Will Milei succeed in Argentina?

I give him a 30-40% chance, which is perhaps generous because I am rooting for him.  Bryan Caplan, who is more optimistic, offers some analysis and estimates that Milei needs to close a fiscal gap of about five percent of gdp.

I have two major worries.  First, if Milei approaches fiscal success, the opposing parties will think long and hard about whether they wish to enable further success.  Or will they instead prefer to see the Milei reforms crash and burn for fiscal reasons?  I don’t think they know themselves, but the history of politics in Argentina does not give special reason to be super-optimistic here.  You don’t have to believe the opposition will deliberately flush their country down the toilet, they just not might be convinced that further fiscal consolidation is needed, even if it is (surely they gotten this wrong a lot in the past).

Second, Argentina has not succeeded in obtaining fiscal stability in the past, not for a long time.  I disagree with this passage of Bryan’s:

The monetary and fiscal stabilization is very likely to work.  Argentina has faced far worse crises before: The hyperinflations of the 70s to the 90s multiplied prices 100 billion times.  That’s like turning a billion dollars into a penny.  Yet Argentinians ultimately overcame all these problems and more using the orthodox medicines of monetary restraint and fiscal responsibility.  Since even politicians who ideologically opposed these treatments ultimately endured their short-run costs, it is a safe bet that a libertarian economics professor will do the same.

That is a misread of the history.  One common tactic, for instance, is to do enough stabilization so that Argentina is “fiscally sound enough” at the peak of a commodity super-cycle.  Most recently, that super-cycle has been China buying lots from Argentina (no such positive wave from China will be coming again, not anytime soon at least).  When the positive real shocks subside, Argentina goes back into the fiscal hole.

In reality, past reforms never put the country on a sound fiscal footing, even if inflation rates were low for a while.

One scenario for now is that Argentina does enough so that it appears fiscally stable, and the recent discoveries of oil and gas — which will translate into government revenue — kick in to support a temporary status quo.  But within ten years the whole thing falls apart again.  Even if Milei wants to do more on the fiscal front to get past that point, it is not obvious that either voters or the legislature would support such further moves.

Those are two “pretty likely” scenarios in which Milei fails, and in neither case is it the fault of Milei.  As I mentioned above, the chances of success remain below fifty percent.