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Two to tango: Can Milei transform the UK's relationship with Argentina?

(Credit: Alamy)

5 min read

Argentina and the UK were once close trading partners, until the Falklands conflict ended the ‘original special relationship’. Can the country’s colourful new president change all that?

He might be an ‘anarcho-capitalist’ with a penchant for wielding chainsaws, but some Conservatives think Argentina’s new president, Javier Milei, can put aside the Falkland Islands dispute to strike a trade deal with the United Kingdom. 

Milei swept to victory in November’s election promising to fix an economy floundering under the weight of the highest inflation rates in South America. His proposed fixes were radical – including abolishing the Argentine central bank and replacing the peso with the US dollar – but pledges to deregulate the economy are piquing interest across the world.  

A huge ‘omnibus’ bill to slash red tape and deregulate industries has been welcomed by markets. And while large parts of the population are less enthusiastic about the reforms, the rewards from such liberalisation may be considerable, 

Michael Reid, a visiting professor at the London School of Economics specialising in Latin American affairs, points out that Argentina’s economy is roughly 50 per cent larger than neighbouring Chile’s, but Chile’s imports are 50 per cent higher.  

“That shows how closed the Argentine economy is,” he says. “Milei wants to open it up. He has already [scrapped] a lot of the exchange and import controls.” 

While at the World Economic Forum in Davos in January, to deliver a speech warning of the perils of socialism, Milei sat down for a 20-minute conversation with UK Foreign Secretary, Lord Cameron.  

Milei – once in a Rolling Stones tribute band – told the Foreign Secretary he would like the group to tour his country, but whatever Milei’s own personal demands might be, it’s the Falklands dispute that is likely to be the biggest obstacle to any deal. 

Javier Milei

Even now, images of the Falkland Islands, known as Islas Malvinas, are plastered everywhere in Argentina, from buses and trains to schools and banknotes. But some observers are nonetheless cautiously predicting that, given the size of the economic challenge, the Malvinas issue will not be a priority for President Milei. 

Reid says: “Milei is on the hard right in some ways, but he is different to, say, [former president of Brazil] Bolsonaro in that he isn’t a nationalist. I don’t expect him to be confrontational over the Malvinas.” 

Christopher Sabatini, a senior fellow at Chatham House, agrees: “Milei will be much more pragmatic going forward, and I think that should make investors much less cautious than they have been in the past.” 

However, residents of the islands are less optimistic. Teslyn Barkman, a member of the Falklands legislative assembly, says that while she hopes Milei’s government is constructive, islanders have heard it all before. 

“There are benefits in it for them [to be more constructive]. It would mean an improved relationship with the UK,” she says. “We’ve seen cycles of governments who are more sympathetic and those who create more laws and attack us with more policy – it just takes us into this huge washing machine where we are just waiting for the next bout of turbulence.” 

Nevertheless, there is excitement among some Conservatives that a radical free marketeer is at the helm. Lord Hannan, who recently met with Milei, says the president is “very keen to emphasise that Argentina was coming back to the western camp”.  

“He’s pro-America, pro-Ukraine, pro-Taiwan,” he says. 

The UK does not feature in the top 25 trading countries for Argentina. There’s more trade, more investment, flowing from Spain and the Netherlands… than there is from the UK

Steve Baker, minister for Northern Ireland, is quietly optimistic about Milei’s presidency. “The president of Argentina is fundamentally right in his political economy,” the MP says.  

“The big question is whether he can make it practical politics. It may be that the future of our civilisation turns on it.” 

If Milei manages to meet the challenge, a trade deal may present opportunities for the UK. Famous for beef and soy production, Argentina – along with its neighbour, Brazil – could become an alternative source of agricultural produce for the UK, Sabatini says.  

And with a wealth of natural resources, including lithium in the north and natural gas in the south, the country may also provide opportunities the UK is already well-placed to benefit from.  

This is also true of the pharmaceutical industry, where UK companies already have important relationships as well. 

Trading is starting from a low mark, however: Sabatini says his research in 2019 found that, before Brexit, the European Union accounted for 73 per cent of agricultural imports to the UK, compared to just 1.6 per cent for Argentina and Brazil. 

And Professor Colin Lewis, senior lecturer in Latin American economic history at the London School of Economics, tells The House that commercial ties between the two countries are far weaker than they were in the past. Argentina was once well-disposed to the UK, until the 1982 Falklands conflict ended a previous ‘special relationship’.  

The South American country was the UK’s biggest export market in the region for large parts of the 20th century, while Argentina’s railway system was owned and built by British companies. The red phone boxes in Buenos Aires are another reminder of a lost affection between the two countries. 

“The UK does not feature in the top 25 trading countries for Argentina,” Lewis says. “[Argentina] no longer has a special relationship with the UK. There’s more trade, more investment, flowing from Spain and the Netherlands… than there is from the UK.” 

But more fundamentally, does Britain still want to champion the benefits of free trade? Ministers may talk of cutting tariffs and Global Britain, but trade negotiations require trade-offs that can upset voters. Yaron Brook, executive chair of the Ayn Rand Institute, tells The House that while he believes the West should expect to “engage” with free trade from Argentina, he is sceptical of the desire from countries like the UK. 

“The hesitancy about free trade is going to come from the western nations, not from the Argentinians,” he claims. 

Argentina may want to rekindle an old flame. But the question remains: is Britain bold enough to mend the broken ties of the past, or has the original special relationship gone for good?

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