The political rise of economist to the presidency was largely driven by Argentinians’ hope that he could revive the debt-laden country’s economic fortunes. But now the libertarian’s key credentials as an economic expert have suffered a massive blow as
What’s come to be known as the “cryptogate” scandal is gripping Argentina, with the rapid rise and collapse of the $LIBRA at the center of controversy.
Investors — most of them reportedly from and the United States — had poured the equivalent of $100 million (€95.3 million) into short-term investments in the cryptocurrency and lost most of their money.
Milei endorsement backfired
Milei endorsed $LIBRA, which is a meme coin, in a social media post on February 14. During the time the tweet remained pinned to Milei’s account, $LIBRA quickly rose in value from $0.000001 to $5.20.
But after Milei withdrew his support, following allegations the coin was a rug pull scam, its price dropped to $0.99 within hours. At its peak, the $LIBRA market reached $4.6 billion, then fell $4.4 billion leaving it worth only $162 million. The scandal even has its own Wikipedia page.
Argentina’s political opposition parties have now accused Milei of encouraging thousands of small investors to put money into a scam.
The case has both political and legal implications. While it will be difficult to establish direct legal responsibility on Milei’s part, the political damage has already been done.
Milei’s rise from economist to president was built on his reputation for economic competence. He had positioned himself as the person who could explain the failures of previous governments — but now, he faces a crisis of his own making.
Trust in Milei government fundamentally shaken?
Hernan Letcher, director of the Argentinian Center for Economic Policy (CEPA), believes the scandal undermines Argentina’s credibility abroad.
“It’s a blow to the president’s economic credentials, to his honesty and to his status as a global reference point,” Letcher told DW, adding that the scandal could have consequences for financial markets and investment opportunities, as well as affect a recent agreement for financial support from the (IMF).
“For the government to sustain its current economic model, which has seen the exchange rate rise sharply, it needs an influx of fresh funds from the IMF,” said Letcher.
The problem, however, is that the IMF is unlikely to “look favorably on this scandal,” especially since Milei knew the global lender had consistently advocated for stronger cryptocurrency regulation.
Long-term impact on Milei’s popularity?
Agustin Etchebarne believes the week the scandal unfolded was actually a “very good week for Argentina.” But the economist from the liberal think tank Fundacion Libertad y Progreso described the incident as a major misstep for the government.
“It was right to acknowledge that a mistake was made, that certain things need to be corrected, and that an investigation is necessary,” Etchebarne told DW, adding that he didn’t expect “long-term consequences for the economy,” which was currently on a positive trajectory.
Argentinian media, however, reacted harshly. The daily newspaper Clarin, for example, called the scandal a “bullet that pierces Milei’s credibility and authority, both of which are built on economic matters.” The paper added that it remains to be seen whether his “ability to generate trust and expectations among the public” would be dented as the next election approaches.
Another newspaper, La Nacion, criticized the government’s handling of the crisis, describing it as a group of panicked officials afraid to offer differing opinions or give Milei unwanted advice. According to the newspaper, this kind of behavior is “the worst ally for a political figure,” criticizing Milei as the “least qualified official to endorse private business ventures.”
Meanwhile, popular daily Pagina 12 reported about public protests against Milei that erupted in Buenos Aires’ Plaza de Mayo, where demonstrators reportedly chanted “Menos Libra, mas libros” meaning “Less Libra, more books” — a reference to Milei’s budget cuts in education.
Milei banking on strong economy
To move past the scandal, the Milei government is not seeking to to help advance the economy.
Recent indicators seem to suggest the country could, indeed, emerge from years of financial and economic turmoil. In January, inflation fell to 2.2% — the lowest rate since 2020 — while wages were rising above the inflation rate. Moreover, Argentina has overtaken Colombia in oil production, a small but symbolic victory in the region.
So far, Argentinians have largely supported Milei’s economic policies, with about 42% of voters supporting his La Libertad Avanza party, according to the most recent poll — but that poll was conducted before Milei became embroiled in the cryptocurrency scandal.
This article was originally written in German.
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