quotes What Argentina’s new President Javier Milei means for Saudi Arabia

15 January 2024
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Updated 15 January 2024

What Argentina’s new President Javier Milei means for Saudi Arabia

On Dec. 10, 2023, Javier Milei became the new president of Argentina by an overwhelming majority (55.65 percent) after enduring a tough presidential campaign. This shock reverberated not only within Argentina’s elite but also throughout Latin America, and also stunned Washington, London, Paris and Madrid.

Milei, a libertarian economist and media personality, rose to fame during the COVID-19 pandemic by critiquing the government’s shutdown policies, mismanagement of the healthcare crisis, reliance on untested vaccines such as Sputnik V, and excessive spending. His victory highlights the influence of social media, showcasing how an underfunded candidate can run a successful presidential campaign and overcome a government-backed opponent. This marks a historic shift, with a presidential candidate winning through direct communication on platforms including TikTok, Instagram, X and YouTube.

Milei's success goes beyond campaign strategy; it reflects a shift in the aspirations of the younger generation. They prefer working, earning a salary, and striving for a better life over relying on social plans and subsidies from a populist government, as their parents did. A new generation of Argentines now sees the government not as a solution, but as Ronald Reagan once said, “government is the problem.” In October, I had dinner at a restaurant in Riyadh, where to my surprise 13 young Argentines worked. When I asked them who they were planning to vote for, all shouted “Milei.”

During the outgoing President Alberto Fernandez’s administration, the Central Bank printed 17 trillion pesos ($20.8 billion), enough paper currency to reach the moon and come back to Earth 175 times. No wonder Argentina’s inflation reached 211.4 percent last year.

Recently, I spoke to a senior government official from one of the Gulf states, and during our conversation he mentioned that he thought Milei was “crazy,” a word that I often heard from the Argentine establishment, including the business community and press. Far from it, Milei is not crazy, he is a pragmatist, an intelligent individual who understands that far-reaching reforms are needed for Argentina to regain its former standing in the world.

His goal is to put an end to the absurd left-wing policies that can bankrupt one of the planet’s richest nations — between 1860 and 1950 Argentina was one of the fastest growing economies in the world. Argentina outgrew Canada and Australia in population, income per capita, and gross domestic product growth. A common expression in Paris during the 1920s was “you are rich as an Argentine.”

Unlike former President Mauricio Macri’s coalition Cambiemos (Let’s Change), which won in 2015 without clearly outlining planned reforms, Milei is explicit about his vision for Argentina. He aims to address the fiscal deficit, dollarize (and liberalize) the economy, enact labor and tax reforms, privatize state-owned companies like YPF and Aerolineas Argentinas, and reduce over 380,000 regulations on the private sector.

In the geopolitical arena, Milei seeks to strengthen bilateral relations and align the nation’s interests with the US, UK, Europe and the Middle East; and foster international trade with all countries while decoupling from China, Russia, Iran, Venezuela and Cuba. This change of epoch offers a great opportunity for Saudi Arabia.

The Kingdom offers tremendous advantages in terms of logistics, low energy costs, low taxes, competitive labor costs, and great infrastructure.

To start, Argentina should propose a comprehensive 100-Year Food Security Agreement to Saudi Arabia and the other Arab Gulf states. Few countries are net exporters of food like Argentina. The eighth-largest country in the world, with its vast farmland, diverse agriculture and quality livestock, produces food for over 400 million people. Argentina today has more heads of cattle, 52 million, than people. Argentina also ranks as one of the top 10 agricultural exporters in the world, with corn (ranked second), soybeans (third), beef (fifth), and wheat (sixth). Without export taxes and the implementation of new reforms, Argentina should be able to expand rapidly and double its food production in 10 years, offering even more competitive advantages. It is at this point where Saudi Arabia and Argentina should converge.

The focus should be on producing value-added products in Saudi Arabia from Argentine commodities. Moreover, other treaties must be signed between the two countries including a double taxation treaty and investment protection guarantees. A visa waiver for Saudi Arabia citizens is also a pending issue that needs to be resolved by the new administration.

Secondly, leading Argentine companies should establish manufacturing plants, open offices and form joint ventures with their Saudi Arabia counterparts. Food production (value added), pharmaceuticals, biotechnology, sports and technology, including e-gaming, are just some of the key sectors that I believe have great potential. The Kingdom offers tremendous advantages in terms of logistics, low energy costs, low taxes, competitive labor costs, and great infrastructure. While Argentina has a lot to learn from the GCC region and especially from its leadership, equally Saudi Arabia can benefit from Argentine technology, know-how and natural resources beyond food — for example, rare earth minerals such as lithium.

Milei is certainly not a madman and comparisons with both Donald Trump and former Brazil President Jair Bolsonaro are inaccurate. Milei is a leader who understands that no matter how rich a country might be in natural resources, the state must be efficient and the treasury must invest wisely. The rule of law, the protection of private property and free enterprise are at the core of Milei’s doctrine.

Barely a week into this presidency, Milei issued a Decree of Necessity and Urgency — named the Foundations for the Reconstruction of the Argentine Economy — which initiated a process of profound deregulation of the Argentine economy. Although it is a rule issued by the National Executive Power, it has the same hierarchy as a law. This document aims to repeal over 300 laws and regulations, including Argentina’s Land Law, which banned foreign investors from owning agricultural land in Argentina. This is something that Saudi Arabia has been looking forward to for several years. A sea change has taken place in Argentina and hopefully soon Riyadh Air will be flying nonstop to Buenos Aires.

Daniel Melhem is founder and managing partner at Knightsbridge Partners, an investment management firm with offices in London. Melhem has a long track record in the financial and real estate industries. Since 2004, he has played a role as a trusted adviser to several families as well as institutional investors from the Middle East, Europe, Latin America and the US.