Are the Wheels Finally Beginning to Fall Off the Mileis’ Faux Libertarian Clown Bus?

For readers who may be wondering why the above title features the name “Milei” in plural, there is a simple reason: the Milei clown show is a double act. The Argentine President Javier Milei has a sister, Karina, who, as his former campaign manager and current General Secretary of the Presidency, essentially manages his political agenda and personal expenses. She is, as her brother frequently describes her, “la Jefa” (the boss). And she is now the focus of a criminal investigation for her alleged role in the recent $LIBRA crypto scam.

Largest Ever Crypto Theft

The deputies of an opposition grouping that calls itself the “Civic Coalition” has filed a criminal complaint against Karina, accusing her of the crimes of bribery, influence peddling and violating the Public Ethics Law in relation to the $LIBRA meme coin scam, which Forbes magazine has described as the world’s “largest ever crypto theft”.

Argentina’s $4.6 Billion Crypto Scandal; Largest-Ever Crypto Theft https://t.co/dKFjP6RgV1 pic.twitter.com/xzFQlpi9Lz

— Forbes (@Forbes) February 27, 2025

The article provides a brief reminder of how it all went down:

On February 14, Milei took to X to promote a little-known token called LIBRA, claiming it would boost Argentina’s economy by funding small businesses. His post linked to a website featuring his signature slogan, “long live freedom,” and assured his 3.8 million followers that “the world wants to invest in Argentina.” Thousands did. LIBRA skyrocketed from near zero to almost $5—before crashing to under $1 within hours.

Milei quickly deleted the post, claiming he was unaware of the project’s details, but the damage was done. Lawyers in Argentina, led by Milei’s political opponent Claudio Lozano, filed more than 100 fraud complaints against the president, and an Argentine judge opened up an investigation…

The numbers paint a brutal picture: 86% of traders who bought into LIBRA lost money, with total losses reaching $251 million, according to blockchain analytics firm Nansen. A lucky few pocketed $180 million.

The focus is now on Milei’s sister, who just a few years ago was scraping a living reading Tarot cards and selling “tortas” (cakes) out of her garage but is now arguably the most powerful woman in Argentina, drawing unflattering comparisons with Kim Yo-jong, the sister of North Korean leader Kim Jong-un.

The deputies behind the lawsuit accuse “la Jefa” of coordinating the President’s meetings with the promoters of $LIBRA. As general secretary of the presidency, Karina decides who gets to see the president and who doesn’t, and according to recent allegations, she has made a tidy little sideline out of it.

A year and a half ago, just before Milei’s election, the prominent Argentine businessman Juan Carlos Pallarols revealed that when he tried to arrange a meeting with Milei, he was told to speak to his sister, Karina, who “managed his agenda”. When he did that, Karina Milei told him that in order to set up a meeting, he would need to pay a “deposit” US$ 2000, for which purposes she provided bank account details.

Karina is also accused of coordinating the President’s meetings with the promoters of $LIBRA. The criminal complaint against her recalls the alleged message sent by Hayden Mark Davis, the creator of the token, in which he apparently said:

“I send money to his sister and he signs everything I say and does what I want.”

Once people like Davis were admitted to Javier Milei’s inner circle, they began making bank. As the New York Times reports, Davis told attendees of a crypto currency conference held in Buenos Aires in October that he had “control” over Mr. Milei and could broker deals:

“Everything from Milei tweeting” to “all the front-facing Milei stuff basically, showing up at things, et cetera — I have control over a lot of those levers,” Mr. Davis said in an audio message to an entrepreneur, obtained by The Times.

“But,” he added, “there’s a cost.” He insinuated that cost could be in the millions of dollars. “I’m not trying to screw anyone over,” he said, using an expletive.

Another entrepreneur said Mr. Davis made an even more brazen offer in writing: He would deliver a meeting with Mr. Milei and a partnership with the Argentine government in exchange for roughly $90 million in cryptocurrencies over 27 months, according to a copy of the proposal viewed by The Times.

There is no evidence that Mr. Milei was aware of the proposals.

Javier Milei already faces one criminal investigation in Argentina as well as another in the US over his decision to promote — or as he puts it “disseminate” — the rug-pulled LIBRA meme coin. Last week, Mauricio Claver-Carone, Donald Trump’s State Department envoy for Latin America, said in a CNN interview with Andrés Oppenheimer that the US justice system will investigate the $LIBRA scandal, in which “defrauded Americans” lost millions of dollars:

“It’s complicated that there were victims, defrauded Americans, hundreds — if not thousands — who have lost millions of dollars [to the $LIBRA cryptocurrency]. And [on top of] some of the president’s [Javier Milei] advisers were Americans… I think there are going to be judicial investigations; it is a complex issue, but a good lesson for President Milei, and for others, in the sense of being better advised, of having a better team and not falling into unnecessary mistakes and self-inflicted coups.”

In recent years Claver Carone has clashed with Milei and senior members of his government, in particular the Economy Minister Luis Caputo, arguing at one point that while “Milei speaks like a true orthodox liberal” at international conferences, “domestically he has a team that is governing like Peronists.”

The U.S. Department of Justice (DOJ) has reportedly already begun investigating President Javier Milei over his promotion of the LIBRA token, along with the alleged involvement of the project’s founders and two Argentine entrepreneurs. According to sources cited by Argentine newspaper La Nación, the DOJ initiated its investigation one week after the collapse of the meme coin. Reports indicate that the probe is still in its early stages, with authorities beginning to gather preliminary information.

Diverting Attention and Tightening Control

As the fallout from the $LIBRA scandal grows, the Milei siblings have done what most cornered politicians that have been caught scamming their own supporters would do: they have tried to divert attention from the meme coin scandal by whipping up a frenzy over other issues while trying to tighten their control over Argentina’s justice system.

To that end, Javier Milei appointed, by presidential decree, two friendly judges to the Supreme Court in an act that the constitutional lawyer Eduardo Barcesat has described as “institutional chaos” and “another step towards authoritarianism”. This is a trend that has intensified since the Libragate scandal.

At the end of Milei’s speech to open parliamentary sessions last week, Milei’s chief advisor, Santiago Caputo, the nephew of Milei’s Economy Minister (and former Wall Street banker) Luis Caputo, physically attacked one of the deputies who had jeered Milei during his speech. Even more disconcerting, this same advisor, who wields significant influence over Argentina’s intelligence agencies, ran a “mega-poll” in January to gauge whether Argentines would accept an authoritarian regime in exchange for greater economic stability.

Milei has also tried to appeal to the “law-and-order” vote by proposing to drop the age of criminal responsibility from 16 to 10 after a seven year-old girl was killed by a car driven by a 14 year-old boy, who cannot be criminally charged, and his 16-year old friend, who committed crimes when he was under 16. According to Milei, if Argentina had had a lower age of criminal responsibility, he would not have been free to steal the car and thereafter run over the seven year-old girl.

In his recent speech at the opening of the parliamentary sessions, Milei called for shaking up “all the penalties” of Argentina’s penal code. He has also tried to take advantage of the tragedy by calling on the Peronist governor of Buenos Aires Province, Martin Kiciloff, to resign and let the federal government intervene in the day-to-day management of the province.

Milei’s government has also landed itself in trouble by trying to rework the language for people with learning disabilities. In January, it published in the official gazette new parameters by which individuals will be evaluated in order to obtain, or continue to receive, a disability allowance. The terminology used included “idiot”, “imbecile”, and “mentally retarded.” The text was copied word for word from a decree signed in 1998 by President Carlos Menem, an ultra-liberal Peronist whom Milei considers Argentina’s best president despite the fact he laid the groundwork for the collapse of Argentina’s economy in 2001.

When the proposed language changes sparked a public backlash, the Milei government quickly backtracked and fired the minister in charge, but the intention was clearly there, and it speaks volumes about how the senior members of the government view the most vulnerable in society.

They include the pensioners who continue to bear the brunt of Milei’s austerity policies and continue to protest on a weekly basis against the pension freezes and cuts to subsidies, including for essential medicines. This is how they’re treated:

El gobierno está haciendo todo mal: denuncias internacionales por estafa, reservas por el piso, 2 millones de personas sin luz. Y se desquita pateando jubilados en el piso (literal) pic.twitter.com/Sssp54j7qn

— Arrepentidos de Milei (@ArrepentidosLLA) March 5, 2025

Economy About to Take Off, Or Fall Off a Cliff

Right now, the economy appears to be in “slow recovery” mode after just suffering one of its worst years this century. According to a new report by Nielsen IQ, household consumption plummeted by 17% in 2024 due to a severe adjustment in purchasing power. The combination of still painfully high inflation (117% accumulated in 2024) and the withdrawal of government subsidies for most basic services, from energy to transport, has left many households with little choice but to pinch their pennies.

“2024 marked a turning point in mass consumption in Argentina, with a historic drop that impacted all categories and sales channels,” said Javier González, commercial leader of NielsenIQ Argentina. “”By 2025, although a partial recovery is expected, the Argentine consumer will continue to be strategic in their purchasing decisions, prioritizing price and cost-benefit ratio.”

Though household disposable income has begun improving, according to the report it is still 40% below 2017 levels, the year before then-President Mauricio Macri requested an IMF bailout. And the last thing the country’s struggling industrial sector needs to hear: last year, industrial activity slumped by 9.4%, the highest fall since 2002.

How things proceed in the short term will depend largely on how quickly Argentina can sign its next deal with the IMF, which will mean another injection of much-needed dollars. It will also mean many years more of IMF-imposed structural adjustment, which of course Milei will happily apply.

It’s a very different reality to the one Milei inhabited before becoming president. In an interview a couple of years ago he said that “we libertarians detest the IMF,… an institution that shouldn’t even exist. It is a perverse institution that… stumps up money when a country is about to collapse, thus allowing it to kick the can down the road.”

That is precisely what is happening right now. Luis Caputo, the economy minister who applied for the original IMF bailout in 2018 after almost single-handedly destroying the economy, is now renegotiating a new deal that will allow the Milei government to kick the can down the road. The new deal will allow the National Treasury to cancel its debt with the Central Bank, thus reducing the total public debt but further indebting Argentina to the Bretton Woods institute.

Rather than letting Congress debate the new bailout agreement as Argentine law stipulates, Milei has just passed it by decree. Only if a majority in both houses reject the Necessity and Urgency Decree can it be blocked.

The government and its supporters insist that once the new bailout agreement comes into effect, Milei’s commitment to fiscal balance and his pro-market agenda, combined with fast growth in the energy and mining sectors, means that Argentina’s economy will quickly take off. Analysts at JP Morgan Chase are predicting growth this year of 5.5%.

An alternative interpretation is that the recent economic upturn is largely the result of creative financing — the so-called “carry trade” — whose inevitable unravelling will culminate in a new devaluation and crisis, as has happened so many times before.

The central bank is still reporting negative currency reserves to avoid a widening of the exchange rate gap and sustain the carry trade — a financial operation that was first introduced by the Argentine dictatorship of the 1970s and was later revived in 2016 by Mauricio Macri and recently brought back again by Milei.

It works by essentially encouraging investors to convert dollars into pesos to take advantage of high yields in dollars for short-term placements in local currency. This unsustainable policy keeps the peso exchange rate artificially high while also making Argentina very expensive in dollar terms. But it also generates a false sense that things are going well.

However, after burning through almost $100 billion to keep this pretense going, the government desperately needs fresh funds, hence the frantic negotiations with the IMF. For its part, the fund is calling for an end to the exchange rate controls that have been in existence for well over a decade while Milei insists that will not happen until 2026 at the earliest. For some market analysts, the first litmus test will be the mid-term elections in the middle of the year.

There is still a long way to go before then and a run on the exchange rate could happen at any time. Indeed, allegations resurfaced last week that Caputo was dipping into the savings of Argentina’s pensioners to support the Argentina peso. As Página 12 reports, Caputo and Fernando Bearzi, the recently appointed head of Argentina’s social security fund (and a former hedge fund partner of Caputo’s), are now allegedly using retirees’ dollars to avoid runs on the dollar caused by funds abandoning the carry trade set up Caputo.

Throwing Zelensky Under the Bus

While all this is happening, Milei is determined to further subordinate Argentina’s economy to the US’, especially now that Trump is back in power. His kowtowing to Washington reached a new low last week when he ruthlessly threw Ukraine’s Zelensky government under the bus by abstaining in a resolution at the UN General Assembly that called on Russia to withdraw “immediately, completely and unconditionally all of its military forces” from Ukrainian territory.

As readers may recall, the Milei government was the most fervent supporter of Kiev in Latin America, even going so far as to offer to donate weapons to Project Ukraine. Milei even invited Zelensky to his inauguration ceremony and the two maintained a close friendship, with messages of mutual support, gifts (Argentina donated two helicopters) and promises. At the end of 2024, the Ukrainian president praised the reforms implemented by Milei and thanked him for his support in the war with Russia.

But when Donald Trump returned to the White House and began calling Zelensky a “dictator” and discussing the prospect of negotiations with Russia, the Milei government quickly abandoned its support for Ukraine. Milei himself has frequently drawn comparisons with Zelensky both inside and outside Argentina. The Spanish economist and political analyst Santiago Armesilla recently described him as “a dangerous man, an Argentinean Zelensky capable of ruining his country before giving up power.” 

Despite Milei’s slavish support for Washington (or perhaps because of it), President Trump did not exempt Argentina from the 25% tariffs he imposed on steel and aluminium that will harm local industries, as he did in 2018. In addition, Trump has indicated that he will move forward with a policy of reciprocal tariffs, which will particularly hurt the countries that make up Mercosur due to the high level of the bloc’s common external tariff.

However, Milei is apparently willing to give up Argentina’s membership of the South American trade bloc anyway in return for a free trade agreement with the US, despite repeated warnings from trade specialists that such a deal, if ever consummated, would be broadly harmful to the Argentine economy given its lack of complimentarity with the US economy. In fact, there are a number of areas where the countries’ economic interests would clash, particularly in the argobusiness sector, which accounts for the lion’s share of Argentina’s exports.

But this is all apparently moot anyway since the Trump administration has no interest whatsoever in signing such a deal. Just a few days ago, the head of the US State Department for Latin America, Mauricio Claver Carone, was consulted by CNN about Milei’s proposal and dismissed it out of hand: “President Trump has been very clear that we are not looking for new free trade agreements.”

So, in other words, Milei is determined to withdraw Argentina from a trade agreement with its direct neighbours, including its biggest trade partner, Brazil, in order to sign a free trade agreement with the US that will provide few economic benefits and which Washington does not even want to sign anyway. It defies all economic logic, just like when Milei and Caputo sent an undisclosed portion of the country’s gold to the UK, at the same time that most countries in the world are trying to repatriate their gold.

While the Libragate scandal may have done significant damage to Milei’s reputation on the international scene, it’s unclear just how many of his voters are now having regrets.

In one opinion poll about the Libragate scandal, a slim majority (52%) of respondents considered it a “serious issue” while 31% said it was “inconsequential” and 17% described it as “an important issue but not serious”. Likewise,  53% of respondents believe that Javier Milei himself was “complicit” in the meme coin controversy; and within that subgroup, only 44% think “he did it for personal gain”. By contrast, 47% believe he was a “victim” of circumstances.

Even as the wheels may be coming off the Milei siblings’ fake libertarian clown bus, a hard core of support, presumably representing around one third of voters, will stand by him. The fact that there is no viable political opposition also works in the government’s favour. As far as I can see, the only two things that might topple it are: a) if one or both of the Mileis face criminal charges in one or more of the investigations into the meme coin scam, or b) if the economy falls off a cliff.

This being Argentina, a country that has defaulted on its debt obligations no fewer than nine times in its that is perfectly possible. However, with a new debt deal about to be signed with the IMF, it’s unlikely to happen any time soon. The can, it seems, is about to be kicked further down the road.