Argentina, the auction begins with the following: Out in pesos, in in dollars. The lithium challenge between the United States and China | Melina Gabanelli

Javier Miley’s presidency begins on December 10 in Argentina. Who is Miley? His father was a bus driver, and his mother was a housewife. After a difficult childhood, he graduated in economics, obtained two master’s degrees, and began working in financial companies, but became famous for his rowdy appearances on television. He was able to elect a deputy in 2021 on the list Libertad advancesWith his “anarcho-capitalist” theories inspired by the liberal Milton Friedman and another less well-known American economist, Murray Rothbard. On November 19, he persuaded voters by offering to radically scale back the state of “absolute evil,” led by “a class of parasites.”.

Here is his program: Abolition of 11 ministries; Abolition of the central bank; Selling major state-owned companies, such as the oil company People’s Protection Units Or credit institution Grupo Financiero Galicia; privatization of health care and schools; There are no counter measures Climate change; Remove restrictions on the possession of weapons; Repeal the abortion law; Liberalize adoptions and the “market for human organs,” given that “men and women are primarily owners of their bodies.” Finally, fix the flag: replace the peso with the US dollar.

Even if you work you become poor

In the In the runoff, Miley won 55% of the voteBy defeating former Peronist Economy Minister Sergio Massa. However, it will only be able to count on 39 of the 257 seats in the House of Representatives and seven of the 72 seats in the Senate.. Therefore, he will be president without a parliamentary majority. He will only be able to do some things by decree, such as reducing the number of ministries, but the rest he will have to deal with moderates. Together for changeLed by former President Mauricio Macri and electoral candidate Patricia Bullrich. Of course, the president, nicknamed “Crazy” since he was a boy, could go ahead with holding the referendum. But it is not certain that he will be able to prevail on sensitive issues such as abortion, organ sales, or… Climate change

The country appears to be heading toward the tenth financial default in its history. Suffocated by stagflation, i.e. a decline in productive wealth (estimates -2.5% for the end of 2023), coupled with angry anger. Inflation today reaches 143% Which, according to expectations, may reach 200% by the end of the year. The unemployment rate is high (6.6%), but not dramatic. This means that a large segment of Argentines become poor, even though they work. About 40% of the population, or 18.3 million out of 45, live below the poverty lineThe equivalent of 750 euros for a couple with two minor children; 9.3% of the population do not even have money to eat. The other main issue is the collapse of state finances. The public debt amounts to $419 billion, equivalent to 85% of the gross domestic product, a burden that could be borne were it not for the fact that more than half of it is in foreign hands. The $44 billion it lent must be counted International Monetary Fund And tens of billions more in stocks and bonds subscribed by large American funds, from Black stone to Gramercy Money Management. Interest rates reached 145%In an attempt to calm inflation and attract more subscribers to government bonds. does not work. Miley’s triumph matured in this debacle.

Exchange the peso for the dollar

For the new president, the way out lies in a shocking solution: getting rid of the local currencyCentral bank closure And start over using only dollars. Many economists, in Argentina and elsewhere, immediately warned: Be careful, this means abandoning monetary policy and outsourcing it. Federal Reserve American. Initially, Washington will set the interest rate for Buenos Aires as well. Furthermore, the Argentine authorities will not be able to manipulate the exchange rate with other currencies: for example, it will not be possible to devalue the currency to encourage exports. Ultimately, they will lose the opportunity to print more banknotes, injecting liquidity into the system to fuel demand for goods and services. All of these are convincing objections for a country with sound calculations: do they also apply to Argentina today? In fact, companies are already exporting and importing in other currencies: the dollar, but also the Chinese yuan. US currency in black trades at a value 3-4 times higher than the official currency. If “dollarization” succeeds in securing salaries and pensions, restarting consumption, and restoring some order to public accounts, few will regret the peso, the local currency.

Panama, Ecuador and El Salvador precedents

There are some precedents: Panama adopted US currency as early as 1904, Ecuador in 2000, and El Salvador in 2001.. Things went well in Panama: the canal state benefited from continued economic growth, and was integrated into the American circuit. However, the economies of the other two countries remained fragile and their public budgets are today at risk of bankruptcy. To save itself, Ecuador requested and received loans from China. On the other hand, last May, it signed a free trade agreement with Beijing. Strange, isn’t it? I depend on the dollar, but I need the Chinese bailout.

At Joe Biden Stadium

The first problem that Argentina faces is that the country does not have enough dollars to pay public sector employees’ salaries and pensions. The central bank does not have the US currency in its reserves. Where could the dollars needed to transform Argentina’s economy come from? One channel could be trade with the United States. But for Argentina, the balance of payments with the United States (exports minus imports of goods and services) runs a deficit of $9.9 billion. Many more dollars go out than enter the country.

Miley has already knocked on a door International Monetary FundBut before spending other resources, he will want to check whether there are real reforms, in particular a 15% cut in public spending. Anyway, dollars International Monetary Fund It won’t be enough. So? Miley hopes to rely on political and economic support from the White House: In recent days, he traveled to Washington to meet with some Treasury Department officials and, above all, National Security Chief Jake Sullivan, a close collaborator of Joe Biden. The two sides discussed how to strengthen the relationship between their countries. All this will lead to some kind of Marshall Plan For Argentina? It’s hard to imagine that Joe Biden, who is dealing with Ukraine and Gaza, could ask Congress to allocate money to Buenos Aires.. If Donald Trump returns, there will certainly be a good understanding (the two sympathize), but financial aid to other countries is not part of the Trumpian doctrine. US finance and industry will likely decide to buy (and perhaps even price out) the government companies that Miley wants to privatize. The sectors are strategic: telecommunications, energy, banking, media and, as we will see, there is the crucial issue of large lithium mines.

Brazil’s plans fail

He repeated this during the election campaign on January 1, 2024 Argentina will not join the BRICS group, along with five other countries Consisting of Brazil, Russia, India, China and South Africa. The reason is that one of the goals of the BRICS is precisely to counter the supremacy of the dollar Globally, using other currencies for trade and central bank reserves. Xi Jinping pays for the yuan. Miley, who wants to stick to the dollar, and the United States are spoiling the plans of at least two countries: those of the Brazilian President, Ignacio Lula da Silva, who proposes to use at least his own currencies in trade between the BRICS countries. There is a lot of trade between Brazil and Argentina: Brazil absorbs 14.3% of Argentina’s exports (data Comtrade 2022). A strong contrast can also be expected between the two leaders in this context MercosurFree Trade Agreement between Argentina, Brazil, Uruguay and Paraguay. The Brazilian president would like to reduce the use of the dollar here as well, and at the same time, conclude an agreement with the European Union (which now seems close); Miley could push for rapprochement with Washington. Moreover, Lula will chair the G20 in 2024 and the BRICS in 2025. These are two opportunities to lead the liberation of the “Great South” from American influence. Miley may not be on board, but we will see him get tested.

Curbing Chinese goals in South America

This “deferential” step is also indigestible for China, which aims to expand its influence in South America. Beijing is a vital customer for the Argentine economy. In 2022, it bought 92% of soy production and 57% of meat. In addition to The Chinese government has already granted Argentina loans worth $18 billion. But the most important match concerns lithiumIt is the primary raw material for electric vehicle batteries, renewable energy storage, and all electronic devices. Argentina, along with Chile and Bolivia, has vast reserves of the mineral that have not yet been fully exploited. The defeated candidate in the elections, former Minister Massa, had just concluded an agreement with the Chinese group Tibet Summit ResourcesInvestments worth $1.7 billion, in exchange for 10,000 job opportunities in mining and related industries.

Many Chinese companies are already active in the Argentine Andean plateau region, including… Janfeng lithium And the Tsingshan Holdings Group. This cooperation is clearly not welcomed in the United States, which is also present in Argentine mining fields with the company Levent Company. Now it’s legitimate to wonder how far Miley might slow down the Chinese and favor the Americans in the lithium race. The match, in which UEFA does not touch the ball, is only just beginning.