Argentina’s Foreign Policy: The Quest for New Alliances and Economic Reform

With the elevation of libertarian Javier Milei to the Argentine presidency, it is timely to ask what foreign policy his country will adopt, especially following his outlandish campaign promises such as breaking relations with China or an expeditious exit from the regional trading bloc Mercosur. With an economy in recession (GDP has fallen almost 3% this year), inflation of 140% and high levels of debt, Argentina needs to once again become an export powerhouse that is connected to the world. The dismantling of protectionist policies through the elimination of export quotas – which were intended to satisfy the local market with low prices – seems logical, but it will not be easy to implement given its severe social costs.

Milei’s programme for government made brief reference to foreign policy, but proposed an ‘alignment with the liberal democracies of the world’ and a professionalisation of the diplomatic service, ‘which has been captured by clientelism’. According to Milei, Argentina is heading towards a ‘new doctrine of foreign relations’ based on two fundamental principles: ‘the unrestricted defence of all the liberal democracies of the world’ and ‘the promotion of free trade between nations to promote the general well-being of Argentines’.

The move is a clear break from recent Argentine foreign policy, which was marked by the distancing of Buenos Aires from the orbit of the US and Europe, and a noticeable Latin American accent through links with other regional left-wing governments. Organisations such as the Union of South American Nations (Unasur) and the Community of Latin American and Caribbean States (CELAC) were also strongly favoured by Argentine diplomats; however, this did not mean that neighbourhood relations were always smooth. There has been no shortage of impasses, with Chile being cut off from gas exports, Paraguay’s expulsion from Mercosur, and the crisis over the Botnia paper mill with Uruguay.

Recently, relations with China, Russia and Iran were strengthened in search of a more multipolar global order less dominated by traditional powers or former creditors. As has occurred throughout Latin America, Chinese investment and trade flowed into Argentina, along with the yuan renminbi, a currency that has become the source of half of international reserves. The crowning of this approach towards the so-called ‘Global South’ should have been Argentina’s entry into the BRICS group, after its recent expansion to 11 members. The above now seems unlikely if Milei is really committed to bolstering relations with liberal democracies, since these are not abundant in the predominantly African-Asian bloc.

The US, China and Russia

The minister of foreign relations, the economist Diana Mondino, is a seasoned finance and market risk analysis specialist – very useful given the local situation. Mondino was director of institutional relations and professor of finance at CEMA University. Her profile indicates that one of the main tasks of her ministry will be to leverage economic recovery through trade opening.

Between his decision to visit the US before assuming the presidency and his natural affinity towards liberal democracies, Milei is already setting a direction for his administration that is aimed north. Although in style and ideas he seems closer to the Republican Party and Donald Trump, with the arrival of Milei to the Casa Rosada, the US could gain an ally in President Joe Biden’s crusade to defend democracies against the global spread of autocracy. US investors on Wall Street, at least, eagerly celebrated the triumph of the reformer.

Although China welcomed Milei’s victory too, it warned that it would be a ‘big mistake’ for him to cut ties with Beijing. In reality, this seems impossible given the volume of trade, the number of Chinese investments in Argentina and the availability of foreign currency. Argentina’s growing rapprochement with China also includes military concerns, including the purchase of JF-17 fighters and Beijing’s growing interest in port facilities in the southernmost region of Ushuaia.

In fact, in one of his first actions in foreign affairs, Milei sent a letter to President Xi Jinping asking to accelerate the renewal of the current currency swap with China, in order to access $5 billion facing urgent maturities with the IMF. This does not mean that dependencies on the Asian giant will not be gradually reduced, especially when there are many developed economies eager to secure and reorient supply chains as part of so-called ‘de-risking’ and ‘friend-shoring’ strategies. The Belt and Road Initiative, of which Argentina is a member, is not the only option for accessing fresh resources to – for example – develop much-needed infrastructure. The G7 and the EU also have their own aid programmes that are willing to engage with Argentina.

However, the country that should be most uncomfortable with Milei’s rise to power is Russia. Ukrainian President Volodymyr Zelensky attended Milei’s inauguration in what was his first visit to Latin America. Commenting on his conversation with his counterpart, Zelensky stated: ‘We are interested in Argentina playing a key role in the peace formula as a very welcome representative of Latin America’. Milei begins his administration on very different footing from his predecessor Alberto Fernández, who met with Vladimir Putin a month before the invasion of Ukraine.

Latin America and the Falkland Islands

Milei’s arrival may complicate the already delayed signing of the trade agreement between the EU and the Mercosur bloc (Argentina, Brazil, Paraguay and Uruguay), which Milei has described as a ‘low-quality customs union that leads to the diversion of trade and harms its members’. In addition to initial friction with Brazilian President Lula da Silva, who did not attend the inauguration, Milei has said that he prefers free trade above all. In that vein, the forum where Argentina will have the most interest could be the G20. In July 2024, when the next G20 summit is scheduled, Milei's economic shock policies – which include reducing the size of the state, dismantling subsidies, spending limitations, and eliminating obstacles to foreign trade – will be in full swing.

Vice President Victoria Villarruel has asserted that the agenda with regard to Latin America will shift from ‘ideology’ to specific issues, such as poverty, drug trafficking and migration. This supposes a pragmatic set of partners that will not be easy to find in the neighbourhood. With the exception of right-wing governments in Ecuador and Uruguay, the outlook does not seem very encouraging for Milei, hence the decision not to include Brazil or Chile in his short-term travel schedule. Argentina will most likely gravitate towards countries outside the region if its priority is trade, similarly to what Chile has done for decades with Asia.

The Falkland Islands constitute an inevitable topic for any Argentinian leader, and Milei has already said that the South Atlantic islands are part of Argentina’s sovereign territory. However, Diana Mondino has pointed out that before seeking to strengthen ties with the archipelago, Argentina must be a ‘normal country’ with contained inflation. This is a measure of realism rarely seen in the face of an issue that always serves to heighten nationalist sentiments.

The UK foreign minister and former prime minister, David Cameron, congratulated Milei on his victory in a telephone call, during which – as reported in the Argentine press – the president’s admiration for Winston Churchill and the Rolling Stones was discussed. On the Falkland Islands, however, there is no word for now.

Looking Ahead

It will be difficult for Milei to sustain a new doctrine of foreign relations based on the defence of liberal democracy and the promotion of free trade. However, it marks a meaningful shift compared to Argentina’s previous closeness to authoritarian regimes and protectionist policies.

Milei proposes to reorganise the country’s foreign affairs ministry through professionalisation and administrative reorganisation – meaning layoffs and job cuts. These will present huge challenges. As the Argentine political scientist Juan Gabriel Tokatlián suggested in an op-ed, perhaps ‘it is not appropriate to evaluate ex ante the international policy of a government that is beginning; the opportunity will come to examine specific management’.

It must also be taken into consideration that Milei faces major internal problems, such as fulfilling his promises of a privatisation wave that has already included the state-run oil company YPF. With 40% of the population in poverty and a political system that is at its most fragmented in four decades, the president will have to dedicate himself mostly to national and not international concerns. His interest in free trade and using the dollar as a currency of stability also comes at a time when economic globalisation is increasingly , and attempts are being made to undermine the influence of the dollar by countries open to trading in other currencies.

In a more competitive world, the US and Europe are looking for partners who share common values and defence and security approaches. Here lies the greatest opportunity for Argentina to return to a position closer to the West from which it should never have left, as Milei seems to believe. When it comes to Latin America, however, we will need to monitor the initial months of his presidency to determine whether he is inclined to collaborate with a region where political alignment does not necessarily guarantee friendly foreign relations.

The views expressed in this Commentary are the author’s, and do not represent those of RUSI or any other institution.

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