Milei, China and empty bellies?
Argentina confronts its spending
Earlier this week I discussed the increased reliance on federal assistance in the United States but we are far from the only country in the world where the public focus on help is rising. Similarly, the determination of Project 2025 to slash government expenditures is hardly an American-only thing but it is an equally hard one anywhere it is underway or under consideration. Relatively new Argentine president Javier Milei, a committed economic reformer, cut back government aid in a number of categories and governs a country where “food insecurity” now bedevils more than half of his citizens.
This may not sound like a big deal until one considers where this is occurring. Argentina is a vast grain and cattle economy, built on the backs of millions of European immigrants between 1880 and 1940. The open areas of the eastern portion of the country with its beautiful pampas, home of South America’s cowboy culture in the form of the gauchos, produced ton after ton of beef, then wheat as the nation’s leaders sought to populate a relatively vacant landscape by welcoming people to populate the land (Argentina had a much smaller indigenous population than the United States). First from Wales, England, and Switzerland, later from Italy and Eastern Europe, the new arrivals often preferred to remain in the growing slums of the capital yet many did move into the interior. The migrants rolled in while wheat departed for the port on the British-funded railroads across the country in the late 19th and early 20th centuries.
Italians, often poor in urban neighborhoods, relied on pasta as a staple while wealthier Argentines preferred and could afford high quality beef. Vegetables have always been a distinct afterthought but the people of the southern cone were definitely able to feed themselves.This country played a major role in the late 19th century transformation of food shipments as technology allowed beef to move out of the port of Buenos Aires to various places in Europe where growing urban populations demanded meat in their meals. As recently as my last journey there in late 1990s, beef’s centrality in the domestic diet was still so strong that after two days my students begged for some carbohydrates in their diets because they were undergoing beef overload. Argentines love their asada meals.
Argentina, by all indicators, ought to be one of the world’s most prosperous and well-fed societies. If you have read my Actions for any of the past two years, you have seen previous thoughts on this topic (“Javier, the Man of Change”, 20 July 2024 at
https://cynthiawatson.substack.com/p/javier-the-man-of-change)
Milei won election in October 2023, at least partially based on an articulated commitment to address nearly a century of disastrous economic management. He embraced “shock therapy” as the only solution, dramatically slashing government subsidies long in place for food as well as support for various aspects of daily life. Milei began implementing his plans upon his December inauguration, initially to considerable fanfare.
The problem is that now more than half—53%—of his nation’s citizens are living below the poverty line, an increase of 11% since he took the presidential sash ten months ago. According to Semafor and Reuters, one out of four Argentine citizens in the country’s poorest neighborhoods struggle to afford basic food. Today, 70% of the country’s children do not have access to sufficient food. This is a shocking figure for a country so rich in food, albeit primarily for export. Medical personnel are reporting scurvy and eye diseases as effects.
It’s seductive to assume this problem only exist in the capital, Buenos Aires, but it extends across the country. Bs As, as its Spanish acronym is known, is actually easily the wealthiest location with some of the more remote communities, large and small, subject to the food insecurity. But, interior Argentina has an extractive mineral economy where incomes depend on the fluctuating resource prices and buyers.
La Nación, an influential national newspaper, urged the government to address el hambre, the hunger, before it continues with defeating the economic mismanagement. Argentine governments following the 1930 coup consistently mishandled the nation’s budgeting and expenditures. The profound comfort of state-provided handouts, to buy popular support as much as because of need, commenced under Juan Domingo Perón in the 1940s as he built his strongest support through unions interwoven through the political system. Post-Perónist regimes oscillated between harshly treating those supporting the populist versus catering to those same remnants his political movement, the Peronistas. Almost invariably, however, presidents turned to government handouts in exchange for popular support.
The irony of one of the most plentiful agricultural nations facing outright extreme poverty is a somewhat recent phenomenon. As recently as the mid-1980s, Argentina had unpredictable politics but never street people—until the government of peronist-turned-freemarketeer Carlos Saúl Menem embraced economic “orthodoxy” in the 1990s following the end of the Cold War. At that juncture, with the failure of the Soviet state-driven approaches, Menem turned to trumpeting his willingness to embrace Washington’s lead in the international system, relying on the market, in exchange for the coveted status as a a non-NATO major ally. The problem was that embrace did nothing to put food on tables as Washington expected hard to swallow reforms with deep implications for the lower classes in Argentina (and other places such as Southeast Asia during the 1997 financial crisis). Washington advocated for a market-driven rather than state-interventionist approach. Those who had been clinging to middle class status in the Argentine Republic increasingly fell into poverty which required further state help. Profound economic crisis in 2001-02 only left the country’s finances in shambles.
Milei’s determination, like several prior leaders, warned he would end this practice to get the country on a firmer footing. Candidate Milei acknowledged this would be a harsh tonic for the society. Yet, the nation now suffers with millions of children going to bed hungry for the foreseeable future. Unicef is a major global critic of the impact that this method creates for the future because of its effects on millions of poor children today. Slashing of subsidies for food and the overall poverty assistance are only two steps of the broad attack on government spending, meaning that education is also seriously underfunded in an era when Argentina needs a more knowledgeable workforce rather than a traditional agricultural one. Actions create consequences of short, medium, and long-term for the Republic.
Argentina thus looks at options for addressing its domestic needs. No government voluntarily seeks unrest but Milei presses forward. Unhappily for many, China—sensitive to addressing internal political disruptions— increasingly dangles loans, investment, and options that Washington does not offer. The Argentine president arrived at the Casa Rosada avowing to keep his nation out of the Chinese web in other Latin American nations such as Venezuela, Brasil or Ecuador.
Milei’s anti-Beijing rhetoric, however, softened this summer as Beijing remains an option to mitigate his immediate problems since Washington is otherwise engaged. China lusts after the panoply of natural resources still available in this less-than-fully developed economy, such as lithium, in its quest to avoid being boxed in by Washington. For Milei, continuing to deepen ties with a communist regime but a partner providing $20billion in annual bilateral trade is a unexpected pill he is still swallowing. Maintaining various Chinese schemes for natural resources and energy projects, and overall “good relations” are coincident with the Argentine’s actions against domestic spending.
Washington, with just over half as much trade with the Argentine Republic as that of China, can only stand by applauding Milei’s aims while worrying about Beijing’s enhanced position. But Washington is providing little more than verbage. The Biden administration has proven no more interested in this region than did its predecessor, despite knowing China wants to increase its participation across Latin America. We simply don’t find Latin America otherwise important, except for Venezuela have feared its links to Beijing for two and a half decades. Everything is viewed through the lens of increasing Sino-U.S. global bifurcation rather than as inherently important connections in and of themselves.
Will Milei successfully slay the handout system so prevalent in Argentina when he arrived? I am skeptical, if nothing else because it’s hard for any population to see its children increasingly hungry. This tends to breed major civil unrest with attendant destabilization; that was, of course, the root of the Malvinas’s conflict in 1982 when the military regime sought to divert attention from food riots by stoking public support behind a long-running nationalist cause. I have no reason to assume Milei would resurrect an attack on South Atlantic islands but I also would never write off the possibility. I do believe he will get a sympathetic ear from Zhongnanhai about steps to alleviate the potential for civil unrest during Milei’s term.
More importantly, as I discussed in other columns, major national projects to recraft societies, despite leaders’s aspirations (good or malevolent), are extremely hard to carry out because of their impact on real people. Actions create consequences. Poverty, food insufficiency, and medical challenges are real, physical effects of some government cuts. In the Argentine case, the China angle adds to our apprehension about this context because we fear a greater CCP foothold in the Southern Cone (or anywhere else around the globe).
The option is for the United States to step in with assistance but doing so would further exacerbate budgetary tensions in an already fraught U.S. system with higher priorities—such as deterring China more directly in the Asia Pacific. I can see no indication we would either tell Milei to cease and desist or somehow intervene in Argentine affairs. To do so, however, would require instruments other than military, our preferred messenger in this region over the post-Cold War period. I cannot overestimate the nationalist response by any Argentine president, particularly Javier Milei, to any such intervention but we currently live in a world of previously unthinkable developments.
Argentina is so far down our list of concerns but I do see the increased pressure on Milei to reconsider as poverty rates continue climbing. Governments are intertwined with their own people, of course, but how that occurs can change over time.
Actions and consequences play out over decades but contexts change more rapidly. It’s worth appreciating that reality. Thirty years ago, the idea of a butterfly flapping its wings in Africa would have an impact on the weather in South Dakota was en vogue. I am not sure about South Dakota but I do think we are seeing more interactions between what transpires in many parts of the world today. It’s complicated, as they say.
I welcome any and all comments, rebuttals, and questions. Please feel free to circulate if you find this valuable. I appreciate your time today and am especially thankful for those of you who contribute financially. I read a boatload of sources which your support helps me pay to read.
Be wel and be safe. FIN
Ryan Dubé and Silvina Frydlewsky, “Argentina’s Milei Finds It Hard to Decouple from China”, WallStreetJournal.com, 18 August 2024, retrieved at https://www.wsj.com/world/americas/argentinas-milei-finds-it-hard-to-decouple-from-china-6faae47f
“La hambre, sin final feliz “, LaNación.com.ar, 5 September 2024 , retrieved at https://www.lanacion.com.ar/editoriales/el-hambre-sin-final-feliz-nid05092024/
“A food emergency is growing in Argentina’s poorest neighborhoods”, Semafor.com, 2 October 2024, retrieved at https://www.semafor.com/newsletter/10/02/2024/semafor-flagship-huge-but-complicated?utm_source=nowshare&utm_medium=flagship&utm_campaign=flagshipnumbered8#j
Lucila Sigal and Javier Corbalán, “In Argentina’s Poverty-hit barrios a food emergency takes hold”, Reuters.com, 1 October 2024, retrieved at https://www.reuters.com/world/americas/argentinas-poverty-hit-barrios-food-emergency-takes-hold-2024-10-01/