-me-dan-35-anos-podriamos-ser-como-eeuu-n5835141
[16] Patrick Gillespie, “Milei Announces Sweeping Reforms to Deregulate Argentina Economy,” BNN Bloomberg (December 20,
2023), https://www.bnnbloomberg.ca/milei-announces-sweeping-reforms-to-deregulate-argentina-economy-1.2014339, and
Flora Genoux, “Argentina: Javier Milei advances his free-market agenda with a comprehensive reform Bill,” Le Monde (December
30, 2023), https://www.lemonde.fr/en/international/article/2023/12/30/argentina-javier-milei-advances-his-free-market-agenda-with-a-comprehensive-reform-bill_6387106_4.html
[17] “Carlos Menem, a conservative caudillo, tarnished liberalism,” The Economist (February 17, 2021), https://www.economist.com/the-americas/2021/02/17/carlos-menem-a-conservative-caudillo-tarnished-liberalism, and Robert D. McFadden, “Carlos
Saúl Menem, Who Led Argentina Through Economic Turmoil, Dies at 90,” New York Times (February 14, 2021), https://www.nytimes.com/2021/02/14/obituaries/carlos-saul-menem-dead.html
[18] Agustino Fontevecchia, “Et Tu Macri? And Then Fall Argentina: An Analysis Of The Failure Of Mauricio Macri’s Economic Plan,”
Forbes (October 9, 2019), https://www.forbes.com/sites/afontevecchia/2019/10/09/et-tu-macri-and-then-fall-argentina-ananalysis-of-the-failure-of-mauricio-macris-economic-plan/?sh=711963ce4165
Gustavo Morales Oliver
Managing Director, Head of Brazil Forensic Litigation Consulting
Gustavo Morales Oliver is the head of FTI Consulting’s Forensic Litigation Consulting practice in Brazil, and a member of its Risk and Investigations team. He works closely with Strategic Communications across a range of Latin American topics. Gustavo has more than 20 years of experience advising clients across Latin America in internal and government investigations, compliance, anti-corruption, litigation, M&A, cross-border matters, business intelligence, risk management and crisis management. He specializes in articulating and implementing strategies with external and in-house legal counsel, as well as with board members and executives in a wide range of matters.
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