‘El Loco’ Won the Argentina Election Last Month With Outlandish Ideas. Now He’s Backpedaling.

Javier Milei revving up a campaign rally.
Javier Milei revving up a campaign rally.


Javier Milei, who pledged to kill the central bank, cut ties with China and slash public spending has taken a softer tone ahead of his inauguration,

BUENOS AIRES—President-elect Javier Milei, known by the nickname “El Loco" since he was a kid, rose from university professor to social-media celebrity, making his mark as an economic libertarian and social libertine.

He won by a landslide promising to slash government spending by roughly 40% to help bring down Argentina’s triple-digit inflation. Milei wielded a chain saw in appearances to make his point. “The state is not the solution, rather the problem," he said, in an echo of President Ronald Reagan.

It was a gutsy platform for a country of 46 million that for years has doled out generous subsidies, pensions and public-works contracts, even if it had to print money to do it.

Milei, 53 years old, wasn’t afraid to extend his stay-out-of-my-life view of government to personal matters, including drug use and same-sex marriage, risking conservative votes in a Roman Catholic country that is home to Pope Francis.

“What do I care what your sexual preference is?" Milei said in a YouTube interview a couple of weeks before the Nov. 19 election. “If you want to be with an elephant, and you have the consent of that elephant, that’s a problem between you and the elephant."

Taxation, he said, is nothing more than armed robbery by the government. “Who are you to put your hands into my pocket?" he asked in one typically hotheaded TV talk show appearance that ended in a shouting match with another guest, who stormed offstage.

Days ahead of his inauguration Sunday, Milei is backpedaling, surprising supporters and opponents.

He has jettisoned some top economic advisers who were enlisted to help him kill the central bank and adopt the U.S. dollar as the national currency. He has aligned instead with officials from a previous center-right government that he previously derided. “No one said eliminating the central bank was going to be instantaneous," he said Sunday.

After promising to cut ties with China—he had referred to the communist regime as assassins—he has since exchanged cordial words with Beijing. China is Argentina’s top buyer of soy, and Argentina is Latin America’s third-largest recipient of Chinese state-bank loans in South America.

Even his tone has shifted from talk-show personality to stoic voice of reason. He acknowledged the transition from nearly two decades of leftist Peronist governments to his vision of unfettered capitalism could take longer than expected. His moderation comes as powerful labor unions and social movements are lining up against him. Violent street protests have brought down Argentina presidencies in the past.

A spokesman for Milei declined requests for comment.

Milei drew votes from people angry at the political establishment, not because they supported his libertarian view, according to political analysts. Many Argentines, accustomed to a nanny state, are now saying they hope his campaign promises were all talk. They worry his economic remedies will hit too close to home.

“Milei is a rich guy. He’s not going to feel the cuts like we are," said Gustavo Pérez, a mechanic in the working-class district of San Miguel on the outskirts of the capital. He fretted over the fate of a new sewage-processing facility being built on his street, where children play soccer next to foul-smelling runoff water.

Despite being an agricultural powerhouse with massive lithium and energy deposits, Argentina is in its worst economic crisis in a generation. Two of five people live in poverty. The peso has lost 90% of its value. In November, inflation was up 147% from a year earlier.

“Argentines are in no mood for sacrifice, after more than a decade of economic suffering," said Benjamin Gedan, director of the Latin American program at the Wilson Center, a nonpartisan think tank in Washington. “Unions, social movements, and the Peronist opposition will be out for blood from day one."

Pablo Biró, a representative of one pilots union, is ready to fight Milei’s expected cuts at government-run carrier Aerolineas Argentinas, which last year posted $200 million in losses. “They’re going to have to literally kill us," Biró said on national radio.

Millions of other state workers fear mass firings. During the campaign, Milei called the public sector a cancer that needed to be removed.

Outside the Ministry of Women, Gender and Diversity, Daniela Aranciva, an administrative adviser, gave a look of anguish as she talked about the possibility of losing her job. “It is going to disappear, something so important," she said.

More than 120 public employees in a remodeled warehouse work at promoting gender-equality policies and trying to ensure companies keep to diversity guidelines. “All that we have left is to resist and organize in the streets," Aranciva said.

Milei said he won’t be pressured by protests. He sees his 11-point victory over Economy Minister Sergio Massa as a mandate to remake a country that has lurched from one crisis to the next. Milei, the first economist elected president in Argentina, said the surge in domestic stock and bond prices after his win was a sign of market confidence in his plans.

Milei said closing the central bank is nonnegotiable, and he still wants to swap the battered peso with the U.S. greenback to prevent Argentina from printing money to cover government spending. How quickly he will move, though, is uncertain.

“The next six months are going to be very hard," said Milei. Failing to act, he added, will worsen the economy. “We’re not a bunch of sadists here, trying to cause harm to the population," he said.

Raw market

Milei said he planned to close ministries and privatize state-owned companies, from energy giant YPF to the national railway system to government media. He wants to cut energy and transport subsidies and dismantle price and currency controls—measures that mainstream economists agree are necessary but will initially drive up inflation.

The president-elect’s proposed economic overhaul will coincide with billions of dollars in debt payments due next year to foreign bondholders and the International Monetary Fund. The IMF provided a bailout to Argentina in 2018. Argentina has since depleted its international reserves and has limited access to debt markets.

Behind Milei’s pledges are a deep belief in the economic teachings of Murray Rothbard, an American economist who championed free markets, and Milton Friedman, the Nobel Prize-winning economist from the University of Chicago, who blamed government spending for stoking inflation.

Milei, who holds advanced degrees in economics, says he is an anarcho-capitalist, an economic philosophy that favors stateless societies, free of governments and kept orderly by pacts and private agencies. He once taught university-level economics but said he abandoned mainstream theories after reading an essay by Rothbard, who died in 1995. Rothbard believed taxation was state theft, opposed central banks and said monopolies were only a problem when governments imposed them.

“While I was reading it, I thought, I’ve been deceiving my students for so many years," Milei said. In public appearances, he rails against socialism. Capitalism, he says, is the only system with a proven record of sustainably improving living standards. He worked for more than 15 years as an economist for Corporación América, a holding company that invests in such sectors as energy, transportation, real estate and agriculture.

Signs of Milei’s postelection moderation are welcomed by Wall Street investors concerned about his ability to govern. The president-elect is expected to appoint to his cabinet several former ministers of Mauricio Marci, the center-right president from 2015 to 2019, when Argentina took on billions in debt and was hit by a currency crisis that prompted the IMF bailout. Macri’s endorsement greatly aided Milei’s election victory.

For now, Milei’s priority is to balance the budget with spending cuts, including to scores of public works projects that were started by current President Alberto Fernández.

In San Miguel, contractors for state utilities are building new sewage systems, water pipelines and low-income housing. They said they were uncertain how long the work would continue under Milei.

“He can’t leave millions of us out on the streets with no pay, can he?" said Mario Gómez Ramon, a foreman at a construction site for more than 400 state-subsidized homes. “If he does do it, I give him two months in office."

Water pipeline repairman Diego Martínez said Milei should cut office jobs at government ministries and spare workers who are improving poor neighborhoods. “There’s a lot of people who get paid to do nothing," he said.

Milei’s eccentric personality, including his unorthodox views on sex, has caused unease among people who otherwise support his free-market policies. On TV shows, he has talked about his sexual escapades, including his past as a coach of tantric sex, an ancient Indian spiritual practice promising pathways to enlightenment through sex. Videos circulated from a 2017 televised chat where he said 90% of the “various threesomes" he joined involved two women.

Milei, who never married, is dating Fatima Flórez, a comedian known for impersonating Cristina Kirchner, the former president. He lives with five cloned English mastiffs, according to Juan Luis Gonzalez, the author of a biography on Milei. Four of the dogs are named after free-market economists, including Friedman and Rothbard.

Trade targets

Among Milei’s campaign pledges is cutting government ties with China and Brazil. Former Argentina officials say such moves are unlikely. But they warn Milei’s harsh rhetoric will likely weaken relations with Argentina’s top two trading partners.

Chinese companies are major investors in local dams, solar energy projects and the lithium industry. China’s Foreign Ministry didn’t respond to requests for comment. Ministry spokeswoman Mao Ning has previously said “no countries could step out of diplomatic relations and still be able to engage in economic and trade cooperation."

Under the Fernández government, Argentina became a member of the Asian Development Bank, enlisted in China’s Belt and Road Initiative and, earlier this year, secured a deal that allows Argentine businesses to use the yuan for China commerce instead of scarce dollars.

China in recent years also negotiated investment deals directly with governors of Argentine provinces, and Milei is unlikely to undo those arrangements, said Margaret Myers, who researches China’s relations in Latin America at the Inter-American Dialogue policy group in Washington.

Chinese leader Xi Jinping said he was willing to continue developing the bilateral relationship with Milei in a letter made public by the president-elect. That hasn’t stopped worries.

“I don’t know what I’m going to do," said David Wang, who runs a shop selling Chinese imported goods in the Chinatown neighborhood of Buenos Aires. Just before closing time on a recent day, Wang watched a Chinese-language news report that warned of trade disruptions resulting from Milei’s anti-Beijing rhetoric. “I really hope he doesn’t do anything that foolish," Wang said.

Hundreds of miles away, in Argentina’s agricultural heartland, farmers who overwhelmingly backed Milei said they looked forward to tax cuts and the lifting of currency controls. They are among the many business owners who have long struggled to import equipment and supplies because of a lack of dollars. They, too, hope Milei wasn’t serious about breaking with China.

“Those were knee-jerk comments over the last two years. I think they’re going to put them away in a box," said Atilio Carignano, a soybean and corn farmer in the central Córdoba province. “There is hope with Milei."

Since his victory, Milei has said that he wants to govern for all Argentines. He recently took a congratulations call from Pope Francis, despite the criticism Milei has leveled at him for keeping ties with authoritarian countries. The pope told Milei that leading Argentina would require both bravery and wisdom, Milei said.

“I told him the courage I already have," Milei said. “But I’m still working on the wisdom."

Clarence Leong contributed to this article.

Write to Kejal Vyas at kejal.vyas@wsj.com and Ryan Dubé at ryan.dube@wsj.com

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