Riskology by Infortal Episode 16: Argentina + Election Economics

How can companies navigate the evolving geopolitical risk landscape and leverage opportunities in emerging markets? In this episode of Riskology by Infortal Worldwide, Dr. Ian Oxnevad and Chris Mason discuss the recent election of Presidente Milei in Argentina and its potential impact on the international stage. They explore the implications of Argentina’s commitment to lean towards the US dollar and the opportunities it may present for US firms. As companies face increasing geopolitical risks, understanding the political and economic dynamics of different regions becomes crucial for effective risk management and strategic decision-making.

Infortal Worldwide is a global risk management and investigation firm that specializes in helping businesses navigate complex risk landscapes. The company’s focus extends to various areas, including economics, politics, and geopolitical risk. By delving into these interconnected realms, Infortal Worldwide aims to provide clients with comprehensive insights that empower them to make informed decisions, especially in critical areas such as mergers and acquisitions, private equity investments, and other strategic moves.

View Transcript


Although I'm not convinced about the dollarization strategy and their ability to pull that off at the scale that they're looking at doing. The fact that they are leaning towards the dollar regionally, I think is very significant for US firms because, as a lot of you know,  right now there's competition in terms of establishing a new world currency. And the US dollar is still in the leaders or the pole position at the moment. But other countries are obviously trying to influence that, particularly China.  So I think here we have a significant South American player that's showing a commitment to lean towards the US dollar.  I think that could be a real ‘poker chip’ that may be used on the international stage in terms of negotiating both policies and natural resources. 


Companies operating in today's global economy really need to get an understanding of the international geopolitical risk landscape. At Infortal Worldwide, we work with our clients on solving risk. Before it starts, welcome to the Riskology podcast, where we're looking at managing business risk globally and really understanding the geopolitical risk landscape. 

Welcome back, ladies and gentlemen, to a new episode of Riskology by Infortal™, where we uncover the world of geopolitical risks, economics, international trade, and really anything that can impact your business, whether that's the middle market, Fortune 500 companies, small businesses around the corner, we dissect it all and we explain how geopolitical risk world events can impact your business. So as we kick off the new year, hopefully everyone's had a good holiday season. 

Chris Mason:

One of the things that we plan on checking in on throughout the course of this next year is on elections. There's a series of elections. Of course, the US election is front of mind for everyone in 2024.  But if you look at the total number of elections going on around the world next year or throughout the course of this year, it's pretty staggering in terms of how impactful the results of the elections can be. 

That's important, whether you're thinking about international conflict, international commerce, interest rates, a lot of things which can indirectly impact your business here in the United States, these elections throughout the course of the year can have a major impact. So we plan on checking in throughout the year on the different elections as things progress. To kick off on that wavelength, I'm about to turn it over to my colleague, Dr. Ian Oxnevad, to discuss one of the most interesting elections to happen in recent times. And that's the election of the newly elected president, Presidente Millet of Argentina. 

So, Ian, welcome back to Riskology by infortal™: what do you think about the recent election down in South America? 

Ian Oxnevad:

Thank you, Chris. To put it bluntly, it is wild. 

What you saw happened in Argentina is kind of a break not only with that country's economic and political past, but also something brand new that we've kind of seen regionally. We now have the election of an Argentine libertarian president, which is something unheard of. 

Argentina, if you look at its economy over the past 150 years, it's had this amazing potential and has been constantly on the cusp of growing and being a major contender due to its natural resources, its educated population, its position geographically. But it just never could quite get off the ground because of a tradition of statism, corruption.  You've had corruption issues, you've had government interference in different places. You've had hyperinflation, and you've had military rule. 

So this is kind of a brand new page. I don't think anybody really knows yet the direction that that's going to go. So Milei, the Milei phenomenon, we'll see if this is a harbinger of things to change this electoral year worldwide. I mean, 2024 is looking to be the “year of the election”. 

Ian Oxnevad:

We have elections in Taiwan, the UK, India, here in the US, and elsewhere. 

That's pretty significant in terms of the potential impacts on policy. So Latin America, in the case of Argentina, kind of gives us a glimpse of how there's an appetite for something new, and I think that's something we need to dissect more closely. 

Chris Mason:

You know, here in the US, the election cycle, as we're all well aware, it's all about soundbites. And that's what's been really interesting in the past few weeks is the soundbites and the quotes coming out of Argentina.

It seems like this was somewhat of a shock to a large percentage of the population. What do you think in terms of the dynamic of having someone who maybe wouldn't have been a frontrunner in years past now suddenly leading the charge? 

Ian Oxnevad:

I think this is part of a global phenomenon where you have a generation now, millennials worldwide, where globalization kind of hasn't been working or responding the way that it was expected to. So what you're seeing is the erosion of legitimacy of traditional, mainstream parties. Now, in some cases, that manifests as a whole new party taking power, like in Argentina. 

And in some places, you just get more what would be previously fringey candidates emerging, where in the past you would have had kind of a predictable center right, center left, matchup in general. In a lot of countries, you now see these kind of wild card figures emerging to different degrees. What's interesting about Milei is the fact that he's libertarian, which is a brand new thing in Argentina's political landscape. I mean, libertarianism kind of covered briefly. It's not exactly conservative in the European sense.  It's not really left wing because it is very close to anarchism in a sense. 

But what's different about him is that he's fiscally very conservative but socially very liberal. So he's fiscally right wing. He's socially kind of a laissez fair touch. He believes in freedom for guns and drugs and all sorts of things like that. 

He's kind of a minarchist, which is basically a form of libertarianism where the government or the state is conceived of as the sort of night watchman role, where you sit back, you let everybody do their thing. If things get crazy, then you kind of step in. 

So his party, freedom advances or La Libertad Avanza party, it's kind of new in that platform. And what he did, if you look at his campaign style, he literally just went door to door. He literally just walked through neighborhoods talking to people.  And it did help that he had a reputation. He was a radio show host. He was a very active economist and mathematician. He did have the nickname El Loco in school growing up. And what's kind of neat about this is that it kind of gave him this persona, and he did curse a lot in his campaign. So there is kind of a Trumpy vibe, I guess you could say, with him, even though his policies are very different, it's something that we haven't really seen before. 

Chris Mason:

Yeah. And as I mentioned before, so many soundbites have come to the forefront of the press coverage, and a lot of it doesn't go much deeper than that. So it is kind of hard, in a sense, to truly understand what this politician is all about. I'm sure within Argentina it's a little bit easier, but a lot of the international press coverage does not go too far past these sound bites.

So really great to have that breakdown Ian.  One of the things that is obviously front of mind for everyone when they think of Argentina is the ridiculously high levels of inflation. They do have a history, of course, of massive inflation events. It could be argued quite easily that the country is on its way to a hyperinflation or hyperinflation conditions in the very near future. And he's really come in and said right off the bat that there's definitely going to be some pain before things get better. 

And that's going to come through austerity, that's going to come through cuts and potentially even devaluing the currency further. 

So when you hear that from the outside, and we've seen sort of economic conditions around the world deteriorate to a certain degree based on the interest rate pressures, how is he going to find a way out? It's one thing to make cut to save revenue, but the economy itself is basically on its last leg. So really, what do you think the path could be going forward for the administration as they come into play? 

Ian Oxnevad:

So something about monetary dynamics that a lot of people don't really know or talk about is: you have, in government economics, if you're looking at an economy, you have three basic options.  You can have monetary autonomy, or you can have a currency peg, or you can have price stability, right? So you can only really have two out of the three of those. And that's something called the Mundell Fleming trilemma. Now, what's neat about inflation is that he's tackling it from two sides at the same time. He is an economist. 

What he's doing is he's trying to change the monetary system or the monetary policy of Argentina by going to the dollar. What he's done is he's devalued the currency, which incentivizes investors, businesses, peso users in Argentina, to basically drop their pesos and go to the dollar. 

Now, that's short term pain, but what that does is that if things start to become denominated in dollars, transactions start to use dollars. That opens the door for greater predictability of the ability for the currency in Argentina being used, in this case the dollar, to actually hold value. And what that does, that allows for growth, because then, if everything's denominated in dollars, you're an investor from the outside. Okay, I can invest in Argentina. I see everything is denominated in dollars. That's a signal to me that the investment is going to hold value. So he's trying to kickstart growth with this sort of shock therapy. And this has worked. 

I mean, Eastern Europe, after the fall of communism, went through this, and eastern Europe is pretty vibrant now economically, all things considered, even despite the Ukraine war. 

Poland is a bright spot. If we were having this conversation in 1991, people would laugh us out of the room. But shock therapy did work to get things going. So he's trying to kickstart growth with that. And at the same time, he's trying to cut corruption and fiscal spending, which are two inflationary pressures so if you look at what he's done from a fiscal standpoint, he's essentially just fired half of the government.  If you look at what he's done, you had 18 or 21 different government ministries and now there's only nine. 

So what he did was he fired or laid off or minimized these massive bureaucracies in Argentina, which cuts down the need for fiscal spending, which eliminates an inflationary pressure, because it reduces demand, and it also reduces potential corruption, which itself is an inflationary driver. So he's doing these things simultaneously in order to get Argentina moving. And we'll see if it works. In terms of Argentina, everyone has been kind of holding their breath. 

The status quo has not been working. You can look at 150 years of Argentine economic history. I don't see how it's something bad to try, from an economist standpoint, the shock therapy, it's the first step in that direction to try to incentivize growth. 

Chris Mason:

You're so right in terms of the history of Argentina within the region. And then as an international player, when you think about it from a big picture standpoint, they have so much going for them in terms of natural resources, potential to have influence within the region, but always tend to struggle in terms of managing fiscal policy and keeping that inflation in check. 

So it may be that drastic measures are needed to, at the very least stabilize. And at Infortal and on the Riskology podcast, we do like to focus on the opportunities and the positives. And so some of the things you’ve mentioned, I think could lead to opportunities longer term for American firms. Goods will be cheaper, so you might get a better deal on exports. There will probably be a significant need for investment in key industries as we go forward.  And so it'll be interesting to see how that looks. 

And one of the things I think to think about, although I'm not convinced about the dollarization strategy and their ability to pull that off at the scale that they're looking at doing. The fact that they are leaning towards the dollar regionally, I think is very significant for US firms because as a lot of you know, that right now there's a competition in terms of establishing a new world currency and the US dollar is still in the leaders’ or the pole position at the moment, but other countries are obviously trying to influence that, particularly China. 

And so I think here we have a significant South American player that's showing a commitment to lean towards the US dollar.  That could be a real ‘poker chip’ that may be used on the international stage in terms of negotiating both policies and natural resources. What do you think, Ian? Do you think that helps the cause for keeping the US dollar as the international currency of trade?

Ian Oxnevad:

Oh, absolutely. If you look at the end of the Bretton Woods system, when the gold convertibility window closed in the 1970s, there was no real alternative to the dollar for denominating world trade. Now, however, you have other major players.  You have the Yuan, you have the Euro, you have bitcoin, to a degree as a potential reserve standard alongside the dollar. 

So even if you wind up with a basket of currencies, the dollar doesn't have the same locked-down monopoly anymore that it did in the past. But this is a shot in the arm for the dollar in the sense that Milei wants closer relationships with the US and the US economy. And that matters. It's political, the monetary system kind of pretends in business school that it's a separate thing, but the politics matters. 

And the fact that you have a major South American economy placing its bets on the dollar and on closer trade with the US not only helps it from a monetary standpoint or helps us businesses, but it also opens up new reshoring and near shoring opportunities to Latin America. 

If you're an industry right now looking to try to de-risk from China, and you potentially have an open door in Argentina, it might be worth looking at. There's opportunities there. So from that standpoint, this is a huge step in the right direction from an opportunity vantage point for U. S. businesses.  

Chris Mason:

That's an intriguing proposition because of the location, the fact that it's a strong player strategically, at least in the region, it could be a destination for firms looking to move their manufacturing base. 

They also do have natural resources that are important for a lot of the modern technology development, which that is definitely getting more complicated from a regulatory standpoint here in the US. So definitely a lot to watch there.

But in terms of mineral reserves, particularly lithium, Argentina could open the door potentially to US firms, where there was a concern that all of South America was going the way of China. This could open the door to change some of that thinking, at least, hopefully. 

Ian Oxnevad:

Absolutely. I mean, there's indicators too, that Argentina is going to play a larger role on the world stage. 

If you look at his inauguration, it's interesting that you had Ukraine's Volodymyr Zelensky attending. You had other figures like Viktor Orban in Europe also attending. And the fact that Zelensky showed up to Argentina of all places. Here you have Ukraine in the middle of a war and he's trying to drum up support and money for the Ukrainian war effort against Russia.

Argentina is not in a position to really financially back Ukraine in any major way. So the question is, why would Zelensky be there? Obviously, he could use that as a venue to talk to other world leaders. But the fact that he chose to go to Argentina specifically, or even Latin America, is significant, especially since Latin America is not typically a very big player on the world stage, especially when it comes to major events in the other hemisphere. So the fact that Zelensky went to Argentina at all is massively significant. 

And Milei actually gave Zelensky a gift during that inauguration visit. If you look at the news, he gave him a gift of a Menorah. Zelensky is Jewish. Milei is not. But the fact that he gave that Menorah to Zelensky is a pretty significant indicator of friendship, I would say, to Ukraine in this situation. 

Even though Argentina doesn't have any real material support to give, obviously, Zelensky thought it was worthwhile being there for this event. 

So that's kind of an indicator that the region is going to play a bigger role in world affairs in the near future. 

Chris Mason:  

That's a really interesting dynamic, something I noticed as well, that Zelensky was there because it's not where you would typically think to go looking for additional funding. But I think you're exactly right, Ian. It just shows that what happens in Argentina will be so important to the big players that do have the ability to influence some of the conflicts that are going on worldwide. 

And I think everyone is looking to see where new leadership in all of these elections around the world will sit in terms of viewing some of these conflicts, and things could shift. 

And so it's definitely something that will be exciting to discuss, at times probably somewhat stressful, because election cycles have just taken a whole new life, particularly here in the US. But again, the impact can be immediate, like we've seen in the past few weeks with the new president in Argentina coming into power. 

But again, our focus will be to look at these elections, to really look at where it could create opportunity on the ground for US investment. And based on what I'm seeing, I think that could be the case for Argentina. 

It's still too soon to tell, of course, but there's definitely some signs that this could stabilize things and open up the door for some investment, which, of course, will require a significant amount of due diligence. But still, we've seen at least some positive come out of this election cycle. 

So any last words before we close out this episode? Ian? 

Ian Oxnevad:

I think we pretty well covered it. 

There's some pretty colorful campaign slogans out there, including from Argentina. So if you want to brush up on it by all means, read the election and campaign material, it is colorful to say the least.  

Chris Mason: 

It will be interesting to even look at the different styles of campaigning that will start occurring around the world.

So we look forward to having everyone back again. This was another episode of Riskology by Infortal™.


Infortal Worldwide | Email | Tel: 1.800.736.4999


CLE Accredited Courses

Infortal’s Continuing Legal Education (CLE) courses are designed to equip executives, attorneys and risk managers with strategic insights to navigate the complex landscape of geopolitical risk. We cover topics such as international sanctions, regulatory risks, corporate espionage, AML, global warfare, anti-terrorist financing and corruption.

We can help you make informed decisions and mitigate potential risks for your business.
This is a block of text. Double-click this text to edit it.