Milei’s way: Argentina’s president, a year on

The Economist.

Hello and welcome to The Intelligence from The Economist. I'm your host, Rosie Bloor. Every weekday, we provide a fresh perspective on the events shaping your world. Startups have tried to launch all manner of alternatives to plastic. Our correspondent visits one firm that's making packaging from seaweed. At least when their products end up in the ocean, that won't be quite so bad. And Celeste Sairoux was a restaurant worker in 1974 when she saw troops streaming through the streets. She handed one a carnation, a gesture that ended up naming the Portuguese Revolution. Our obituaries editor remembers her.

But first, this week I met Javier Milei, Argentina's president, in his office in the Casa Rosada.

Kinley Salmon is our Latin America correspondent.

That's the historic seat of power, the Pink House, and it's an imposing sight. Inside, it's so full of red carpets, heavy gold drapes, and marble statues of past presidents. A year into his term, Milei carries himself with a presidential air, but the man who campaigned wielding a literal chainsaw has maintained his radical streak as well. Throughout our conversation, he gave a fervent account of the failures of Argentina and underlined his own radicalism, reiterating that in his view, philosophically, the state is a criminal organization, despite the fact he's been running it for the best part of a year. And he railed against any restraints on free enterprise, talking about his desire to remove what he called government interference from all areas of people's lives. In recent decades, Argentina has experienced a frankly humiliating decline caused by rampant inflation, absurd government spending and handouts, and just thickets of regulation right across the economy. And President Milei's radical reforms have really tried to blow that system up. And so far, at least, they've worked out far better than most people expected. Inflation, really the scourge of Argentina, is down sharply. Government spending is almost 30% lower in real terms. But these successes, of course, could yet still be reversed.

Kinley, before we get on to what he's done and what he's said, tell me, what is Milei like in person?

Well, look, Javier Milei is sort of famously a passionate person, and at some times in the past everyone has seen that that can also be combative. In this interview, in fact, in large part he took a more philosophical tone, discursive, got into kind of arcane economic theory. But of course there were flashes of that passion and at times anger attacking cultural Marxism, as he calls it. At one point he said that he thought The Economist itself was socialist. Some people have compared him to Donald Trump.

Where would you say he fits into the panoply of charismatic, slightly unexpected world leaders?

Well, it's a fascinating comparison because on the one hand, he does resemble Donald Trump to some degree. He has an aggressive style on social media. He is skeptical to angry about anything woke, and he loves Donald Trump and was the first world leader to see Mr. Trump after Trump's own election victory. And yet, seeing him through the lens of Donald Trump, or indeed other right-wingers like Viktor Orbán, I think is in fact not very illuminating. Milei is above all a zealotry believer in free market economics. That is his absolute guiding understanding, and that is very, very different from the protectionist, big-spending tendencies of Donald Trump and of plenty of other populist right-wingers around the world. In fact, Milei really resembles more a sort of messianic version of a now endangered species, a kind of small-state Republican that admires Margaret Thatcher. And it's that focus on economic freedom that I think is at the core of who he is.

And you say he's focused on economic freedom. What has he actually done in the past year since he's been in power?

Well, above all, he's revved up the chainsaw that he campaigned with. He has cut spending and the state quite remarkably. He slashed the number of ministries from 18 to 8. He's more or less halted public works. He's cut transfers to provincial governments. He's, you know, slashed down real public salaries, university spending. A lot of those cuts have sort of fallen on the state, but the biggest savings actually came from holding down the real value of pensions, which was very controversial. But all this delivered him, you know, a primary surplus in his very first month in office and every month since. And that's an absolute rarity in Argentina. And the point of all this is to pull down inflation by ending the pressure for the central bank to sort of finance the government spending itself, which has typically been what's happened in Argentina. And that is what drives up inflation. But he's also been trying to tackle the central bank itself, which had pumped vast amounts of pesos into the system. He's been trying to rebuild foreign reserve ratios, which were in the negative when he took over. He's been trying to get dollars back into the formal banking system with some success. Some $20 billion have come into the formal system thanks to a tax amnesty. And he's taken that chancellor out again to slash red tape on everything from air travel to apartment rentals. And he's certainly not done with that. He told me that there are more than 3,000 structural reforms still pending. And he also suggested that Elon Musk, who in the United States is tasked with looking at government inefficiency, is very interested in watching this example.

And so what has the overall economic effect been of those cuts?

Well, look, markets have absolutely loved it. A much-watched index, the JPMorgan Country Risk Index, which basically estimates the likelihood of default, has fallen from around 2,000 to about 750 now. It's more than halved. A big thumbs up from markets. More remarkably is that his popularity amongst voters is still very high despite all of those cuts. And in fact, in recent months it's been rising. Argentines, I think above all, are impressed with falling inflation. That is, you know, the bane of life in Argentina. And when he took office, it was running at 13% month to month, and it's now down to 3% month to month today.

When you rev up a chainsaw, you often end up cutting down a few people, some jobs, occasional communities. What's the sort of broader response been to those cuts?

That's absolutely right. I mean, these cuts in the end do also hurt, and I don't want to downplay that. The economy entered a recession this year, unemployment went up, and perhaps most worryingly, the national poverty rate surged to 53%, up from 40%, uh, about a year earlier. The good news at least is that the recession does seem to have bottomed out, and as the economy recovers, it should help ease poverty and unemployment. It may, one should note, also put a little pressure on prices again. And Mr. May is also hoping that investment will really come through. He's tried to encourage that with a big bill that he got through Congress that provides sort of huge tax incentives to major investments in the country, exemptions on customs duties as well to try and pull in those investments. He's also keen to encourage trade to boost the economy, and he's been striking an increasingly friendly tone with the rest of the world.

He hasn't always had such a friendly tone on trade though, has he?

No, that's right. I mean, during the campaign, he was very combative, shall we say, particularly towards China. At one point, he asked rhetorically, would you trade with an assassin? But he recently met Xi Jinping, the president of China, and he is now, it is fair to say, extremely enthusiastic. So he describes China as a fabulous partner and said it is incumbent upon him basically to increase commercial ties with China for the welfare of the Argentine people. Above all, he was thrilled that China basically, he says, doesn't ask anything of them. They just want to trade calmly, he told me.

All of this sounds like a really big shift for Argentina, but you said at the top that these successes could be reversed. What are the risks then?

Well, that's absolutely right. And Argentina certainly had false dawns of reforms before. One big risk is simply political. I mean, Milei had at the beginning lowered expectations in a way by telling people that while the cuts were absolutely necessary, they would also be brutal. But he is now striking a more triumphalist tone. And that is, of course, risky when people don't quite feel that in their pockets. He's also benefited from, you know, very disorganized opposition since his election win. So either a sudden rise in the polls for the opposition or some kind of protests that look unmanageable could very quickly quickly send investors running, threaten the recovery. And we've seen that happen before in Argentina. Another risk is that there is still kind of technical economic work to do. The peso looks overvalued. There are still capital controls on Argentina, and they put off investors from putting money into the country because they are afraid they won't be able to get it out. Millet has promised those capital controls will go next year, but because he's kept that peso high, there's a risk that when he takes off those controls, lets the exchange rate free up a bit, there could be a sudden pressure on the peso to fall, to depreciate. And that could stoke inflation. Now that, of course, inflation falling is his signature achievement. So that is a real both economic and then potentially political risk.

And what does Milei say to all these concerns?

Well, frankly, he is feeling very good, feeling very confident at this moment. So he basically rejects those are major dangers. He recently said in a speech that the country is entering its best moment in 100 years. You know, he says his reforms justify the peso's value. And he says, sure, people might turn against him, but why would they? They can see that his policies are working and other people's haven't in the past. And there is a final risk that I sort of tried to delicately raise with Millet, in fact, which is that he can be a volatile character. I mean, he has fallen out with his vice president very recently. He's increasingly engaged in kind of culture wars about climate change, which he's not a believer in, particularly about abortion, deriding all of this as a sort of new front in Marxism. And the risk is that he both sort of fires up and attacks institutions like we've seen Trump do, But also that he just gets distracted. And distraction when your economy is in such a fragile moment, I think, is simply a danger.

Kinley, great to talk to you. Thank you.

Thank you.

So we're looking for like one of those little blue heritage site plaque things.

Something like that.

Recently, data journalist Marie Zegger and our producer Kunal Patel went out to East London in search of a hidden bit of history.

Oh, oh, there it is!

Wow! You want to describe what we're looking at? So we're looking at a big brick building, um, which looks to be like some sort of very sheeshy Garnish shop?

Furniture shop?

Could be any and all of the above.

And there's a brown plaque on it that says London Borough of Hackney, first plastic in the world, known as Parkesine, invented by Alexander Parkes.

Wow, he was humble.

First made near the site, 1860. 1966. Wow. So this is where plastic was produced for the very first time. But just around the corner from the birthplace of plastic is a startup seeking to disrupt its legacy. That's an extrusion machine to create the pellets. That's Lisa Honsinger, the chief revenue officer of Notpla. It will pull out into a long thin strand that looks like spaghetti, and then it gets chopped up into these little pellets. You can see here, those are pellets, but those are pellets of seaweed, of our material, not of plastic. Did you catch that? Yep, seaweed. Everything we make starts with seaweed. Seaweed is one of our, you know, our selling points, because if they are going into landfill, they will break down. If they end up in the ocean, they will break down. If a turtle Eats them, they will be fine. Notpla isn't the first upstart that's trying to end the world's dependency on plastics. But recently, it seems to have found common cause with governments and big corporations.

So Marie, we've known for ages that plastics are a problem for the planet and they're a problem in terms of recycling. So what's new here? What's changed?

The truth is that our plastic production is still rising. So now the world produces around 500 million tonnes of plastic per year. And the litter isn't even the biggest problem. The biggest problem are probably the emissions that this plastic production causes. And more recently, people are also waking up to the health effects from having microplastics in the environment and in your food. But a new treaty from the United Nations might make a big difference.

Okay, so tell me about the UN treaty.

Yes, so they've got about 180 countries at the negotiations table to decide on a treaty that would be globally binding In terms of what that means on the ground, there are 3 main ways to reduce plastic's overall impact. First, improving recycling to reduce the amount of new plastic that's being made. At the moment, just 1/10 of the plastics produced each year is recycled, and the treaty is trying to change that. So it's likely to impose stricter rules on recycling and ask rich countries and big businesses to help pay poor countries to increase their recycling rates. Then second, shift to using more traditional but less polluting materials. Think, you know, paper, wood. And then the most innovative is, of course, developing new biodegradable materials that can be used much in the same way as plastics, which would be a boon for firms like Notpla.

Are there other firms that are doing this kind of thing?

There's lots of other companies that are working with seaweed and mushrooms and corn. And I also talked to a company called Traceless. They're based in Germany. They've just purchased their first big factory and they use agricultural waste.

So some of these alternatives have actually been around, or at least available for a while, but presumably companies like plastic because it's cheap and it's durable. So are firms really going to start using these alternative products?

Yes, so plastic has a huge advantage in that it's dirt cheap and it's also very heat resistant. So the seaweed coating works for products that aren't boiling hot. So finding a solution to all of those different use cases of plastic is really difficult because plastic is so flexible as a material, and these companies need to scale for the price to come down first.

And forgive my scepticism, but there are a lot of UN treaties and a lot of them say that they're binding and it is really hard to get countries to comply, let alone companies to comply. Is this UN treaty really going to make a difference?

That's a good question. I think the important thing is that there are also businesses who support this treaty, so it's not just coming top down. There are about 250 companies who've signed a petition that supports the treaty. So this includes companies like Coca-Cola, Nestlé, Danone, which I think really sends a huge sign because obviously for them it will be more expensive. But for companies that are multinationals, so they've got a global market, at the moment they need to comply with regional and national rules. So it's such a patchwork of regulations at the moment that companies need to contend with that often it's easier to just use the same solution. And they're in favor of having this treaty.

So thinking about us as consumers, how soon are we going to see any change? How soon is what we actually experience in our daily life going to be these alternative products rather than the plastics?

We don't really know about that yet, but this is the final stage of negotiations. So the idea is that they will come to an agreement now, and it should then be formally signed and start to come into effect next year.

Marie, fascinating stuff. Thanks for talking to me.

Thank you, Rosie.

There were many strange stories about carnation flowers. That they had sprung from the eyes of a shepherd who displeased the goddess Diana because she thought he was too handsome, or that they'd grown from the tears of the Virgin Mary as she stood beside the cross.

Anne Rowe is The Economist's obituaries editor.

But the only thing that Celeste Saroo knew for sure when she turned up for work on the 25th of April, 1974, was that there were an awful lot of carnations sitting in buckets in a warehouse, waiting to be deployed by the staff of the Sear Restaurant where she worked. She could foresee an awful lot of extra work going on, and she was not sure it meant any more pay. She already only got just about enough to cover the rent of her one-bedroom room where she lived with her mother and her 5-year-old daughter Helena. Portugal was still in the grip of the rule of António Salazar, who had established what he called the New State in 1933. This was a state that was completely autocratic, and he was a dictator. He would not allow freedom of the press, freedom of any media. He would imprison all dissidents. And generally the country was kept to very traditional agrarian ways, even though he had meant to industrialize it. And it was lagging behind most of the rest of Europe after the Second World War. But Celeste had never known any other regime, so she dreamed of better days. And in particular, she dreamed of the Communist Party, although she didn't actually join it until she retired. She didn't have time for those sorts of things when she was trying to work. Now, when she arrived at work on the 25th of April in 1974, to her surprise, the door was shut and she was met by Mr. Chavez, who was the manager, and he told them that the restaurant was not opening today. The party was off. There was a coup going on because some dissenting young captains in the army had decided they could no longer stand the wars that Portugal was waging in Africa to try to hang on to its colonies. So Mr. Chaves said to them all, "There is nothing happening here. There's a coup. We'll see if it turns out well or badly. But meanwhile, will you all go and pick up a bunch of carnations on your way home from the warehouse because Mr. Gomes would not like them to go to waste." So off she went and picked up her bunch of carnations, but she had no intention of going home because this was the moment that she had longed for for so many years. So instead, she joined the growing crowds who were making their way to the Largo do Carmo, a lot of them carrying Portuguese flags, and she with her huge bunch of carnations, red carnations. When she got there, the square was full of tanks and armored personnel carriers, and she got into conversation with a group of soldiers up on one of the tanks. She was tiny and the soldiers were high above her, but they managed to shout that they'd been there since 3 in the morning. And one of them said, "Madam, do you have a cigarette?" Sadly, she didn't because she'd never smoked, but she felt so sorry for this soldier who looked so tired. So she gave him all she had, which was a carnation. She handed it up to him, and he rather surprisingly put it in the barrel of his rifle. Now this meant that he couldn't fire his gun, and the colleagues who stood round about him thought this was a wonderful idea and asked to have carnations too. So Celeste soon found that she was handing out all her carnations and running out and as she ran out, it seemed that other people stepped forward, also having found carnations. And they included quite a few of the florists in Lisbon who were worried, as her own manager had been, that they would just go to waste if nothing was open that day. So the morning was now empty, and Celeste went back to her flat, which was not far away, and she stood at the window watching the crowds continue to flow past. It was a symbol that seemed to get stronger and stronger. It symbolized peace rather than war, rather than violence. It symbolized liberty rather than oppression. And it was a symbol that resonated far beyond Portugal because it also had a meaning for those colonies in Africa that were attempting to throw over their Portuguese masters. She would have liked in later years to have had a little bit more recognition for what she'd done. But everything had been rather confused that day. A lot of people had been handing carnations out. She knew she was the first, but she was still living in her poor flat. And when that was destroyed by fire, she was moved into a really awful place in a very dangerous part of the city. Until the local governments found her somewhere nicer. She kept struggling. Her pension was only €370 a month, but the people had taken her as their heroine, and she found herself represented with her carnation on murals and posters all over Lisbon and indeed over Portugal. When the 50th anniversary celebrations came round in April, She was the very center of attention. And now, if you called up Carnation on the internet, what would pop up would not be, first of all, references to Diana or the Virgin Mary. They'd be a reference to her, Celeste, and to the Portuguese Revolution.

Anne Rowe on Celeste Cyrul. Who has died aged 91. Subscribing to Economist Podcast Plus helps make our journalism possible. Thank you. Search Economist Podcast Plus for a free trial. And that's it for this episode of The Intelligence. The show's editors are Chris Impy and Jack Gill. Our deputy editor is Jonjo Devlin, and our sound designer is Will Rowe. Our senior producers are Rory Galloway and Sarah Larniuk. Our senior creative producer is William Warren. Our producers are Maggie Khadifa and Benji Guy, and our assistant producer is Henrietta McFarlane, with extra production help this week from Kunal Patel. We'll all see you back here for the Weekend Intelligence tomorrow.

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