Why Washington Should Side with Argentina’s Milei Against Beijing

The presidential campaign of Javier Milei of Argentina was one of a kind, from the chainsaw he wielded at rallies to his promise to create a marketplace for human organs. He shouted “long live liberty” to screaming crowds and described his cloned dogs as his closest advisers. Those idiosyncrasies, however, overshadowed the most radical item on Milei’s platform — a foreign policy designed to distance Argentina from China, a top trading partner.

Throughout his winning campaign, the country’s new far-right president, a libertarian economist, made it clear he would be no friend to Xi Jinping. “We don’t make deals with communists,” he told Bloomberg Television in August, lumping in China alongside Cuba, Nicaragua, Venezuela, and North Korea.

Now that Milei is in office, that policy promises a dramatic reordering of Argentina’s international relations, raises the possibility of an economically devastating diplomatic clash between Buenos Aires and Beijing, and presents the United States with an unexpected opportunity to offer alternatives to Chinese trade and investment. The stakes are high in a region where China’s influence has increased dramatically in recent decades, leaving little incentive for leaders to take sides in the U.S.-Chinese competition. Washington should make the most of this opportunity and demonstrate the benefits of siding with America.

Background

Milei’s remarks were surprising in a region where nonalignment in the intensifying rivalry between the United States and China has become an article of faith. Trade between Latin America and China has grown rapidly since 2000, reaching $450 billion annually. Beijing has also channeled huge investments, both public and private, to the region. China’s policy banks —the China Development Bank and China-Export Import Bank — have loaned $136 billion in Latin America over the past two decades.

So not surprisingly, the United States has found few takers for its vision of decoupling from China. President Donald Trump’s first secretary of state, Rex Tillerson, warned U.S. neighbors of China’s “imperial” ambitions. His successor, Mike Pompeo, adopted a similar tone, traveling to Panama to highlight China’s “predatory economic activity.” In November, at a gathering of Latin American leaders at the White House, President Joe Biden raised alarms about China’s “debt-trap diplomacy.”

Latin American leaders are clearly unconvinced. Last year, Honduras broke off diplomatic relations with Taiwan in favor of formal ties with China. This followed similar decisions by Costa Rica in 2007, Panama in 2017, El Salvador and the Dominican Republic in 2018, and Nicaragua in 2021. Today, Latin America and the Caribbean countries account for seven of Taiwan’s remaining 12 diplomatic partners.

In October, the presidents of both Chile and Colombia met with Xi in Beijing, where Colombia and China elevated their relationship to a “strategic partnership,” a notable upgrade. Both are leftists, but conservatives in the region have similarly sought China’s affection. That includes Ecuador’s then-President Guillermo Lasso, a former banker who signed a free trade agreement with China in May. In all, 21 countries in the region have joined China’s Belt and Road Initiative.

This was especially true in Argentina, at least until now. Argentina is the fourth-largest recipient of loans from China’s policy banks, $17 billion in all. China is the country’s second-biggest export market, after Brazil, filling cargo ships on the Paraná River with vast quantities of Argentine corn, soy, and wheat. A multibillion-dollar line of credit from the People’s Bank of China has been a vital source of hard currency, helping pay for imports and to repay the International Monetary Fund. For Argentina, an economic basket case that has no access to international capital markets and where inflation exceeded 200 percent last year, China is widely considered indispensable.

In return, Argentina agreed to host a space station in Patagonia run by the People’s Liberation Army; offered to use Chinese technology for its next nuclear reactor; expressed interest in buying fighter jets designed by China and Pakistan; and explored the possibility of a Chinese port in Tierra del Fuego on the strategic Beagle Channel. China is the top investor in Argentina’s rapidly expanding lithium industry.

Uncharacteristically, Argentina’s coast guard sunk a Chinese fishing vessel operating illegally offshore in 2016. But Argentina has typically showed deference to Beijing. In 2021, Milei’s predecessor, the center-left Alberto Fernández, celebrated the centennial of the Chinese Community Party by reminiscing about the friendship between Juan Perón and Mao Zedong.

A New Turn

Milei, however, seems willing to jeopardize this relationship. In office, he has been less blunt about his distaste for China, and he has displayed a grudging openness to Chinese trade and investment. He had a friendly exchange with a senior Chinese diplomat at his inauguration and he replied amicably to a congratulatory letter from Xi. Nevertheless, Milei’s loyalties are hardly hidden. Following a White House meeting in November, he suggested Argentina’s foreign policy would prioritize “nations that respect freedom.”

Given Milei’s conservativism and his combative and improvised leadership style, a diplomatic crisis seems likely. In just two months in office, he has rejected an invitation to join the China-led BRICS bloc in favor of the Organization for Economic Cooperation and Development; described Colombia’s president as a “communist murderer;” and pledged to move Argentina’s embassy in Israel from Tel Aviv to Jerusalem. Even among Western friends, he is a bull in a china shop. At the World Economic Forum, in Davos, Switzerland, Milei criticized his counterparts for infidelity to capitalist principles.

China’s Dilemma

For China, Milei poses a diplomatic challenge. China has a big appetite for Argentina’s farm and mineral exports, but Xi is not known for turning the other cheek. China infamously imposed economic punishment on Australia over criticism of China’s mishandling of the COVID-19 pandemic and later did the same to Lithuania over Taiwan. When Brazil’s former far-right president, Jair Bolsonaro, considered excluding the Chinese company Huawei from its 5G wireless network, China threatened to withhold COVID vaccines. (It carried out that threat in Paraguay, Taiwan’s only diplomatic partner in South America.)

In recent years, Xi has sought to soften China’s image, which has suffered as a result of the pandemic and from the country’s aggressive “wolf-warrior diplomacy.” In Latin America, for example, Xi appears agnostic about the ideology of presidents, buddying up with conservatives and left-wing leaders alike. The charm offensive has had mixed results. Almost half of Brazilians have a negative view of China, according to the Pew Research Center, and the same is true for roughly a third of Argentines. It does not help that Chinese investment in the region has evaporated in recent years, even as previous loans are coming due.

Nevertheless, Xi has not shown much tolerance for Milei. Days before his inauguration, the Global Times, a Chinese Communist Party newspaper, published an interview with an Argentine economist headlined, “Best approach for Argentina is to never take sides.” Later, China expressed disapproval of a reported meeting (later denied) between Argentina’s new foreign minister and Taiwan’s senior diplomat in Buenos Aires, leading to fears that China would freeze its line of credit.

The experience of Argentina’s last conservative president, Mauricio Macri, is instructive. Though more polite than Milei, Macri ruffled feathers in Beijing at the start of his presidency after promising to strengthen ties with Washington, publicize secretive agreements between China and Argentina, and reconsider premier Chinese projects, including two controversial dams in the remote Santa Cruz province. In response, China reportedly threatened to suspend other infrastructure investment, including an unrelated railway project, an example of how it wields the unusual cross-default and cross-cancellation provisions in its overseas contracts.

Macri ultimately fell into line, and it is possible that Milei will also sidestep a falling out with China. That said, Milei is widely seen as far less disciplined and far more ideological than Macri, a center-right former business executive. Tension with China could have significant consequences for Argentina. In retaliation for Argentina’s westward turn, China could restrict access to its market for Argentine food exports, suspend its line of credit, call off discussions of a free trade agreement with the Mercosur bloc, and taper investment in infrastructure and minerals, among other economic punishments. Examples of such economic coercion abound. Just this month, Ecuador shelved plans to transfer Russian-made military equipment to Ukraine after Russia threatened to boycott Ecuadorian bananas, a major industry.

And America’s

Paradoxically, Milei is also a test for the United States. His unabashed admiration has led to expectations of significant support for Argentina’s moribund economy. Argentina’s needs are multitudinous — and not easy to satisfy.

The United States, for example, is not likely to provide a loan to Argentina, a serial defaulter. Nor is it expected to match the multibillion-dollar megaprojects that China has carried out through the Belt and Road Initiative, such as railroads and dams. American farmers and ranchers compete with their counterparts in Argentina, so the United States will not replace China as a major export market. Finally, Biden does not have the same influence as Xi over private sector decision-making, and U.S. companies are understandably jittery about investing in Argentina.

Policy disagreements could be another stumbling block, at least under Biden. Milei has dismissed climate change as a “socialist lie,” opposes abortion rights and gun control, and is beloved by far-right figures including Trump, Tucker Carlson, and Viktor Orbán of Hungary. He spoke at the Conservative Political Action Conference on February 24 and excitedly hugged Trump backstage. Already, Milei has tested the Biden administration with his attempts to control protests in a country accustomed to demonstrators snarling traffic and crowding public plazas throughout the capital. The new government has already had several opportunities to demonstrate its approach, including during a national strike in January. Its heavy-handed response prompted criticism from the Inter-American Commission on Human Rights. Milei has also demonstrated contempt for his opponents in Congress, labeling as “traitors” lawmakers who voted against his proposed reforms and suggesting he might govern by executive order.

This behavior could lead to calls to condition support for Argentina so as to avoid a repeat of the U.S. Cold War policy in the region, where “the enemy of my enemy is my friend” logic led to blind support for repressive anti-communist regimes. That included in Argentina, where the United States supported the “Dirty War” military regime that murdered an estimated 30,000 individuals from 1976 to 1983. In his otherwise upbeat visit to Buenos Aires on February 23, Secretary of State Antony Blinken rightly hinted at potential areas of disagreement. Standing beside Argentina’s foreign minister at a press conference, he emphasized Argentina’s “strong and long history of addressing labor rights, the rights of women and girls, human rights more broadly.” Should Argentina fall short in these areas or find its democratic institutions imperiled by an overreaching president, the White House should reconsider its approach. Triggers should include the abuse of peaceful protestors or the intimidation of lawmakers, judges, or journalists.

U.S. Outreach

For now, however, the United States is giving it the old college try. That is the right idea. After all, it has not felt this much love in Buenos Aires since the early 1990s, when President Carlos Menem’s administration sought “carnal relations.”

Biden sent his energy secretary to Milei’s inauguration and later dispatched his deputy national security adviser for international economics to Argentina. For his part, Blinken promised that “the people of Argentina can count on us as you work to stabilize your economy.” The United States has reportedly greenlit the sale of F-16s to Argentina, a longstanding request previously thwarted by the United Kingdom over fears of another invasion of the Falkland Islands. Under Menem, the United States designated Argentina as a “Major Non-NATO Ally” and there is now talk of including the country as a formal NATO partner (Colombia is the only country in the region that currently holds that title).

The White House is also looking for ways to incentivize the purchase of Argentina’s lithium for electric vehicle batteries, even though the Inflation Reduction Act favors battery minerals produced and processed domestically or in countries that have signed a free trade agreement with the United States. NASA has expressed interest in training an Argentine astronautto travel to the International Space Station. The United States should go further and faster. As Argentina reins in runaway public spending, the U.S. government should step in to build infrastructure to dramatically expand food and energy production and incorporate Argentina in U.S. clean energy supply chains.

A lot is riding on the U.S. Argentina strategy. Even robust U.S. support for Argentina would not compensate for a meltdown in Argentina’s relationship with Beijing — China will remain an influential actor in the country. However, should the United States help stabilize Argentina’s economy, it would strengthen a stalwart friend leading South America’s second-largest economy. It would also demonstrate the value of U.S. partnership — and the rewards for presidents willing to resist the siren song of China’s gargantuan market and deep pockets.

On the other hand, the failure to support Milei through this difficult period — as deep budget cuts and sky-high inflation eat away at his popularity — would send the opposite message, reinforcing the logic of nonalignment throughout the western hemisphere.

Benjamin N. Gedan, Ph.D., (@benjamingedan) is the director of the Latin America Program at the Woodrow Wilson International Center for Scholars, an adjunct professor at the Johns Hopkins University School of Advanced International Studies, and a former South America director on the National Security Council staff in the Obama administration.

Image: Photo by Vox España via Wikimedia Commons