The situation in Argentina has changed. The most anti-communist president has appeared. Congratulations to the Chinese Communist Party! Shocking right-wing ideas: “dollarizing” the country, drastically reducing government agencies, and taming 140% annual inflation? ! (Provided by “Qin Peng Observation”)
[The Epoch Times, November 21, 2023]Hello, viewers, and welcome to “Qin Peng Observation”. Today is November 20th, Eastern Time, November 21st, Beijing, Hong Kong and Taiwan time.
Today’s focus: Argentina’s presidential election was a big upset. Right-wing scholar Mire (also translated as Milai) won. He will launch a series of amazing governance measures, especially the abolition of currency, the abolition of the central bank, and the realization of “dollarization.” How does the outside world view this? Are there any successful examples?
Mire was about to become Argentina’s most anti-communist president in recent years, but the Chinese Communist Party unexpectedly congratulated him on his election. Why? What changes will it bring?
The weirdos elected: chainsaws, rock n roll, economists, TV stars
On November 19, local time, the 53-year-old economist and TV personality Mire was elected as the president of Argentina as an amateur. Before that, he had almost always been regarded as an amateur showman. It was not until August this year that he was elected with the highest number of votes in the primary election, causing an uproar in the political arena. Even so, most polls and observers still believe that the pro-CCP leftist Massa is more likely to be elected.
Mire will take office on December 10. Many people say that Argentina has elected a “chainsaw” president. Because he often carries a chainsaw to rallies, saying he will tear the current government into pieces and promising to significantly reduce the size of government. It also became a symbol of his contempt for the status quo.
A few years ago, Mire was a beloved TV talk star who boosted ratings for his anti-government tirades. It won him a seat in the lower house of Congress two years ago.
During the election, his views received widespread attention: He opposed abortion, supported gun rights, once called Pope Francis “evil”, questioned the death toll under Argentina’s brutal dictatorship, and believed that the far left ‘s sex education is a Marxist plot to destroy the family and considers his cloned mastiff his “four-pawed child”.
Mire is also regarded as the “Argentine version of Trump”, with sharp words and messy hair. His legions of fans have called him “crazy” and “wiggy”. He himself is called “Lion”.
Milley, who focused his campaign on economic proposals, has accused successive governments of wantonly printing money to fund state spending. In the interview, he called the national currency, the peso, “garbage that is worse than fertilizer.” He proposed to build a market-friendly, small-government, dollarized Argentina. He also said that public works spending by the Argentine government would be “cut to zero.”
In terms of international relations, Milley is pro-American and pro-Israel. He plans to visit the United States and Israel before taking office on December 10. He often waves the Israeli flag at rallies and hopes to move Argentina’s embassy in Israel from Tel Aviv to Jerusalem in the future.
Mire’s election is believed to reflect the people’s desire for change and represents their deep dissatisfaction with the ruling class and the status quo. “We are very tired, we want updates, we want to see new faces,” one woman told AFP. “I bet on change, bet on Mire.”
After the election results came out, former US President Donald Trump (Trump) welcomed the results, saying that he believed that Mire would “make Argentina great again.” Former Brazilian leader Jair Bolsonaro said that “hope will shine again in South America.”
Tesla President Musk also believes that with Milay’s election, “Argentina’s prosperity is about to come.”
The toughest challenge!Can dollarization tame 140% inflation?
Argentina is facing severe economic challenges. Annual inflation of more than 140% has severely damaged the South American country’s purchasing power, with two-fifths of Argentines living in poverty and key agricultural areas hit by a historic drought. So, Argentines have had enough.
However, Mire’s future is full of challenges, especially the “dollarization” plan. Ecuador and Panama are two well-known examples of previous economic dollarization, but no country of the size of Argentina has ever turned to dollarization.
In early 2000, a serious financial crisis occurred in Ecuador. Floods destroyed banana plantations, an important export industry, triggering a serious financial crisis. Faced with bank runs, currency runs and debt defaults, then-President Jamil Jamil Mahuad announced dollarization.
Ten days later, Jamil Maawad was ousted in a military coup, but dollarization succeeded and quickly restored Ecuador’s financial stability. Over the past two decades, its inflation rate has averaged 2.8%. In 2000, the country’s inflation rate reached a high of nearly 100%.
Salvador followed closely behind. At that time, the inflation rate was low, currency reserves were sufficient, and the exchange rate was stable, but the interest rate was around 17%.
Supporters say dollarization could help Argentina curb runaway inflation and end its boom-and-bust cycle.
Critics say dollarization will strip Argentina of its national sovereignty and weaken its ability to influence the economy through interest rate adjustments and other measures. Moreover, they argue that with Argentina bankrupt, there are no funds to implement such an ambitious plan as dollarization. At the same time, it is believed that dollarization is best suited for countries that are fully integrated into the global economy, and although Argentina is among the G20 countries, it is one of the most closed economies in the world. Argentina’s commodity export platform’s business cycle is also different from that of the United States, and U.S. monetary policy decisions may have adverse effects.
“First, you need access to capital markets to convert the entire monetary base into dollars, and you don’t have that,” said Alejandro Werner, an economist who formerly served as head of the International Monetary Fund’s Western Hemisphere Department.
Nicholas Watson, managing director of Teneo, a well-known global CEO consulting firm, is also one of the important opponents. “Governance is going to be really, really difficult for him,” he told CNBC’s “Signpost Europe” on Monday. “We’re probably going to have a roller coaster ride in the future.”
Teneo is a global CEO consulting company that focuses on providing comprehensive strategic consulting to the leaders of large global companies on major business issues, corporate transformation and reputation management. It has close ties with former US President Clinton.
“Dollarization? I think they’re going to kick it into the long grass. Central bank reform? I mean, he talks about blowing up central banks, his trick is with chainsaws…I mean, some of them are no longer there It couldn’t be more realistic.”
Watson also predicted: “(Argentina) inflation is likely to rise because economic distortions and imbalances are so severe and pervasive that fixing one thing may mean creating problems elsewhere.”
Steve Hanke, a professor of applied economics at Johns Hopkins University, dismissed those opponents, saying that many arguments against dollarization are “junk”!
“The key issue in Argentina since 1876 has been the peso,” he told CNBC on Monday.
“It’s been one currency crisis after another, one recession after another. Debt defaults after debt defaults. They’ve had three sovereign debt defaults since 2000. And the current inflation rate, I just said today Argentina’s inflation rate has been measured at 220%.”
“It’s all tangled up with the central bank and the peso. So, Miré has the right idea. You have to dollarize, and a lot of the arguments against dollarization are absolute rubbish.”
Hank also said that he was not officially involved in Mire’s campaign but had been in close contact with his technical team and described himself as an “informal adviser” on issues such as the dollarization of Argentina.
“Fiscal excess” has been a serious problem in Argentina for more than a century, and successive left-wing parties in power have built a huge welfare state and a stacked bureaucracy. In the past 65 years, Argentina has experienced 22 IMF (International Monetary Fund) rescues. The IMF was exhausted and gave up on its requirement to balance its fiscal balance.
Although Argentina’s official foreign exchange reserves are negative, its actual implementation of dollarization also has a big advantage, that is, the private sector—companies and individuals—have US$371 billion in US dollar assets.
“This is already a principle that Argentinians practice every day. They keep a lot of dollars at home.” Riccardo Grassi of Switzerland said at a hedge fund conference in Switzerland, which participated in Argentina 2020 of huge debt restructuring.
On the streets of downtown Buenos Aires, the Argentine capital, dollar prices are everywhere alongside the price of pesos. Some things—houses or cars—are already closely tied to the dollar. Some local businesses have chosen to pay wages at least partially in U.S. dollars. About 20% of local bank deposits are dollarized.
Kristalina Georgieva, managing director of the International Monetary Fund, also congratulated Mire and said, “We look forward to working closely with him and his government.”
Of course, dollarization requires a process, and experts pointed out that “in the short term, we expect Milei to announce strict fiscal, monetary and foreign exchange policies to begin to stabilize the economy and reduce inflation to achieve the transition to dollarization. Although the peso-denominated Bonds will take a hit, but market expectations may improve in the medium term.”
Will the CCP congratulate Mire on his election? Will there be a fork in the road ahead?
Mire’s election may be a loss for the CCP. Mire has said throughout the campaign that he would freeze relations with Brazil and China because they are “socialists.”
Milley described his foreign policy line as “confronting socialism and totalitarianism” around the world.
In an interview with the famous American host Tucker Carlson, he said: “Socialism has always existed, with destruction everywhere. It is a phenomenon of violence, brutality and poverty.”
“Socialists don’t like the invisible hand. They prefer the claws of the state and hide it behind the words of social justice.” “This kind of social justice is deeply unjust because it is governed by legal inequalities. The treatment was premeditated and it was robbery.”
Mire vowed that if he is elected president, he will cool relations with China and withdraw from the Southern Common Market (Mercosur, whose members include Argentina, Brazil, Uruguay and Paraguay).
He said that he would not do business with China or communists, emphasizing that Argentina’s first priority is to do business with the “civilized side”, that is, the West, such as the United States.
On August 16, he told Bloomberg, “The Chinese people are not free. They can’t do what they want to do. If they want to do it, they may be killed.” “Would you make a deal with an assassin?”
However, on Monday (November 20), the Ministry of Foreign Affairs of the Communist Party of China expressed congratulations to Mire on his election. Spokesperson Mao Ning said, “We are willing to work together with Afghanistan to renew our friendship, promote mutual development and revitalization through win-win cooperation, and promote China-Afghanistan cooperation.” The relationship is stable and long-lasting.”
So, does this mean that after being elected, Milley will change his attitude towards the CCP?
In fact, in August this year, after criticizing the CCP as an “assassin”, Mire softened his remarks and clarified that he believed that it was up to the Argentine private sector to decide whether to continue business with China and others. At the same time, he said that he respects the agreements signed by Chinese companies in Argentina.
Actually, this is not surprising at all. Because the trade exchanges between the two countries are already very close. Last year, Argentina’s trade with China and Brazil totaled about $55 billion, nearly three times that of the United States, its third-largest trading partner.
Therefore, from a pragmatic point of view, Mire will definitely continue to promote trade with China. Just like the United States, Japan, South Korea and Australia now.
However, one thing I think is clear is that Argentina will strengthen its cooperation with democratic countries and drift away from the Chinese Communist Party in many aspects.
Mire has clear values but is not a nerd and knows how to make reasonable compromises. For example, he does not like to be often compared to the “Argentine version of Trump.” When asked whether he hopes Trump will return to the White House, he cautiously replied: “This is decided by the American people. I prefer the Republican Party to the American Democratic Party. image, but no matter which party is president, the United States is our important strategic partner.”
Some people describe Argentina’s election as a choice of “the lesser of two evils”: Although they are uneasy about Mire’s prescription to save the economy, they hate the ruling party even more for causing today’s economic crisis.
So, what will happen to Mire in the big test after taking office? We’ll see.
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