Is the Argentine Election Really Good for Bitcoin?

By now, if you follow crypto media or crypto Twitter, you’ll have seen a slew of headlines and posts hailing Javier Milei’s victory in yesterday’s Argentinian election. This is uncomfortable because it highlights the insularity of crypto enthusiasts and reminds me of the old adage “be careful what you wish for.”

Don't get me wrong, I'm glad Javier Mire won, and if I were Argentinian, I would vote for him. Argentina needs profound change, and I'm eager to see the results of the radical economic experiment that Mire - an outspoken liberal economist - has promised.

But there are three key things to keep in mind:

• Mire was not as “pro-liberal” as many people thought.

• As Mire cuts government spending by reducing benefits and subsidies, many Argentines will have to endure severe economic hardship, even worse than they are now. This is very necessary and will hopefully bring growth on the other side. But let’s not gloat over the suffering of millions.

• Bitcoin is unlikely to be part of his political narrative, at least not in the next few years. He has plenty of other things to worry about, not least the coming monetary chaos and the massive debt to the IMF.

Below, I will explore the above in more depth.

But first, let's draw a positive conclusion from the results: He won. Miret won the highest percentage of the vote (nearly 56%) since Juan Perón's landslide victory in 1973. Even before the official results were announced, his opponent, Sergio Massa (current government, now former economy minister), called for his victory to be recognized.

The local annual inflation rate is over 140%, more than two in five people live below the poverty line, and the local currency is one of the poorest in the world and the worst performing currency relative to the US dollar.

The Argentine people have great respect for voters who bravely called for change and risk-taking, rather than sitting back and waiting for death. They sincerely wish Millet an economic miracle. At least he has a chance - and others don't.

free?

But it will be a bumpy ride, both economically and socially. Milley promised "freedom," freedom from shackles and desperate governments trying to buy votes through wasteful and profligate spending. He supported free markets and free trade. His talk of "individual freedom" resonated with an angry populace. These are freedoms that I can have, but we must recognize that they may come at the expense of other freedoms that many of us take for granted.

One is monetary independence. Milley has launched a dollarization campaign that would at least address the foreign exchange crunch that has hobbled basic operations. But it would not necessarily bring the promised relief from inflation, and would also subject the country to the conflicting monetary policies of the world’s superpowers.

Another is reproductive rights - Mireille is staunchly anti-abortion and has vowed to call for a referendum to abolish a woman's right to terminate an unwanted pregnancy before 14 weeks. He also pledged a "cultural crusade" against socialism and feminism, which sounds... ominous?

Let us not forget that Mire and his vice president, Victoria Villarul, are far-right politically. Both have downplayed the atrocities committed during Argentina's dictatorship, proposed demolishing museums that honor the victims, and stressed "zero tolerance" for crime.

growing up?

It is unclear where growth will come from. He said he would refuse to talk to neighbouring countries such as Brazil (Argentina’s largest trading partner), Colombia (the country’s fifth largest) and Chile, although the private sector could continue to make deals.

The currency chaos caused by dollarization is likely to severely erode the country's revenues at a time when the worst drought in six decades has slashed production of soybeans, Argentina's top export.

One international entity that should be happy is the International Monetary Fund (IMF). Argentina is by far the largest borrower from the IMF, with outstanding debt more than twice that of the next largest borrower, Egypt. The Washington, D.C.-based bank has been urging austerity, which Meeley seems happy to try to achieve, but austerity will hurt growth until financial conditions are on firmer ground. It may be necessary, but painful.

It’s also worth noting that Milley has little leadership experience, or even business experience, and has only been in Congress for a few years. He’s a TV commentator and an economics professor, neither of which suggests he has what it takes to run a team, let alone a country.

Bitcoin?

Finally, there is no indication that Bitcoin will be part of Milley’s administration, at least not at first and probably never.

As far as I can tell, Mirei rarely speaks publicly about Bitcoin, except in direct response to questions. He never sounds like an evangelist. He comes across as pandering to his base by espousing an anti-establishment ethos. But our idea is that, for him, Bitcoin is more of a pastime than a tool.

In addition, Mire can’t afford to upset the IMF, which doesn’t like Bitcoin at all. Last year, the Argentine Senate accepted a $45 billion loan from the IMF on the condition that the use of cryptocurrencies was not encouraged. The IMF has since realized that trying to ban Bitcoin is impractical.

This was not the victory for Bitcoin or freedom that many thought it would be.

On a positive note, he is unlikely to try to stem the country's growing interest in bitcoin, and a ban on banks offering crypto services could be reversed. Earlier this year, the securities regulator approved bitcoin derivatives. Bitcoin holders would do very well — the price of bitcoin has risen nearly 400% in Argentine pesos over the past year.

But Bitcoin will not become Argentina’s monetary standard, and we are unlikely to hear Mire mention it again unless directly asked. This is very different from the situation in El Salvador, which does have a president who sees Bitcoin as a tool for freedom and is less influenced by the IMF.

Still, Bitcoin will do well due to future changes in Argentina. Local interest in Bitcoin will likely continue to grow, especially as savers face more currency turmoil and especially if inflation takes time to recede.

More importantly, Argentina’s underlying prosperity has the potential to resume. If the government lacks the courage to take the necessary steps, the economic and social costs of runaway inflation will lead to severe and lasting pain. Millet does not seem to lack courage.