Sawtooth or entrenched decline?: the economic specter haunting the Cabinet as Milei polarizes

President Javier Milei alongside ministers Luis Caputo (Economy) and Pablo Quirno (Foreign Relations) October has arrived. In politics and in the markets, doubts are growing about the sustainability of the economic program, and the government is playing its last cards of the pre-electoral year. With that in mind, the political leadership projected, on Tuesday afternoon, the final sprint of the legislative period. The balance of the meeting was brief: the Executive has already passed several relevant bills and now would only need to ride out the debate on delinquency, push forward the National Sovereignty Defense Law, and get the "law of laws" — the Budget — through. The ruling party, moreover, stopped procrastinating on the electoral reform. Diego Santilli appeared confident about harvesting the votes, although others in the government began to shuffle a rougher 2027, with the primaries (PASO) on the calendar. With that horizon, the cabinet prepared to pack its bags to seek a few days of breathing room in Paris. At that very moment, however, a plot twist was brewing at the Palace of Courts. In their session, the three Supreme Court justices signed more than 400 rulings, among them one that had reached the highest court in May 2024: the injunction promoted by the La Plata Center of Malvinas Islands Ex-Combatants (CECIM), which the city's Federal Court had upheld months earlier by annulling Article 154 of DNU 70/2023. That provision — Javier Milei's "mega decree," influenced by Federico Sturzenegger, who at the time was not even a minister — repealed the Land Law and freed up the sale of land to foreigners without any cap. Horacio Rosatti, Ricardo Lorenzetti, and Carlos Rosenkrantz resolved unanimously to overturn that appellate ruling. They did not rule on the merits of the case but argued that the ex-combatants' center lacked standing to bring a collective action: for the three justices, the injunction was mischaracterized from the start and should never have been processed as such. At first glance, the ruling benefited the government. Milei understood it that way: first he reposted a message on X from businessman Martín Varsavsky celebrating the ruling, and then, in his virtual participation in the 62nd IDEA Colloquium, emphasized that "what the Court decides is what the Court decides." Javier Milei participated in the IDEA Colloquium virtually (Source: IDEA) The political consequence of the ruling today has unpredictable ramifications. Milei and his delegation had not yet boarded the Tango plane when various blocs in the Chamber of Deputies were already organizing to repeal the entirety of DNU 70/2023. The narrative is perfect for the hardest opposition: Milei's first DNU must be brought down to save the Nation. Without it having been planned, the government finds itself pushed to defend that 366-article monstrosity from December 2023, which had been Milei's first disruptive political action. The context is far more uncomfortable. With his Malvinas pivot, Milei had gained ground on the nationalist agenda, but a childish squabble yesterday in the lower chamber was enough for Juan Grabois to once again call the government a seller-out of the homeland. The riskiest part is that, at a moment of high economic sensitivity, the opposition could inflict a defeat on the Casa Rosada over a sensitive issue. Very much in 2025 style. The question now is whether the hard opposition in the Chamber of Deputies — from the PJ to the left, including deputies like Maximiliano Ferraro or Esteban Paulón — will actually be able to gather the votes to repeal DNU 70/2023. The meeting of LLA legislators last week Martín Menem — who stayed in Argentina and improvised a trip to La Rioja following the death of Senator Juan Carlos Pagotto — began to devise the resistance. He will seek a diagonal path with the dialogue-minded deputies through the shelved Law on the Inviolability of Private Property. The idea is to include in that bill (which has half-sanction from the Senate) new articles to regulate the foreign ownership of land. That is, to channel the issue there and drain support from a full repeal of the 2023 DNU. The plan would imply setting new caps on foreign ownership in a bill that, in its original wording, sought total liberalization. It remains to be seen how the idea lands with Sturzenegger and, above all, with Milei. The other question left hanging in the air is why the Court took up this issue now. The case agenda handled each Tuesday is in the hands of the head of the highest court, in this case Rosatti. But any of the other members can propose topics or block them. In other words, the ruling was corporate: beyond who pushed it, none blocked it and all three signed it, without being unaware of its political effects. In consideration 9, the justices recalled that DNU 70/2023 was never dealt with in the Chamber of Deputies under the parliamentary control of emergency decrees provided for by the National Constitution. It was a subtle way of telling the political class to take responsibility for its own issues. And, in passing, of reminding it of the power the highest court has to manage timing and stir up the hornet's nest. The Court's ruling added an unexpected front at a moment when the government needs political predictability. After the plunge in activity in July, the growth in poverty in the first half of the year, and the escalation of country risk, the fear of the government's political wing is that the economy will abandon its sawtooth pattern and show a consolidated decline. "The biggest concern is focused on August's EMAE. Politics and the markets are measuring us by the drop of oil. We hope it comes in positive; we don't want a recession to materialize," acknowledged a senior collaborator of the political wing. The possibility of a technical recession surfaced in JP Morgan's latest report on Argentina. The largest bank in the United States, which had always been favorable toward the libertarian economic program, dramatically cut its expectations, with a natural impact on bankers and investors. But for Milei there will be no recession, nor are there corrections to be made, nor does the rise in country risk — which has been climbing almost uninterruptedly since mid-July — have anything to do with the doubts that the weak real-economy data cast on the sustainability of the current orthodox model. Milei spoke last week about the economic situation at The Economic Club The political wing has never voiced its concerns out loud, but it hopes that minimal measures will help reactivate the economy. "Javier has already authorized infrastructure works to resume. And governors will also be allowed to take on debt to carry out their public works. (Axel) Kicillof included," an official collaborator let slip. The other concern circulating in the Casa Rosada had to do with the statements the President left in his latest interviews. At the seat of government they placed special emphasis on the fact that Milei did not call into question the reliability of INDEC when he said that "the indicators are throwing out all sorts of things," in reference to seasonally adjusted data (beyond the fact that there are technical voices in the government who advise against insisting on the "trend-cycle" that the head of state keeps hammering). "What he meant was not understood," they justified on behalf of the first executive at Balcarce 50. And they took particular care to give meaning to the figure of "30,000 terrorists" deported in the last two years. Adrian Ravier attempted a discursive pirouette: "They are possible terrorists or people who could threaten national security in some way. Or, in any case, people who for various reasons do not enter." No attempt to give meaning to the presidential word and to the tossing around of figures in which Milei is entrenched can keep up with him. Last night at IDEA he let loose: "If we had not faced the attempt of seven coups d'état, 40 laws trying to break fiscal balance, and people trying to carry out terrorist acts in the streets, inflation would be starting with a zero." Milei finds, ruminating on conspiracies against him, the explanation for all problems. "It's not that he lies; he builds that story in his head," admitted a collaborator who works in the Casa Rosada. Beyond his musings, the President resorted to a narrative that is shaping up as a campaign strategy: polarization, no longer by economic orientation, but under the logic of good and evil; prosperity and terror. Milei speaks of Kirchnerism as a "ghost train," and Toto Caputo describes Kicillof as the "antichrist." Those who call for a correction of the dollar he calls "mummies." These are the winds of Halloween. While Milei participated in the UN General Assembly in New York, Axel Kicillof took part in his own meetings in the American city The official rhetoric contains a dilemma: if the government prematurely brings Kicillof into the ring for electoral convenience, it also increases — by its own logic — the political risk in the market. The Buenos Aires governor also benefits from Milei positioning him as his main rival. If the polarization between them consolidates and both maintain a high floor, they complicate the proliferation of candidates within their respective spectrums. Patricia Bullrich watches this dynamic and Milei's poll potential with special attention. The requests from the political table that she not air her dirty laundry have little effect. Yesterday itself she put her finger on the sore spot regarding the Court ruling. "There is a learning issue. If we had a DNU and that decree was still in the courts, perhaps pushing forward the private property law with the land chapter was hasty," she said about the debate that ran through the months after the World Cup. Behind closed doors, the senator intensifies her questioning of the economic course more and more. She no longer demands measures: she calls for a deeper correction and a change of course to address reactivation. "Today I am not clear on how this continues. If everything in the government stays the same, I don't know what Javier's reelection capacity will be," she told her inner circle in recent hours. There are those who heard her, even, demand changes in the economic team. "She believes this is the stabilization team. That they have plateaued due to their training," an important figure in her circle told Infobae. "If everything in the government stays the same, I don't know what Javier's reelection capacity will be," Patricia Bullrich told her inner circle (Photo: RS Fotos) In the administration there are concrete frictions. The debate over funds for Disability has not yet been settled. In recent days there were several exchanges between Caputo's team, the Legal and Technical Secretary, María Ibarzabal, and Martín Menem's collaborators. Deputies such as Silvana Giudici and Laura Rodríguez Machado also participated, who negotiated with the PRO the committee report on a new Disability bill to avoid the extension of the emergency that the opposition is pushing. Parliamentary sources acknowledged that at the Palace of Finance they are not happy with that report that LLA achieved last week, due to its fiscal cost. Nor did the text sit well at the Ministry of Health — headed by Mario Lugones — because of the impact the new nomenclature would have on the accounts of the union health insurance funds (obras sociales). Far from domestic problems, Milei and part of the cabinet are going through their stay in Paris. In the city of light, each will activate their weapons of seduction. Karina Milei will continue deploying her new open-arms approach with the governors. "She is seen trying to pull off political closings that are now harder to pull off. Doubt about Milei's reelection is growing among all the actors," they warned in the Bullrich camp. Santilli, for his part, has faith in himself to harvest the missing support to suspend the primaries and advance with the Budget. "After the trip there will be more clarity. This is 'Emily in Paris,'" they joked in the Karina wing, alluding to the Netflix series starring Lily Collins. Off script, the chief of staff now also has to work on shielding Milei's foundational DNU. It remains to be seen what the governors ask for in exchange. And whether the champagne, wine, and canapés accelerate political understandings that until now have not matured.