Transcript: Argentina is in its Milei era

This is an audio transcript of the FT News Briefing podcast episode: ‘Argentina is in its Milei era’

Marc Filippino
Good morning from the Financial Times. Today is Tuesday, November 21st. And this is your FT News Briefing.

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The world’s biggest cryptocurrency exchange is looking at a massive settlement price tag. And the saga of Sam Altman continued another day. Plus, Indonesia is trying to transform itself into an economic powerhouse and wants to do that by moving its entire capital.

Alec Russell
It sounds a bit of a hare-brained project, but whatever you think of it, there’s a lot of building happening, there’s a lot of bulldozers crashing through the rainforest. One thing for sure, it’s an ambition on an epic scale.

Marc Filippino
I’m Marc Filippino, and here’s the news you need to start your day.

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Chaos still reigns in the world of artificial intelligence. On Monday morning, OpenAI’s staff rebelled against the company’s board. A majority of employees sent a letter demanding that the board reinstate former CEO Sam Altman, who they fired on Friday. Employees said that the directors had, quote, undermined our mission and company. Altman, though, seems to have moved on, at least for now. After negotiations with OpenAI fell apart on Sunday evening, Microsoft offered him a job, along with many of his former colleagues. Microsoft is a major investor in OpenAI, which makes things interesting. OpenAI’s board, meanwhile, appointed the co-founder of video streaming service Twitch as the latest interim chief executive.

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It’s the start of a new era for Argentina.

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Over the weekend, people there elected a rightwing populist Javier Milei to be the country’s next president.

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But Milei’s ideas are drastic and unproven. Meanwhile, the country is in its worst crisis in decades. Here to talk about it is the FT’s Southern Cone correspondent Ciara Nugent. Hi, Ciara.

Ciara Nugent
Hi.

Marc Filippino
So, Ciara, Milei’s win really came as a surprise. What pushed voters his way?

Ciara Nugent
Well, Argentina has been stuck in this kind of chronic loop of economic crises for the last few decades. And Milei, along with a lot of his voters, has blamed the country’s political elite, which Milei calls the Casta. Casta politica. And he’s particularly criticised the Peronist movement, which is currently in government. And since the early 2000s, it has dramatically increased taxes, doubled the size of the public sector and introduced a lot of subsidies and restrictions across the private sector. And that model has always led to a lot of inflation in Argentina. But this year, things have gotten really bad. Inflation hit 143 per cent in October and the poverty rate has risen above 40 per cent. So people are very angry and Milei’s anti-casta narrative has proven very successful.

Marc Filippino
I mean, a 143 per cent inflation is just impossible to wrap your mind around, unless you’re experiencing it day after day. Is that the top priority for Milei? What’s the first thing on his plate?

Ciara Nugent
Yeah, I mean, I’m sure it’s the top priority for a lot of voters. But it will take some time to sort out the inflation issue. In the short term, Milei is going to have to prepare a budget for next year. Analysts expect it’s going to include a lot of spending cuts. Milei is famous for his promise to take a chainsaw to the Argentine state and slash spending by up to 15 per cent of GDP. And Milei will be under a lot of pressure from day one to roll out a stabilisation plan. And what I mean by that is over the last year, Massa, the economy minister who Milei was running against, has introduced a lot of really complicated, unwieldy measures to keep the economy afloat and stop it from exploding on his watch. And these are things like price controls, restrictions on imports, multiple exchange rates. All of that together is now really choking off the economy. But to unpick any of those measures will start to unleash more inflation. So most economists agree a shock is coming. But the question is whether Milei will be able to manage that shock or if it will spin out of control.

Marc Filippino
Now, as I understand it, markets were closed in Argentina on Monday, the day after the election. But international markets were open. How did international investors feel about a Milei presidency?

Ciara Nugent
Positive. So on Monday, stocks in Argentine companies that trade in New York soared. They were really led by YPF, the majority state-owned oil company, which Milei said on Monday that he would privatise when possible. Its shares jumped to 32 per cent. There’s a lot of optimism that Milei is going to be able to implement really painful economic reforms that other Argentine governments haven’t wanted to touch. But I would say in Argentina, there’s a lot more trepidation because he doesn’t have a majority in Congress, he is far off a majority. And also about the social unrest that his reforms could spark.

Marc Filippino
OK. So foreign investors are on board, at least at the moment. But there’s definite fear and scepticism from a lot of others. Ciara, what are the bright spots for Argentina right now?

Ciara Nugent
Well, I mean, it’s definitely true that Milei’s election has shown a will to change some quite unsustainable things about the Argentine economy. Milei’s voters would argue that if his shock therapy works and he manages to normalise the situation, we could see Argentine exports like soy and corn, as well as lithium and natural gas, becoming really competitive and a lot of dollars flowing into the economy over the next year or next few years, which would really ease the pressure and maybe possibly in a year’s time or a couple of years’ time, Argentina could be on a more positive track.

Marc Filippino
Ciara Nugent is the FT’s Southern Cone correspondent. Thanks, Ciara.

Ciara Nugent
Thanks very much.

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Marc Filippino
Four billion dollars — that’s how much the US Department of Justice wants Binance to pay to settle a criminal investigation. US prosecutors have been looking into the cryptocurrency exchange for years. The allegations range from bank fraud to money laundering. And sources tell the FT that this $4bn agreement would end this investigation. But the massive settlement isn’t the only price that Binance might have to pay. Under the deal, the company’s CEO and co-founder Changpeng Zhao could face criminal charges. Binance is facing two other lawsuits that US regulators filed this year.

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Indonesia’s President Joko Widodo is trying to transform the country into an economic superpower, and he has a pretty big dream to make it happen: move the capital of the country from one island to another. Widodo is in a bit of a rush. His time in office runs out next year. Here to talk more about Widodo’s decade in power and his plans for the future is the FT’s foreign editor Alec Russell. He was recently in Indonesia reporting on this. Hey, Alec.

Alec Russell
Hello. Very good to be back on the News Briefing.

Marc Filippino
Good to have you back. So tell me about this plan to move the country’s capital. How’s it coming along so far?

Alec Russell
Well, this is possibly the most extraordinary project that I’ve seen in several decades, on and off as a foreign correspondent. What Indonesia’s president has decided to do is shift the government from the current capital, Jakarta, which is below sea level and prone to flooding, and shift it to the middle of the rainforest on another island, the island of Borneo, which is a two-hour flight away and then a two-hour drive from the airport along bumpy tracks.

Marc Filippino
OK, but what do Widodo’s critics have to say about the plan to move the capital, Alec?

Alec Russell
Well, I think that the critics say a number of things. One, they say, you know, this is just a bit of a personal legacy project and it’s an awful lot of money. So the budget at the moment is put at $32bn. So there’s the money issue. There’s the environmental issue. Indonesia has a, at best, patchy record in terms of caring for the environment. And of course they’re having to chop down quite a lot to build this city. So I think those are the three primary criticisms. But he shrugged them all off with the confidence of a man who’s been president for nine years and has stratospheric polling ratings, something like 80 per cent popularity.

Marc Filippino
Yeah, but even with all that popularity, his time in office is coming to an end. He’ll be forced to leave next year, and the project is obviously not going to be finished by that time. So what happens after he’s gone?

Alec Russell
Well, I think the next year is very, very important and Widodo appreciates that. I mean, in essence says, as one business person told my colleague Mercedes and me, that he has to have got it to reach the point of no return. So that’s stage one. Stage two, obviously, is what happens when he goes. Well, really interestingly, he has all but done a sort of deal with the person who’s currently the frontrunner to succeed him. And I would think that that frontrunner, if he becomes president, will feel a certain sense of obligation to Widodo and then as a result, may keep very competently going with the project and the way you go.

Marc Filippino
So this seems important to Widodo’s legacy, but just how important is it for Indonesia’s future?

Alec Russell
If the capital were to be finished, that would be a terrific signal to the outside world of a new Indonesia re-emerging, of a confident, modern Indonesia that is really getting its act together after many years in which it’s been broadly seen as having failed to achieve its economic potential. I don’t actually think, though, that the city itself is the key thing to unlock the potential of this country. What it is about is tackling some of the entrenched, shall we say, opaque and un-transparent interests and practices in the economy and in the state enterprises, and also just sort of scything through some of the bureaucracy that just needs massive reforms. That’s the key thing to transform Indonesia.

Marc Filippino
Alec Russel is the FT’s foreign editor. Thanks, Alec.

Alec Russell
Thank you very much.

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Marc Filippino
You could read more on all of these stories at FT.com for free when you click the links in our show notes. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

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