Chelsea Follett: Daniel Raisbeck is a fellow policy analyst in Cato Center for Global Liberty and Prosperity, and he focuses on Latin America. Previously he was a senior fellow at the Reason Foundation, the editor in chief of the Pan Am, host, and a lecture at Universidad Francisco Marroquín in Guatemala. He frequently writes on Latin American Affairs. His op-eds have appeared in the Wall Street Journal and Foreign Policy among other prominent publications. And he joins the podcast today to discuss human progress and potential in Latin America, especially recent developments in Argentina. Daniel, how are you?

Daniel Raisbeck: Fine, thanks Chelsea for inviting me on.

Chelsea Follett: What would you say are some of the biggest strengths and opportunities for Latin America today? Obviously, a fairly broad question.

Daniel Raisbeck: Right. Well, in terms of, liberty in general, and especially economic freedom, of course, the experiment that we’re now seeing in Argentina with the election of Javier Milei, and his, the beginning of his government, he took office on December 10th, and it’s all quite encouraging on, in one sense, especially the deregulating part. He had a pretty large decree, that repealed, many, many laws and modified others, to really, liberate the Argentine economy, which has really been strangled over recent decades. It’s one of the most regulated economies in the world, so that’s very good news. He has another, big law in Congress that aims to do pretty much the same on the economic side, and also has some, say political, aspects as well. So it’s going to be very interesting, how that plays out.

Daniel Raisbeck: It will depend, of course, a lot of it will depend on Congress. Formulate doesn’t have a majority, and also on the courts, because the courts can potentially block a lot of his initiatives. But we have focused, here at Cato, especially with my colleague, Gabriel Calderon on his main proposal during his campaign, which was the dollarization of Argentina’s economy, which we think, is the most important, proposal. And one, I mean, Cato is one of the few institutions and perhaps the only institution in Washington, I believe, that has actually paid attention to dollarization in Latin America over the past, three or four decades. And, in general, we think it’s a very good policy that, there are only three dollarized countries so far. They’re smaller countries, Panama, Ecuador, and El Salvador. And we think it would be a very big deal and very positive for Argentina if it were to dollarize. But so far, sadly I think I’ve been disappointed with, the beginning of Milei’s, government, but we can discuss that further, if you like.

Chelsea Follett: That is fascinating. Let’s, first sort of set the stage. Could you describe the situation in Argentina before Milei and what was going on and what sort of situation he’s inherited?

Daniel Raisbeck: Right. Well, the main problem and, the polls, opinion polls confirmed this was inflation, which was, running at around 140%, at the time of his election in November. And it’s actually been increasing. So right, when you have triple digit inflation, it’s definitely a big problem. And of course, this is caused by, the Central bank and, Argentina Central Bank is particularly, irresponsible even within a Latin American context. For instance, it had, billions and billions of dollars in, interest bearing liabilities. And it was basically just, funding the banks, especially the banks, commercial banks in Argentina, were lending to the Central Bank. And it was basically a Ponzi scheme in which, you had, of course, 130% or so interest rates on very short term bonds. And this was something that was bound to collapse.

Daniel Raisbeck: And Milei’s government has taken, some steps to remedy this, basically by transferring, many, if not all of these bonds to the Treasury. And you still have the debt problem, but, perhaps it’s not, as explosive. And of course, you had as a result of this, of the inflation, largely, but not only, you also had a, as I said, one of the most regulated economies in the world. You have 40% of the population, living in poverty and an economy that hasn’t grown at all in, over a decade. Which is very sad if you think about it, because Argentina used to be, of course, around, a hundred years ago, 120 years ago, one of the richest countries in the world. And it’s, decline has been, very marked and very steady. And it has coincided, of course, with the rise of nationalism at first and then with Peronism, which has been like the standard, prototypical Latin American corporatist, ideology.

Chelsea Follett: Could you contrast that with Milei’s ideology and talk a little bit about what are his beliefs? What are his economic beliefs that are driving him?

Daniel Raisbeck: Well, Milei is interesting because, he describes himself as a classical liberal or a libertarian. And he even goes farther, and he even describes himself as an anarcho-capitalist. Of course saying that he has to govern more like a minarchist in terms of having a minimum state because he is governing a state after all. But he was actually trained as a neoclassical economist but he has said in different interviews how he discovered the Austrian School of Economics relatively recently in 2013, I believe. He came across a text by Mises and Hayek and he basically says that he saw the light and he became basically an adherent of the Austrian school and in that sense a libertarian or a classical liberal in the Austrian tradition. And he was very, what’s been surprising in Argentina is that he’s been very open about it. He has never tried to soften his stances at all in order to appease some section of the electorate. He has been very adamant in defending freedom and he is very talented in explaining these concepts which he understands very well on an academic level and he’s also been a lecturer or professor at some Argentine universities but he’s very skilled at communicating these ideas to the mass of the people.

Daniel Raisbeck: And there’s even a Twitter account that arose recently called Milei Explains with English subtitles in which they go through many interviews in which Milei is explaining different economic concepts as to for instance the causes of inflation or the effects of regulation. And so he really does know what he’s talking about and he’s also very good at reaching a very broad audience. So I think that’s quite remarkable.

Chelsea Follett: And it is fascinating that those ideas have resonated with voters to the point that he was successfully elected. Can you talk a little bit about the classical liberal tradition in Argentina or Latin America?

Daniel Raisbeck: Right. And I should qualify that also in terms of Argentina has many classical liberal economists. I think at a per capita level it’s probably about the highest percentage in Latin America. They also have a long tradition of think tanks even beginning in the 1950s. One particular think tank started by a gentleman called Alberto Benegas Lynch the father whose son is also called Alberto Benegas Lynch. He was corresponding with both Ludwig von Mises and Friedrich Hayek and he brought Mises to Buenos Aires and Mises delivered a series of nine lectures in 1959 there which they’re still talked about. So Argentina does have I would say a very rich intellectual tradition in, or academic tradition in the let’s say Austrian school. At the same time Milei has a very sweet generous background insofar as he’s not only a trained economist, he was also a semi-professional soccer player and he was also a rock singer, made part of a band that I think made Rolling Stones covers.

Daniel Raisbeck: So he’s an entertainer and I think that was really what allowed him to sell his ideas. And there’s a debate of to what extent did people actually vote for Hayekian economic policy versus how many people just voted for this entertainer who as I said is very skilled and also had a very radical speech against the political class which had brought about this economic disaster within which Argentina currently finds itself.

Chelsea Follett: All right, so he’s got this eccentric aspect but also serious policy ideas. You talked about dollarization, how some other countries have tried that in Latin America. Could you describe more about this policy of dollarization for people who aren’t familiar with it? What is it, why is it a good idea for Argentina and what are your hopes for Argentina if Milei is able to successfully dollarize?

Daniel Raisbeck: Right, well there are different types of dollarization but basically you grant the US dollar legal tender or at least you get rid of exclusive legal tender for a national currency in the home country. So as I mentioned, Panama really was born as an independent country with a lot of involvement from the United States of course. So it was born dollarized in 1904 and then more recently Ecuador dollarized in 2000 in the midst of a crisis quite similar to what Argentina is facing now. And El Salvador dollarized in 2001 and it had faced a similar crisis the previous decade and then it had established a kind of fixed exchange rate mechanism. So they had already defeated the inflation problem which is what dollarization does. When you dollarize you basically end up with inflation levels pretty much akin to those of the United States which might be high now in the last few years from a US perspective.

Daniel Raisbeck: But when you have for instance 140% inflation in Argentina or higher in Venezuela then having seven or 8% inflation really isn’t that bad after all. And with all the problems that we know that occur with the Federal Reserve, when you compare that to currencies even in countries with so-called responsible independent central banks that have had their currencies devalued tremendously against the US dollar, then from that perspective then having the dollar really becomes quite a good option.

Daniel Raisbeck: And I’m not saying it should be the only option and I think Panama has a good model insofar as there is no established official currency. In theory there’s monetary freedom and it just so happens that most people choose, the overwhelming majority of people choose US dollars for their contracts and transactions. So by taking away the local political class and the power of local politicians to interfere in the monetary sphere and to print money and to monetize the debt you just get rid of a huge problem. Now that doesn’t solve all other problems. For instance Ecuador dollarized, it has, dollarized countries have had by far the lowest inflation levels in the last few decades. But that doesn’t mean you’re going to have very high economic growth automatically. Ecuador hasn’t had that. But because they also had a radical left-wing government, an authoritarian government from 2007 to 2017.

Daniel Raisbeck: But as long as you get rid of inflation and the currency devaluation problem, that’s just very important in these countries because the governments can still, run deficits and have debt problems. But when you have dollarization, those debt problems don’t really affect the private sector and don’t affect a regular citizen. Whereas when you have a national currency, then you have a debt crisis, it usually leads to, to a deterioration of the currency and a loss in purchasing power. So maintaining that purchasing power, I think is, is key, which is why in these countries, nobody is thinking about dedollarizing. Even in Ecuador, when the left wing strongman, Rafael Correa was at the peak of his power and popularity with 60% or above in approval ratings, the dollar was always more popular than, than he was.

Daniel Raisbeck: So he, he wanted to get rid of the dollar, but he was unable to do so. And that’s also why we think it’s important for Milei to dollarize and dollarize quickly, because you never know if the Peronist come back to power, which they may, they could overturn a lot of the measures he’s taking now, for instance, deregulation. But if you dollarize, it’s going to be very difficult for any future government to, to get rid of that. And that’s why we think it’s such a good policy.

Chelsea Follett: So if he can implement it, he’s probably going to be able to keep it. But there are people who object. What are some of the criticisms of the dollarization and what would you say to critics of this policy who are skeptical about it?

Daniel Raisbeck: Well, there are different types of critiques and a standard left-wing argument is that you lose monetary sovereignty as if this were a terrible tragedy, or that you surrender sovereignty to the United States and the Federal Reserve, when that’s not really the case. For instance, Panama, it not only has dollarization, but it has a very liberalized banking sector which means that monetary policy in the end depends on internal factors. And the Federal Reserve only affects Panamanian monetary policy to the same extent that it does affect monetary policy in, the rest of the world so I think that’s just a nationalist and very emotional and, bad argument because, I mean, what use is monetary sovereignty if you’re, sovereign currency is losing value consistently against the dollar and causing inflation or helping to cause inflation.

Daniel Raisbeck: A more technical argument that is constantly applied to Argentina has more to do with the technique of, of dollarizing or the mechanics. And it has been argued across the, the English speaking press as well, that Argentina doesn’t have enough dollars to dollarize this is really not the case because it, it’s true that the Argentine state is basically bankrupt and, doesn’t have too many dollars and, definitely not enough to cover the, circulating currency, for instance. But if you look at the private sector and just households, they have more than enough dollars. It’s, they have over half of GDP according to one estimate from the national, statistical Institute. So what people do is that they keep dollars, as they say in Argentina under the mattress or maybe in safe deposit boxes or, abroad in, the case of most companies.

Daniel Raisbeck: And when you dollarize, which is what happened in Ecuador you create a confidence shock in the banking system. So that creates a huge increase in deposits. And in Ecuador it’s also false that you need to dollarize the entire circulating currency from one day to the next. In Ecuador, there was a mandate for a nine month period in which both currencies, the Sucre, which was the old Ecuadorian currency, and the dollar they circulated at the same time, and at the end of the nine month period, you had to hand in all your Sucres for dollars. In El Salvador, it was a 20, it was voluntary, but it took about 24 months for 90% of the, local currency, the colon to be, dollarized. Whereas the deposits you, can really dollarize overnight. So we see there’s really no reason why Argentina couldn’t follow a, a similar example as to what these countries did. So, so those are just some criticisms, but of course there are others as well.

Chelsea Follett: How hopeful are you that he’ll be able to pull this off and actually implement dollarization?

Daniel Raisbeck: Yeah, well, it’s a good question because, Milei actually came to power. This is a presidential system. It’s not a parliamentary system, but he ended up winning as part of a coalition because he had to join forces with, former President Mauricio Macri’s party he had to have their support in order to win. He went into a runoff, which, which he won, but he won because of that support. And many people in that party are not really in favor of dollarization. And the person that he put in charge of the finance ministry is former President Macri’s, one of the former President Macri’s, former finance ministers. And he has spoken out against dollarization in the past. And more recently he has taken the view that yes, it was a, campaign promise and it’s still going to be met, but they’ve taken the view that the fiscal issue is more important and that dollarization will be a consequence of stabilizing the economy.

Daniel Raisbeck: Now, I think that is a mistake and I think you have to dollarize first you have to solve the currency problem, and you have to solve the, monetary issues and inflation before you can really proceed with, all other reforms. So I think it’s more of a point of departure, instead of a destination, whereas it seems that Milei’s government is regarding it in the other way around, and I think it’s potentially a mistake.

Chelsea Follett: And so dollarization obviously a big proposal, but there are others as well, various deregulatory reforms. What other promises has Milei made?

Daniel Raisbeck: Well, it’s very far reaching and in both the decree and the omnibus law, which is a very wide ranging law there, it just really deregulates very broad swaths of the Argentine economy. So one example is they got rid of price controls for rents and meaning real estate, which had even caused a shortage. There were price control laws dating back even from the 1970s that were scrapped. There was even a more recent law that determines what can and cannot be displayed [laughter] by stores and supermarkets on their shelves.

Daniel Raisbeck: So, those are all very, I think, healthy and positive, deregulatory, measures. Another one that has been very popular and that has been commented on is the Open Skies policy, or basically, cutting down on the on the monopoly of especially one National Airline and allowing airlines from abroad to enter the market and even control flights within the country. Because basically what they had was a scheme to, undercuts the low cost airlines in favor of the National Airline, which, of course is heavily subsidized. And, Milei even went so far as saying that he is, handing over this national in terms of privatization. He’s not selling it. Instead he’s just handing it over to the workers and of course cutting subsidies.

Daniel Raisbeck: And you had a very interesting reaction from the far left, and suddenly, because of course they’ve been saying for years that [laughter] companies, enterprises should belong to workers and Milei is saying, okay, here I give it to you for free. And then they’re saying, no. [laughter] So, right. It’s funny in that sense. But, really it, there’s a wide scope of things that you could really, talk for a long time about. So these are just some highlights.

Chelsea Follett: That is fascinating. But you did mention earlier that in some ways you have been also disappointed, with Milei. Everything you described so far sounds fairly positive. Are there any areas where you feel he could be doing more to promote freedom and prosperity and so forth?

Daniel Raisbeck: Well, I mean, I think everything on the deregulation side and, the economic freedom side is very positive. As I mentioned, my main concern is on the monetary side, where I think that, I mean, they’ve kept, for instance, they’ve kept the, an official exchange rate. They adjusted it because they had an exchange rate that was at around 400 Argentine Pesos to a dollar. Whereas the blue dollar, which is a black market rate and which it’s not a complete free market rate, but it’s the closest thing you have to a free market rate was at around and even over a thousand. So, they adjusted that and they, they said it’s going to be 800 with, 2% increase, per month. So you would say it’s an improvement, but you still have an official rate whereas, what you should do, especially in terms of dollarization is to liberate the, the exchange rate.

Daniel Raisbeck: And, you have of course, for instance, another measure that, I think is not ideal is a 5% tax that they placed on withdrawing dollars from the banking system. So there’s no tax to introduce dollars, but, there’s a 5% tax to withdraw dollars. And this is mistaking because you should be generating confidence in the banking system, and you should be trying to increase, deposits as as much as possible. And this makes you think twice, of course, if you deposit and then you’re gonna be charged to withdraw, then I don’t think it’s the best policy and there are other distortions that really you should either get rid of or not introduce in the first place, especially to advance towards dollarization, but we’re not seeing that in the first month of the government in office, at least until now.

Chelsea Follett: Now, Milei has said that things will get worse before they get better, which is, perhaps an unusually, non sunny statement for a politician. How long do you think before we start to see some positive effects from these reforms?

Daniel Raisbeck: Yeah, again, it’s a very good question, but I do think a lot of it depends on the monetary policy, because of course, I think the deregulation aspect can be very positive, as well, because as I said, the economy has been absolutely strangled. But, the thing with, the minister who’s called, Caputo, so, the Caputo plan, apparently involves, liquefying the debt. In terms of, for instance, these bonds that I mentioned, very short, short term bonds were paying, around 130%. And, when they were transferred, now they’re, they have a longer duration and they’re paying around a hundred percent. So you’re liquefying that debt through inflation. And in order to strengthen the Peso, they’re also offering even longer term bonds that, would yield something around 180% per annum. So it’s there’s very complex, financial measures being, being carried out here.

Daniel Raisbeck: But the thing, the thing with liquefying, the, the government debt is that you’re liquefying everyone’s savings and everyone’s, salary. So it’s bold and even an even dangerous alternative. And, I also think if you dollarize it involves a similar process because once you dollarize or once the market realizes you’re serious about dollarizing, the obvious thing would be for inflation to, to begin to decrease, and quite rapidly. And, also for interest rates to come down as well. But you do that without destroying purchasing power even more. And I think that would be the better scenario.

Chelsea Follett: So the main obstacle then is political, whether he can convince his coalition to go along with dollarization. How hopeful do you feel that he was?

Daniel Raisbeck: Well, I mean. It’s hard to tell because even towards the end of the campaign, Milei wasn’t talking about dollarization as much and he was definitely not going into details about how he would dollarize. One thing that did happen was that he had named, before he won the election, one particular person, it was Antonio Ocampo, as the next president of the central bank and he said that his only mission would be to shut it down. Of course, his promise involved dollarizing and shutting down the central bank, which is the ideal scenario under dollarization.

Daniel Raisbeck: And when he adopted Caputo’s view and he was about to name Caputo, it involved Ocampo not assuming the presidency of the central bank. It’s not clear to what extent this was a decision made out of political expediency and necessity, or to what extent Milei actually believes in what Caputo is doing. The thing with dollarization is that it’s such a niche subject and it’s only three countries have dollarized it. They’re small countries. Not a lot of people have paid attention to it, even though it’s been terribly successful, especially in terms of bringing down inflation, that really I think there’s few economists in the world that understand it and also understand how to bring it about. The question is how much Milei is convinced or still convinced with the measure, or to what extent it’s just a political act to buy some time in order to dollarize, but even if that’s the case, I think that’s still a mistake.

Chelsea Follett: Still a lot of hopeful signs. Now, we do want to talk about Latin America more broadly and not just Argentina. Do you see Milei’s election as part of a broader trend toward greater embrace of liberty and economic freedom, or do you see this as more of an isolated hopeful case in Latin America?

Daniel Raisbeck: Yeah. Another good question. I think maybe both possibilities are in play. I think someone like Milei, one, because of the combination of factors that I mentioned, the fact that you have 130, 140% inflation, then people start paying attention to what causes inflation. So It’s a very positive environment for a libertarian and even a radical libertarian to gain people’s attention. On the other hand, you have Milei’s particular talents, which I also mentioned. On the other hand, I think that this came about in a Latin American perspective. Recent elections have gone rather to the left, and in some cases to the far left, as in the case of Colombia, which elected basically a Marxist president in 2022.

Daniel Raisbeck: You had the recent election in Brazil when Lula da Silva came to power. You had the election in Chile several years ago when Gaudi and Boric, who is basically in a coalition with the Communist Party and is far to the left, came to power and tried to undo Chile’s very successful constitution. I wouldn’t say that Milei’s election is part of the trend, but he could begin a trend towards more classical liberal ideas. What I see from other countries, because in many countries they’re saying we need our own Milei, the problem is that when you don’t have such a rich academic tradition of classical liberalism, and you don’t really have a lot of people who understand what these ideas really mean, you can end up with maybe some very shallow attempts at copying what Milei is doing, especially more on the histrionic side, but without the policy and seriousness that there is there. So in that sense, I think you have to be careful because I think Milei is a very unique politician, and whether or not that can translate in more libertarians coming to power in other countries is, I think, an open question.

Chelsea Follett: Obviously, the situation in Argentina is unique, but are there any other countries in Latin America where you feel particularly hopeful about recent developments or where you think things might be ripe for positive change?

Daniel Raisbeck: Well, it’s another good question. In general, Latin America has not shown a lot of proclivity towards freedom, and definitely not in recent years. Of course, there are some exceptions. Now, I think Chile is on a very positive note because after many difficult years, they had massive protests in 2019 that led to former president, center-right president Sebastián Piñera, leading to offer a referendum on the constitution, the 1980 constitution, which was originally approved under the military government of Augusto Pinochet, but it was later amended many times, particularly in 2006 under center-left social democratic administration.

Daniel Raisbeck: So it’s not really the same document that was introduced by that military government. And after several new plebiscites and elections, what ended up happening is that people rejected the new constitution that was presented, which is a radical far-left constitution that even the Economist criticized. So I think in that sense, Chile, after some turbulence, can return to some stability. And of course, it’s the freest economy in the region, and hopefully it can return to what it was some maybe 10 years ago. And elsewhere, I think it really depends on the context. It really depends on the country. In Venezuela, it’s back and forth.

Daniel Raisbeck: The Maduro regime has promised free and fair elections this year, but I personally doubt that that will happen. There might be an election, [laughter] but probably not very free or very fair. And the question there is whether the, the main opposition candidate, María Corina Machado who is relatively friendly to classical liberal ideas, she just won a primary organized by the opposition independently, not through the Venezuelan state itself with over 90% of the votes. But the thing is that, the Maduro regime several years ago disqualified her from running in any official election.

Daniel Raisbeck: And now it is clear that she is, or she should be the official candidate of the opposition. But the question is whether they will allow her to run or not, or the question is whether they will allow a free and fair election. And I think it’s very doubtful and otherwise really, you, can go country by country a analyzing the situation. But I would say that, Argentina will be the main focus at least of libertarian attention to the, during the next few years. And I think that the success or failure of Milei can determine, the future of, let’s say a little bit of Latin American libertarian movement in general.

Chelsea Follett: It’s an exciting time. Now, obviously it’s a very diverse region. Lots of different things are going on, but you’ve talked about some of the strengths, some of the opportunities. What about some of the biggest challenges facing Latin America and some of the biggest threats to progress and to the region becoming more prosperous?

Daniel Raisbeck: Right. Yeah, I think there are several threats or obstacles. Many of them are commented on. One that is not very, known is the lack of trade within the region. So Latin America is far less integrated in terms of trade between countries than North America. And this includes Mexico within NAFTA or NAFTA 2.0. The USMCA, but I’m speaking of the rest of Latin America. It’s far less integrated than North America and Europe and especially in the European common market. And if you think of the population and the common, you have a common, mostly common language, except for maybe Brazil and, and a few other smaller countries, very common institutions, historical backgrounds. You would think that it’s a very, ideal region to, trade. But, trading within countries is very difficult, even migrating within Latin American countries.

Daniel Raisbeck: A lot of the immigration debate in the United States focuses solely on how difficult it is to migrate legally into the us, which is true of course, but few people comment on how difficult it is to migrate from one Latin American country to the other, and how many restrictions there are in many of these countries. For instance, Columbia, where I’m from, where I’m from, there’s restrictions on for companies, for private companies on how many foreigners they can hire. And this is just standard across the region. So I would say trade, migration. And I would say one problem is that you never had even, to the extent that, for instance, the Anglo sphere had a certain or even very strong classical liberal element in the center, right? At least until Trump came to power. You wait and you, you can think of Thatcherism and Reaganism and these types of politicians and movement.

Daniel Raisbeck: You never really had that, in general in the Latin American, right. The Latin American right has been traditionally very protectionist, very corporatist. So that’s why also the Milei phenomenon is interesting because, you’re of course, you have to break from the leftist model both in its, Chavista phase and an aspect, also with the Peronist, with the Argentine Peronist model, which has been influential. And Peron had many imitators across the region. But you also have to break with the, with the, let’s say more crony capitalist or protectionist, right.

Daniel Raisbeck: An interventionist, right. And I think that’s what Milei did in terms of rhetoric, at least. And I think that’s where the, the litmus test is of whether this can be repeated in other countries, because I think you, you have to break with, with both sides because, maybe, you know, a right wing government in one country, especially after the era of the military dictatorships might not bring about a humanitarian collapse as occurred in Venezuela, which of course was all, to a great extent orchestrated and organized by Cuba.

Daniel Raisbeck: But at the same time, these governments don’t allow with their policies and their protectionism and interventionism, they don’t allow these economies to grow. And of course, if you don’t grow, you’re not gonna be able to live people out of poverty. And that’s the big problem in, in Latin America. It’s anemic economic growth. And it’s a question of how conscious people are of the fact that you need freedom in order to have that economic growth.

Chelsea Follett: Staying zoomed out to that level of political and economic philosophy. Obviously, Latin America is much poorer than its northern neighbors, the United States and Canada. Would you say that one of the main things holding Latin America back is this lack of promotion of economic freedom on both sides of the political spectrum?

Daniel Raisbeck: Yes, totally. I think… I see it in my own country, in Colombia. It’s a good example because, of course, you have the left and you have the communists and you still have communist guerrillas, which have become also involved in the drug trade. But on the other side, where you have the business sector and the centre right, so if you’re against the communists, in theory, you would be pro-business. But the thing is that, in this scenario, being pro-business also means being pro-trade restrictions and pro-subsidies and in favor of all these vested interests. And there really hasn’t been an alternative. And, of course, maybe if you have to choose, it’s better to have that protectionist model that at least allows some economic growth than having a Venezuela-type regime. It’s true. The same as it’s true to have, it’s better to have a 10 or 12% inflation as Colombia has had over the last few years and 140% inflation or higher.

Daniel Raisbeck: But you really need to break with that model. And that’s why I think, for instance, dollarization is so important because with dollarization, you don’t have that problem. You completely exclude the political class from monetary policy. And that’s positive. And there’s some other areas where you can do that as well, for instance, in the legal sphere with arbitration. I think that’s a term. I’m not sure if that’s a term. Arbitration, is that a term?

Daniel Raisbeck: Where you basically outsource many of your, outsource part of your legal system to, say, a court in London. I think that’s very positive and it’s something that should be done. But, right, in general, I think that this is a problem and I think it’s the main problem. Whereas in a lot of academia and in a lot of the media, they’re looking more at symptoms of the problem like inequality or concentration of resources. And you also have a lot of stereotypes that do the rounds. For instance, they’re still talking about how these large extensions of lands and latifundios is the term generally used is such a problem.

Daniel Raisbeck: When… And you generalize that across the region where I don’t think it applies to every country. But at any rate, what you need in terms of developing the agricultural sector is it’s also you need economies of scale. And you’re probably not going to do that by having a land reform and breaking up large estates as long as they’re legally held and acquired, of course. But, I mean credibly in these countries, you’re still debating this constantly. So it’s also a matter of mentality that you still have the mentality that Latin America is poor because other regions are rich or that other regions have become rich at the expense of Latin America. And you really have to overcome this and realize that wealth creation is not a zero-sum game. And I think that might be the first step. And it’s, of course, more cultural and educational than anything else. And, of course, there’s a lot of work to be done in that area.

Chelsea Follett: And as you pointed out, with the common language and cultural similarities, you would expect if trade barriers come down for there to be an incredible potential there for economic exchange between the countries. How can Latin America unlock its potential?

Daniel Raisbeck: I think, again, it’s, Milei, I think, has all the right ideas for Argentina. And the thing is, in Argentina, it’s not they’re not starting from scratch because they had this incredibly successful experiment in the 19th century, going back to the 1853 Constitution, which was drafted based on the ideas of a classical liberal author called Juan Bautista Alberdi. And what Alberdi says, basically, is that after independence, you had had several lost decades because people were still obsessed with military glory and these kinds of things and protectionism.

Daniel Raisbeck: What you needed was free trade, unrestricted industry, free immigration, and basically building infrastructure to connect a very large country, especially through railroads and a river network. And that’s what they did. And it wasn’t immediate. It took a few decades, but basically from 1880 to 1916, and you had elected governments, although with problems, of course. But you had this very successful export model that, as we’ve said, turned Argentina into one of the richest countries in the world.

Daniel Raisbeck: And, of course, with 1916, 1920, everything that’s happening in the world, the rise of nationalism, that took hold in Argentina, and eventually that morphed into Peronism, and you have the very clear decline ever since. And Milei’s message, which I think is correct, is basically saying we don’t even need to invent anything new. We just have to go back to our roots, our classical liberal roots. So it’s been done before. There’s no reason why it can’t be done again. But I think that, right, a lot of the problem is not just the communism and the Peronism in academia and in much of politics. It’s also that the alternative to that, until now, has not been kind of an unfettered free market or even kind of Thatcherite economic policies. It’s been rather kind of this dirigiste, middle-of-the-road kind of system that has really failed, I think, to let these countries grow at fast rates. And these countries need to grow at fast rates. They need catch-up growth. And I think that mentality is just not there.

Daniel Raisbeck: You look at Argentina, but this is also seen in countries like Columbia. These countries have incredibly high tax rates for instance, for in corporate taxes or in VAT as well. And when you think of what Latin America needs in order to bring investment and to bring companies and to, allow new industries to surge, of course, is you need competitive tax rates that you can’t have higher tax rates than the United States or Europe when you have a lot of problems in these countries that you don’t have in the developed world. But there is, there has also been the mentality of we need to implement some of the policies that Rich maybe Scandinavian countries have been applying lately.

Daniel Raisbeck: And I think, Johan Norberg has written about this before. You don’t need to see what Sweden for instance, has been doing in the last 50 years or so, even though there’s some positive measures in the last decades, I think that are overlooked. But what you have to do is you have to look at how a Sweden, for instance, became developed in the first place in the 19th century, especially with basically a laissez-faire type of policy. And this has been, I think, completely overlooked. And again the positive or one very positive aspect of Milei or the Milei phenomenon is that it’s, helping to raise this debate again, this essential philosophical debate not only in Argentina, but I think across the region.

Chelsea Follett: Do you have any thoughts on the potential of conflict to disrupt, positive reforms across the region? What with recent events around Guyana and so forth?

Daniel Raisbeck: Right. Well, okay. We can mention Guyana, but I would also say that there already is a lot of conflict and mostly it relates to the drug war. This is seen most clearly in the case of Mexico, the way the cartels have taken over large swaths of the country. And since the Mexican government decided in 2006 to combat the cartels with the Mexican army, you have seen an explosion in terms of the rise of homicide rates, in a country like Columbia. You, of course, narco trafficking is a huge problem. And the way that I see it or that that we’ve seen it also at Cato, is that you really can’t solve this problem unless you recognize the market dynamics. And that as long as the product is illegal while you maintain the supply, especially in the developed world, well, you’re gonna turn a lot of the underdeveloped world, in this case, Latin America into a war zone.

Daniel Raisbeck: And this is exactly what has been happening. But this is of course not, this is, we’re not talking about interstate conflict. Now what I see in with Venezuela and Maduro and Guyana is that there potentially could be a problem a conflict. I think Maduro has numerous incentives to be quite aggressive against Guyana, especially the oil producing SAQ or region. But we’ll see. I mean Of course, he also has incentive not to pull off a Vladimir Putin type move. But we’ll see. Of course it would mark a departure from what has been the norm in recent decades. But that doesn’t mean that there hasn’t been conflict. The thing is that the conflict has been more “low intensity”, but it’s been, it has been still quite brutal in many countries.

Chelsea Follett: We try to end on a positive note usually with this podcasts. So what are you the most optimistic about with regards to the region’s future?

Daniel Raisbeck: Right. Well, yeah. I’m not gonna be terribly original here, but if you, just to get some context, if you go back a few years time, five, 10 years, if I would’ve told you, or if someone would’ve told me, in a few years, you’re gonna have an openly libertarian president of a major country Argentina, who’s not only libertarian, but is actually an anarcho-capitalist. I would’ve likely not believed you. And this is where we are. And I think the lesson is that sometimes it might seem very difficult, to enact freedom oriented reforms. And then all of a sudden you see a very clear example of, well, it can be done. It is being done now. And it’s being done by someone who was very radical in his approach. He wasn’t as I said, he wasn’t moderating his principles in order to convince centrist voters or any kind of, he didn’t have any type of tactic just to win. He was just very straightforward. And I think that’s very positive. And I think it’s an example to follow. It certainly taught me, a few lessons and maybe in a few years time, or at least my hope is that we’ll have several and not just one libertarian president or libertarian oriented government and we’ll see how it plays out.

Chelsea Follett: Fingers crossed. All right. Thank you again so much for talking to me. This has been fascinating.

Daniel Raisbeck: Thank you, Chelsea. It was a pleasure.