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Adnan Zai Explains Argentina’s Recent Primary and Its Global Impact

Adnan Zai

Adnan Zai, Advisor to Berkeley Capital Beachwood, has lived on three continents, and understands the importance of foreign policy and how one seemingly innocuous event in a corner of the world can send out ripples around the globe. We sat down recently to talk to him about the recent victory of Javier Milei in the primaries in Argentina, a man who is anything but the usual when it comes to politics.

Mary Kraven: Recently, Javier Milei, a passionate libertarian who is anything but a “typical” politician, won the largest share of the vote in open primary elections, changing the trajectory of the race to become Argentina’s next president. Milei has a combative style which appeals to voters who are fed up with the status quo. Many voters are angry with the current 116% inflation and rising poverty in this country, and looking for something different.

Benjamin Gedan, director of the Latin America and Argentina programs at Washington-based think-tank the Wilson Center, explained that Milei has rattled the two main political blocs in Argentina, saying “His plague-on-both-your-houses message resonates among voters fed up with traditional political parties. And there are legions of these voters.”

Some people say that Argentina is far enough from the beaten path to not influence the world. But when a vibrant right wing presidential candidate comes into play with the primaries, do you think this will change things around the world?

Adnan Zai: The pandemic and subsequent supply chain debacle taught us once and for all that the world is interconnected. It doesn’t matter how far away Argentina seems to be. What happens there will affect the world. Nothing happens in a vacuum in 2023. And with his interest in converting the money in Argentina from pesos to the U.S. dollar, he is certainly bringing the rest of the world into the conversation.

Mary Kraven: Milei will challenge the currently governing Peronist coalition and the main conservative opposition group Together for Change in the election on October 22. No matter what the outcome, Milei’s party is both untraditional and powerful.

It seems like Milei came out of nowhere in the last year or two, and in terms of political background, he did. He was an athlete and rock musician, but his vocal and far-right ideals have shot him into the spotlight recently. He is vehemently for guns and against abortion, speaks out against worker-friendly labor laws, as well as against the state. He has been a lawmaker in the lower house of Argentina’s Congress since 2021, and many people are surprised at this primary showing.

“People are fed up with politicians,” said Adriano Gabriel Zoccola, a 31-year-old lawyer from Buenos Aires who supports Milei because of his economic proposals and plans to slash government spending and cut the number of ministries.

Do you think we will see more of this type of person running, like Donald Trump did in the United States? Someone that is not your typical politician?

Adnan Zai: People get tired of the status quo. This trend in Latin America has been moving forward in recent years, where citizens outside of the mainstream political parties are rising through the ranks, saying they will squash the status quo. And this becomes a global issue as more and more countries elect candidates off the political track.

Mary Kraven: And Milei definitely has a strong voice. According to a recent Reuters article, “He has pledged to “blow up” the political status quo, shutter the central bank, dollarize the economy, and massively shrink the state – ideas that have resonated with many voters, especially the young, after years of economic decline.”

Adnan Zai: Yes, young people are moving away from the typical political parties of the past. Milei feeds into the young people’s energy by singing to them at rallies, all the while calling typical politicians thieves.

Mary Kraven: Yes, his energy seems infectious! After the election victory he said, “We are facing the end of the caste model. Today we have stood up to say enough to the model of decadence. Today we took the first step for the reconstruction of Argentina.”

Adnan Zai: Well quite soon after Milei won the primary, the Argentine peso plunged in value. Not surprisingly, because Milei wants to replace the peso with the dollar and wants to abolish Argentina’s Central Bank.

Mary Kraven: Yes, Argentina’s government immediately devalued the local currency by 20% after Milei’s victory. Unfortunately, their already rising inflation will rise even faster now. The bottom line is that when inflation rises so starkly, it hurts ordinary people who are trying to make ends meet.

According to CNBC, the official exchange rate is currently 287 pesos per dollar, and the U.S. bank recommended staying “market weight” on Argentina’s government bonds, mostly because the current financial story “is set to deteriorate further” for Argentina.

Adnan Zai: Argentina is Latin America’s third largest economy, and it is experiencing failing central bank reserves as well as sky high inflation. And like it or not, Milei is an unknown entity that could erode market confidence even further if he comes to power in October.

Mary Kraven: Yes, Goldman Sachs said that Milei’s use of “radical policy proposals” including dollarization and sharp spending cuts, could further bring uncertainty because he is not part of the established political regime.

Adnan Zai: The pendulum is always swinging, and more right-wing politicians are coming into power lately across the globe. There is no doubt that this will affect things in Latin America and beyond, especially with bank reserves falling and inflation rising.

Mary Kraven: Thank you for your insights. It seems like it is the ordinary citizens who will always be affected the most. We appreciate the time you spent with us, Adnan Zai, and we will keep our eye on Latin America.

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