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Javier Milei and the Future of Latin America | Podcast Highlights

Blog Post | Economics

Javier Milei and the Future of Latin America | Podcast Highlights

Chelsea Follett interviews Daniel Raisbeck about the recent election of Javier Milei and what it means for the future of Argentina and the rest of Latin America.

Listen to the full podcast episode or read the full transcript here.

What are some of the most promising events in Latin America today?

Of course, the election of Javier Milei. He took office on December 10th, and it’s all quite encouraging. He had a large decree that repealed many laws and modified others to liberate the Argentine economy, which is currently one of the most regulated economies in the world.

It will depend, of course, on congress and the courts which can potentially block many of his initiatives. Here at Cato, my colleague Gabriel Calderon and I have focused on his main proposal: the dollarization of Argentina’s economy. In general, we think it’s a very good policy, but in that respect, I’ve been disappointed with the beginning of Milei’s government. We can discuss that further if you like.

First, let’s set the stage. Could you describe the situation in Argentina before Milei?

Well, the main problem was inflation, which was around 140 percent at the time of his election in November. And, of course, this is caused by the central bank. Argentina’s central bank is particularly irresponsible even within a Latin American context. Argentina also has one of the most regulated economies in the world. Forty percent of the population is living in poverty, and its economy hasn’t grown in over a decade.

This is especially sad because Argentina was incredibly successful in the 19th century. Its 1853 constitution was drafted based on the ideas of a classical liberal author called Juan Bautista Alberdi, who basically called for free trade, unrestricted industry, free immigration, and infrastructure to connect the country. And that’s what they did. It wasn’t immediate; it took a few decades, but from 1880 to 1916, you had this very successful export model that made Argentina into one of the richest countries in the world. Then, in 1916 and 1920, with everything that was happening in the world, nationalism took hold in Argentina and eventually morphed into Peronism, which is the standard, prototypical Latin American corporatist ideology. There has been a very clear decline ever since.

Could you talk more about Milei’s political beliefs?

Milei describes himself as a classical liberal or a libertarian and even as an anarcho-capitalist. He was actually trained as a neoclassical economist, but he relatively recently became an adherent of the Austrian School. And he’s been very open about it. He has never tried to soften his stances to appease some section of the electorate. He is also very talented at explaining economic concepts like the causes of inflation or the effects of regulation in a way that the public can understand.

Can you talk a little bit about the classical liberal tradition in Argentina?

Argentina has many classical liberal economists. At a per capita level, it’s probably the highest percentage in Latin America. They also have a long tradition of think tanks beginning in the 1950s. One particular think tank was started by a gentleman called Alberto Benegas Lynch, who corresponded with Ludwig von Mises and Friedrich Hayek. So, Argentina has a rich intellectual tradition in the Austrian School.

You mentioned dollarization. Could you talk more about this policy?

Dollarization means granting the US dollar legal tender or at least getting rid of exclusive legal tender for a national currency. Panama was born dollarized in 1904, and more recently, Ecuador dollarized in 2000 amid a crisis similar to what Argentina is facing now. El Salvador dollarized in 2001 after facing a similar crisis the previous decade.

When you dollarize, you end up with inflation levels akin to those of the United States. That might seem high from a US perspective after the last few years, but when you have 140 percent inflation in Argentina, 7 or 8 percent isn’t so bad. And even with all the problems with the US Federal Reserve, when you compare that to other countries, the dollar is a good option. By taking away the power of local politicians to interfere in the monetary sphere, you get rid of a huge problem. Now, that doesn’t solve all other problems. 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 regular citizens. Whereas with a national currency, a debt crisis usually leads to the deterioration of the currency and a loss in purchasing power.

Maintaining that purchasing power is why nobody is thinking about dedollarizing in these countries. Even in Ecuador, when the left-wing strongman Rafael Correa was at the peak of his power and popularity, with 60 percent or above in approval ratings, the dollar was always more popular than he was. That’s also why we think it’s important for Milei to dollarize and dollarize quickly. If the Peronists come back to power, they could overturn a lot of his deregulatory measures, but dollarization would be very difficult for any future government to reverse.

How hopeful are you that he’ll be able to implement dollarization?

Milei had to join forces with former President Mauricio Macri’s party to win the election, and many people in that party do not favor dollarization. Luis Caputo, the person that Milei put in charge of the finance ministry, who was also one of Macri’s finance ministers, has previously spoken out against dollarization. More recently, he has taken the view that the fiscal issue is more important and that dollarization will be a consequence of stabilizing the economy.

Caputo’s plan involves liquefying the debt through inflation. But the thing with liquefying the government debt is that you’re also liquefying everyone’s savings and salary. So, it’s a bold and even dangerous alternative. I also think that dollarization involves a similar process because once the market realizes you’re serious about dollarizing, the obvious thing would be for inflation to begin to fall and for interest rates to come down, but without destroying purchasing power even more. And I think that would be the better scenario.

It’s not clear if this decision was made out of political necessity or if Milei actually believes in what Caputo is doing. Dollarization is a niche policy that only three small countries have accomplished. Even though it’s been terribly successful, especially in bringing down inflation, relatively few economists understand dollarization and how to bring it about.

What other policies has Milei proposed?

His decree and omnibus law aim to deregulate broad swaths of the Argentine economy. One example is they got rid of price controls for rents that dated back to the 1970s. Another one is the Open Skies policy, which allows airlines from abroad to enter the market and even control flights within the country. Previously, they had a scheme to undercut the low-cost airlines in favor of the national airline, which is heavily subsidized. Milei even said he is privatizing the national airline by handing it over to the workers and cutting subsidies. But there’s a wide scope of reforms. These are just some highlights.

Let’s talk about Latin America as a whole. What are some of the biggest obstacles to the region becoming more prosperous?

One that is not well known is the lack of trade within the region. There is a mostly common language and very similar institutions and historical backgrounds, so you would think Latin America is an ideal region for trade. But trading between countries is very difficult. It’s also very difficult to migrate from one Latin American country to another. For instance, Colombia, where I’m from, restricts how many foreigners companies can hire. And this is standard across the region.

Another major problem is that there hasn’t been a very strong classical liberal element in Latin American politics. In the Anglosphere, you had Thatcherism and Reaganism and these types of movements, but the Latin American right has traditionally been very protectionist and corporatist. A right-wing government in Latin America, especially after the era of military dictatorships, might not bring about a humanitarian collapse like in Venezuela, but at the same time, these governments don’t allow their economies to grow. And, of course, if you don’t grow, you won’t be able to lift people out of poverty. That’s the big problem in Latin America: anemic economic growth. And it’s a question of how conscious people are that you need freedom to have that economic growth.

So that’s also why Milei is interesting. He is, of course, breaking from the leftist model but also from the crony capitalist, protectionist, and interventionist right.

We usually try to end on a positive note. What are you the most optimistic about concerning the region’s future?

I’m not going to be terribly original here, but five years ago, if someone had told me that, in a few years, there would be an openly libertarian or anarcho-capitalist president of Argentina, I wouldn’t have believed them. And this is where we are. And I think the lesson is that sometimes it might seem very difficult to enact freedom-oriented reforms, but 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 moderating his principles to convince centrists. He was straightforward. And I think that’s a very positive example to follow.

Buenos Aires Times | Macroeconomic Environment

Milei Cools Argentina Wholesale Inflation to Lowest Since 2020

“Argentine President Javier Milei notched another economic victory Tuesday after data showed wholesale prices declined in May for the first time since the height of the pandemic, adding to his momentum before October midterm elections. 

The producer price index fell 0.3 percent from April and rose 22.4 percent on the year, according data from the INDEC national statistics bureau. It’s a sharp turnaround from December 2023, Milei’s first month in office, when wholesale monthly prices soared 54 percent. The libertarian often uses the indicator to warn that Argentina was nearing hyperinflation due to his predecessor’s policies. 

Local prices stayed constant while prices for imported products fell 4.1 percent, according to the monthly report. Economy Minister Luis Caputo celebrated the good news on X.

Discounting pandemic data that saw demand plummet, the May print is the lowest in the series, which begins in 2016, Caputo wrote.

In May, monthly consumer price increases also cooled to their slowest pace in five years to 1.5 percent.”

From Buenos Aires Times.

Blog Post | Innovation

Cardwell’s Cage and How to Break Free

History's cycle of progress and stagnation can be broken.

Summary: Throughout history, cities and nations have repeatedly sparked extraordinary—but relatively brief—periods of innovation. Cardwell’s Law is the idea that creative peaks are historically short-lived. Can any society sustain innovation over the long term? The conditions that support progress are fragile, but by identifying and safeguarding them, we can break out of this historical cage.


Donald Cardwell, a British historian of science and technology, famously observed that “no nation has been very creative for more than an historically short period.” Known as Cardwell’s Law, this dictum haunts many people concerned about the future of innovation. Can the United States, or any other country, break free of the cage of Cardwell’s Law and create an environment that fosters innovation indefinitely?

To better understand this challenge, it helps to zoom in from the level of nations to that of cities, which often function as engines of innovation. While intended to describe whole societies, Cardwell’s Law scales down well to the level of individual urban centers. After all, city-states were the first states and served as the sites of institutional experimentation. And for a long time, it was cities, not larger nations, that commanded loyalty.

A grim message from my otherwise uplifting book, Centers of Progress: 40 Cities That Changed the World is that a city’s creative peak tends to be—as Cardwell noted—brief. As the British science writer Matt Ridley observed in the foreword to the book, “Global progress depends on a sudden series of bush fires of innovation, bursting into life in unpredictable places, burning fiercely, and then dying rapidly.”

Are there any exceptions to that rule? Have any cities managed to maintain longer-than-expected golden ages of innovation, and what can we learn from them?

The cities from earlier eras that I profiled in my book tend to be featured for their achievements over longer periods of time. That is, unfortunately, because in the distant past, progress was often painfully slow—not because someone had cracked the code to break Cardwell’s Law.

Writing, for example, developed over multiple generations, as simple pictographs that accountants invented for record-keeping purposes evolved into a symbolic script and eventually into highly abstract, cuneiform characters. The birthplace of writing was Uruk, an ancient Sumerian city. The most noteworthy part of Uruk’s history lasted for many centuries, but only because the city’s great achievement took generations to accomplish. We should hardly want to emulate a society that advanced at such a pace.

In contrast, when we turn to modern history, the pace of progress accelerates—but the creative window narrows. Manchester, the so-called workshop of the world, led the way during the Industrial Revolution, but only for a few decades. Houston’s heyday helping drive forward space exploration also only lasted a few decades. Today, the youngest living person to have walked on the moon is 89. Tokyo went from being a world capital of technology in the 1980s to decades of economic stagnation. The San Francisco Bay Area that birthed Silicon Valley and the digital revolution has lost its crown, with many technological breakthroughs now occurring elsewhere. In the modern era, the golden age of innovation in any locale tends to last only a few decades, or even less.

To understand why this pattern repeats so consistently, consider the underlying conditions that support—or sabotage—sustained innovation. The economic historian Joel Mokyr, in an illuminating 1993 essay, describes the narrowness of the path that societies must walk to promote creativity, a veritable tightrope where one wrong move can lead to everything crashing down. “In retrospect, the most surprising thing is perhaps that we have come this far,” he concludes.

What causes the downfall of centers of progress, making Cardwell’s Law so seemingly prophetic? While world-changing innovations have come from an extraordinarily diverse set of places, from Song–era Hangzhou to post–World War II New York, sites of creativity almost always share certain key features. It is the loss of those factors that spells their doom. These feature are: conditions of relative peace, openness to new ideas, and economic freedom.

Free enterprise and healthy competition encourage innovation, and the freedom to trade across borders plays an important role by increasing that competition. At the same time, free exchange across borders must not be confused with the total dissolution of borders: vast empires under centralized control tend to stagnate technologically, and complete integration of countries under a global government would in all likelihood be a disaster. A certain type of international competition can be beneficial—just not the kind of rivalry that leads to war.

War redirects creative energies toward making deadlier weapons and away from technologies aimed at improving living standards. And, of course, losing a war can lead to a society’s complete destruction.

Moreover, war prevents innovators from collaborating across borders, and even thinkers within the same country often cannot put their heads together due to the secrecy inherent in war. While some credit WWII with speeding up the creation of the computer, a case can be made that the conflict actually delayed the computer’s invention by preventing collaboration between many innovators, from Konrad Zuse in Berlin to Alan Turing in Great Britain. Even in peacetime, innovation can be stifled when freedom and openness are curtailed.

In short, progress is threatened when peace is lost to war, openness is stifled by the suppression of speech, and freedom is undermined by restrictive or authoritarian laws.

Hong Kong provides a recent and illustrative example of how quickly the conditions for progress can disappear. During its whirlwind economic transformation in the 1960s, Hong Kong rose from one of the poorest countries in the world to one of the wealthiest. It accomplished this feat through policies of “noninterventionism”: simply allowing Hong Kongers to freely compete and collaborate to enrich themselves and their society. But the city’s proud tradition of limited government, the rule of law, and freedom has been abruptly extinguished by a harsh and unrelenting crackdown from the Chinese Communist Party.

Despite sobering examples such as that of Hong Kong, there is reason for hope. Centers of progress are often short-lived, but the fact that throughout history most societies remained creative for only a short time should not discourage us. To defy Cardwell’s Law, all that is needed is a clear-eyed willingness to learn from the mistakes of the past and to fiercely protect the conditions needed for further progress.

This article was published at Econlib on 5/17/2025.

World Bank | Quality of Government

Côte D’Ivoire’s Land Reforms Are Unlocking Jobs and Growth

“Secure land tenure transforms dormant assets into active capital—unlocking access to credit, encouraging investment, and spurring entrepreneurship. These are the building blocks of job creation and economic growth.

When landowners have secure property rights, they invest more in their land. Existing data shows that with secure property rights, agricultural output increases by 40% on average. Efficient land rental markets also significantly boost productivity, with up to 60% productivity gains and 25% welfare improvements for tenants…

Building on a long-term partnership with the World Bank, the Government of Côte d’Ivoire has dramatically accelerated delivery of formal land records to customary landholders in rural areas by implementing legal, regulatory, and institutional reforms and digitizing the customary rural land registration process, which is led by the Rural Land Agency (Agence Foncière Rurale – AFOR).

This has enabled a five-fold increase in the number of land certificates delivered in just five years compared to the previous 20 years.”

From World Bank.

Buenos Aires Times | Macroeconomic Environment

Inflation in Buenos Aires City Slows to Monthly 1.6 Percent

“Consumer prices in Buenos Aires City rose 1.6 percent in May, lower than the expectations of most analysts and a slowdown from the previous month.

The news will be welcomed by President Javier Milei’s national government, which is awaiting the publishing of the INDEC national statistics bureau’s national figure later this week.

According to data from the Buenos Aires City Statistics Office, prices in the capital were up 1.6 percent, down from the 2.3 percent recorded in April. Most private consultancy firms expected a rate of around two percent.

Inflation so far this year in the capital totals 12.9 percent – a massive drop on the 48.3 percent recorded over the same period in 2024.”

From Buenos Aires Times.