Pablo Gerchunoff has an interesting interview in La Nación in which he suggests that Milei, like Roca (the Argentine Porfirio, for gringos that know something about Mexico), has seen a structural change in the Argentine economy and has been able to convert it into a political opportunity. In Roca’s case, the combination of railways and refrigerated shipping opened the possibility of the old agro-export model. In Milei’s case, Gerchunoff points to the new productive geography along Route 40, with mining and energy potential. Vaca Muerta, lithium, mining, energy, Patagonia and the northwest frontier. There is something to the point. But the analogy, I think, is more misleading than illuminating. I also might add that it is striking that someone like Gerchunoff, who once admired what he saw as Alfonsín’s non-Peronist social-democratic model (something that I share), could now find historical promise in Milei.*
On the historical issue, it is clear that Roca's model was not similar to the current one. The so-called generation of 80 did talk the language of liberalism, but the construction of that economic model required a very active state. Military occupation, territorial incorporation, railways, ports, public credit, land policy, immigration policy, and a political regime designed to guarantee the conditions for accumulation. Free markets did not spontaneously build the agro-export economy. It was built by the state, often violently. The current government wants the epic of a new productive frontier without public works, without infrastructure, and without the political construction that made the old liberal order possible.
There is another problem. Much of the so-called Route 40 strategy depends on investments and institutional decisions that preceded Milei. Vaca Muerta did not fall from the sky in December 2023. Energy infrastructure, the development of shale production, and the reduction of energy imports are the result of previous policies and investments. Milei can try to appropriate the narrative, and he may even give excessive incentives to some sectors, like AI (see Milei's piece in the FT), through the RIGI and other measures (for an explanation of the investment regime go here). But the current improvement in the external sector is not evidence that chainsaw economics works. It is evidence that past public investment, together with favorable external conditions (and a lot of dollars from the IMF and the US Treasury), can temporarily improve the balance of payments.
This is also why the idea that Milei is an outsider was always implausible. As I have noted before, the economic team is not new. Caputo and Sturzenegger are not outsiders to Argentine economic policy. They were central to the Macri experiment, which led to the 2018 IMF agreement and the renewed dollar debt trap. Milei’s rhetoric is anti-caste, but the economic program is the old neoliberal package of fiscal austerity, deregulation, trade and financial liberalization, and external indebtedness. The dog may be new, but the fleas are not.
Gerchunoff is right to worry about the losers of creative destruction (not sure how much is being created). But here too the Roca analogy fails. Argentina today is not a sparse nineteenth-century frontier society organized around land, beef exports, and a small urban elite. It is a modern, urban, very unequal society with a large working class, a complex service sector, industrial remnants, public employment, pensions, universities, health systems, infrastructure needs, and a binding external constraint. You cannot tell workers in the so-called conurbano to wait until 2050 or move to Patagonia. That is not a transition strategy. And it is not even good politics.
Where I disagree more sharply with Gerchunoff is on the exchange rate. He suggests that if the central bank moved the dollar closer to the top of the band (a devaluation in Latin American usage), Milei would almost guarantee reelection. That seems wishful thinking. Milei’s only clear achievement has been the reduction of inflation from the very high levels reached after the exchange-rate jumps of 2023. But that stabilization was not caused by fiscal austerity as such. The fiscal shock caused recession and the persistence of Argentina stagnation since 2011. The stabilization of prices came mainly from controlling the exchange rate, with substantial external support. The initial maxi-devaluation in December 2023 doubled monthly inflation and produced the collapse of real wages. Another depreciation would risk repeating the same mechanism. Higher import costs, higher prices, lower real wages, weaker consumption, and renewed instability.
In a peripheral economy with a strong pass-through from the exchange rate to prices, depreciation is not a magic route to competitiveness. It is often contractionary and inflationary. It reduces real wages, worsens distributional conflict, raises the domestic cost of imported inputs, and may fail to generate exports to compensate for the contraction of domestic demand. The idea that a cheaper currency automatically solves the external constraint is another version of the same marginalist fantasy that relative prices are the main mechanism of adjustment. In Argentina, relative prices often adjust by generating a crisis. Note that he already has a positive external situation in the short run (in the long run, the next several governments will have to contend with much higher external debt obligations).
This does not mean that the current exchange rate regime is sustainable indefinitely. It probably is not. But the problem is not solved by devaluation. The problem is that the government is trying to stabilize a highly dollarized economy with negative interest rate differential, offering insufficient incentives to hold pesos, scarce reserves, external dependence, and a brutal recessionary adjustment. In those conditions, a depreciation may be less a solution than the beginning of the next round of instability.
The broader issue is that the nineteenth-century liberal model cannot be recreated in a twenty-first-century Argentina. Even the nineteenth-century liberal model was less liberal than its admirers pretend. Today, a development strategy would require public investment, infrastructure, industrial and technological policy, energy planning, external management, and institutions capable of integrating the losers of structural change. Milei has none of that. He has a chainsaw, a Twitter account, and the enthusiastic support of the same groups that benefited from previous failed neoliberal experiments.
Roca, for all the brutality and exclusions of his project, built a state capable of organizing a model of accumulation. Milei is dismantling state capacity while claiming to inaugurate a new era of material progress. The result may last long enough to win an election if external financing keeps arriving. But the logic of the model points, as before, toward a crash. Roca 'conquered' the desert, Milei is creating a productive one.
* If you read Spanish I highly recommend his book on Alfonsín.
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