What to know:
- Javier Milei was elected almost one year ago on December 10, 2023.
- Inflation has gone down significantly, though the Argentine economy has also slowed.
- Milei remains popular with the Argentine crypto sector despite his not having any particular interest in developing a national regulatory framework for digital assets.
As a seasoned observer of global political landscapes, I must say that the narrative unfolding in Argentina under President Javier Milei is nothing short of intriguing. Having followed his political career since his days as an academic and economist, it’s fascinating to witness his meteoric rise to power and the transformative changes he has brought about in a relatively short span of time.
It has been almost exactly a year since Javier Milei became the 59th President of Argentina.
On December 10, 2023, the vibrant free-market economist, who previously played as a goalkeeper, cloned his pets and is known for criticizing central banks as “the most detestable rubbish on Earth,” was sworn into office. This individual had pledged to tackle the South American nation’s hyperinflation crisis head-on and significantly cut government expenditure.
Starting from December 2023, Argentina’s monthly inflation rate has significantly decreased, going from 25.5% to just 2.7% by last October. For nine consecutive months, the government has managed to record a budget surplus – quite an accomplishment given that it had been facing deficits since 2008. Moreover, the Argentine peso no longer experiences a continuous decline against the U.S. dollar. Although the country’s economy is projected to contract by 4% in 2024, there are expectations for a strong recovery of 6% in 2025.
“One unexpected development is that Milei has largely fulfilled his campaign pledges, as Alfonso Campenni, Latin American growth lead at Matter Labs (the primary developer of Ethereum layer-2 protocol ZKsync), points out.
For Argentinians like Campenni, a local from Buenos Aires, it’s challenging to grasp the idea of a politician performing their duties effectively. Typically, around this time of year, people express frustration because they can’t afford Christmas purchases due to hyperinflation. However, this year, there seems to be a shift in sentiment: “Well, maybe this is different.” It feels unusual, even strange, but it’s peaceful.
At a tech gathering, Milei was among the featured speakers. Upon his entrance on stage, he received a resounding standing ovation, as shared by Jack Saracco, a fellow Buenos Aires resident and co-founder of crypto payment platform Ping, with CoinDesk. The Argentinian crypto community admires his work greatly, so much so that there’s a popular meme asking when they can vote for him again since he’d repeatedly receive their votes. They support him because he embodies what they voted for in his actions.
Although reforms have brought about certain benefits, they’ve also come with a price. In the first half of 2024, Argentina saw a significant increase in poverty, reaching nearly 53%, up from approximately 42% at the end of 2023. This surge is due to Milei’s administration cutting back on funding for various social support programs and dismissing tens of thousands of public sector workers.
During the campaign, he declared, “I will not deceive the Argentinians; we are facing difficult times in the future.” Indeed, he was remarkably truthful about the challenges that lie ahead.
Milei’s ideological kinship with crypto
It’s striking how the cryptocurrency community admires Milei more than President Nayib Bukele of El Salvador, given that unlike the president, Milei, who is 54 and an economist, hasn’t expressed much desire to create a legal framework for managing digital assets on a national level.
Juan Aranovich, a research analyst from Argentina at crypto venture fund Ryze Labs, stated to CoinDesk that the main concern of this individual has been dealing with the country’s economic troubles. This focus has resulted in numerous initiatives being prioritized and not much time or attention being given to policies specifically related to cryptocurrency.
Nevertheless, Milei’s brand of libertarianism has struck a chord within both local and global cryptocurrency communities.
Bitcoin was created as a means for people to carry out digital transactions without needing third parties to facilitate them. The message embedded in the Genesis Block by its creator, Satoshi Nakamoto, can be interpreted as a direct critique of Western monetary policies that emerged following the 2008 financial crisis.
During his presidential run, Milei pledged to close down the Argentinian central bank. He made this statement to Bloomberg, saying, “Central banks can be divided into four types: the problematic ones like the Federal Reserve, the significantly problematic ones, which are common in Latin America, the extremely problematic ones, and finally, the Central Bank of Argentina.
So far, the President of Argentina hasn’t implemented the promise he made regarding that specific issue. However, he has been advocating for an economic shift where the use of US dollars becomes more common and dependence on pesos decreases, which is known as dollarization of the economy.
Aranovich stated that dollarization represents a different approach to currency than what Bitcoin stands for – a decentralized financial system. Contrary to the belief of American crypto entrepreneur Balaji Srinivasan, who labeled Milei as a ‘Bitcoin President’, this title does not accurately reflect Milei’s actual views on the subject.
Saracco concurred, stating that dollarization might not be the optimal choice due to the potential adoption of U.S. dollar inflation. He expressed concerns about the U.S.’s ineffective management of government expenditure and its involvement in numerous conflicts. If we were to adopt the U.S. dollar for our economy, we would be subject to decisions made in Washington.
In essence, it’s clear that the use of cryptocurrencies in Argentina is largely driven by grassroots efforts. According to Chainalysis, Argentina ranked 15th out of 151 countries in terms of crypto adoption, as reported in their 2024 study. Moreover, the country has seen a significant surge in stablecoin trading volume, which had been gradually increasing, but skyrocketed during the first three months of Milei’s term. Although the government shows some level of support for crypto technology, deep-rooted economic mismanagement over decades has resulted in a widespread distrust of public institutions. This mistrust, as asserted by Saracco, will likely continue to drive Argentinians towards using cryptocurrencies even if the ongoing economic crisis resolves itself.
Coming back to Argentina
For many years, high inflation rates forced Argentinians to hold onto US dollars as a form of savings. Due to this trend, the government imposed currency controls and set a monthly limit of $200 on the amount of US dollars that citizens could legally buy. Consequently, an underground cash market emerged where people trade US dollars (often referred to as “blue dollars” because of the blue stripe on $100 bills) for a rate higher than the official one.
In Milei’s first year as president, the capital controls remain active, even though the administration has introduced a tax amnesty plan designed to persuade Argentinians to transfer foreign currencies into their bank accounts, thus bringing money back into the formal economy. It is estimated by the National Institute of Statistics and Census that around $277 billion U.S. dollars are hidden outside the financial system.
The gap between the formal exchange rate of the dollar and the unofficial “blue” rate has nearly vanished. Before Milei’s election, one U.S. dollar would fetch approximately 350 Argentine pesos officially, but nearly 1,000 pesos on the black market. However, the official rate now stands at around 1,032 pesos per dollar, while unofficial dollars cost about 1,090 pesos. This development is seen as a positive sign by many Argentinians, suggesting that the economy may be improving.
Generally, conversations revolve around politics constantly, from morning to night, with politics and sports being the primary topics of discussion here. However, now there’s hardly anyone talking politics throughout the day… It feels as if you’re witnessing a beautiful sunset, where everything seems peaceful.
It’s an additional source of pride that Milei is well-known globally. Notably, the Argentine president was the first foreign leader to meet U.S. President-elect Donald Trump following his election in November. Furthermore, his encounters with Elon Musk, CEO of Tesla and SpaceX, have also enhanced his reputation both abroad and at home, as per Campenni. “I’ve been to Istanbul and Denver,” he shared, “and everyone was referring to Milei as a superhero.
As a crypto investor, I’m closely watching the midterm elections scheduled for October 2025. These elections will offer valuable insights into how the public perceives the government’s shock therapy policy. Currently, Milei’s political party, La Libertad Avanza, holds 40 seats out of 257 in the Chamber of Deputies and seven seats out of 72 in the Senate. However, they’ve maintained a strong lead in most opinion polls for the legislative elections. But remember, a lot can change in the 11 months leading up to the elections.
Campenni appears hopeful, as he notes that many individuals who departed Argentina during the COVID-19 pandemic are returning due to an abundance of opportunities in the country.
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2024-12-04 16:33