Javier Milei's 'CEO Diplomacy': Will It Boost FDI in Argentina?

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Ever since he became the ‘first libertarian president’ in history, Javier Milei has not only revolutionized Argentine politics but also has drawn significant attention to a country that had become relatively isolated from the major conversations in the West. Milei has become a prominent figure for citizens throughout the globe due to his unique style, his appealing narrative, and the ambitious reforms he plans to enact to radically transform Argentina’s economy.

Among the issues that have brought him great visibility, his intense international activity should be noted. As of mid-June 2024, the president has embarked on seven trips abroad, including four to the United States. His upcoming European tour, where he will attend the G7 summit, will make him the Argentine president with the most international visits within his first six months in office. Nonetheless, his vigorous diplomacy presents some distinct and innovative features that set him apart from previous administrations. 

Most of these visits align with one of Milei’s primary objectives: attracting significant flows of foreign direct investment (FDI), to enable his administration to modernize the country’s productive infrastructure, boost its exports and thereby integrate it fully into globalization. While a crucial component of this agenda involves implementing significant domestic reforms – evidenced in his promise to adopt the ‘Irish Model’ and the controversial ‘RIGI’ regime in the Omnibus bill – his diplomatic efforts also constitute a key pillar of his strategy to boost investment.

One strategy that stands out prominently is the emphasis placed on engaging with business leaders and CEOs at the expense of traditional diplomatic protocol with heads of state and government. In none of his four visits to the U.S., did he meet with President Joe Biden, Vice President Kamala Harris, or any members of their administration. Instead, he visited prominent business figures such as Elon Musk (CEO of Tesla and Starlink, among other companies), whom he visited twice, as well as Meta’s Mark Zuckerberg and CEOs of other tech companies like Apple, Alphabet (parent company of Google) and Open AI. Although Milei has met with White House officials during their visits to Argentina, his approach during his own travels emphasizes his preference for engaging with business executives. 

This unique diplomatic approach brings some key questions that need to be addressed: why has Milei adopted such a distinctive strategy? Does it align with the current dynamics of the global business environment amid an increasingly volatile and competitive geopolitical context? In short, will this ‘CEO diplomacy’ prove successful in attracting significant FDI to a country in dire need?

How Milei’s libertarian ideas shape his foreign policy views

Milei’s decision to implement a ‘CEO diplomacy’ is no coincidence. To understand it, one must consider his ideological foundations, which shape his perceptions and worldview, thereby conditioning his foreign policy approach. In this sense, Milei’s diplomacy is rooted in the principles of the Austrian School of Economics, which significantly shapes Milei’s views, thoughts and perceptions.

In his widely read 1973 book, For a New Liberty: the Libertarian Manifesto, Murray Rothbard outlines numerous ideas that have significantly influenced Milei’s worldview. In a recent interview, the President even claimed that Rothbard was ‘his North’. The book centers on one of Rothbard’s and the Austrian School’s core ideas: the abolition of the state, as they understand it as a coercive entity that limits the individual’s freedom.

With regard to foreign policy, Rothbard states that “in a perfectly libertarian world (…) there would be no foreign policy, because there would be no states, no governments (…)”. Considering the influence that these works have had in Milei’s formation is crucial to understand his behavior as president. While this does not mean that he entirely eschews traditional foreign policy, as he has in fact met with ideologically aligned foreign leaders such as Nayib Bukele (El Salvador), Giorgia Meloni (Italy), and Benjamin Netanyahu (Israel), it remains true that his most widely publicized and celebrated visits have been with figures from the business sector. In fact, the significance of these individuals in Milei’s view of international politics was evident even during his campaign. Following his interview with Tucker Carlson and the praise it received from Elon Musk, his close advisor and current minister of foreign affairs claimed that Argentina was ‘back on the geopolitical stage’.

These elements suggest that Milei – and his administration – ultimately views the international system as a sphere in which states and governments should not necessarily be regarded as the primary actors. Instead, given his strong ideological background, he believes that influential individuals such as tech company CEOs are far more relevant for achieving Argentina’s economic success through the attraction of investment.

CEO Diplomacy in the 2020s

The question of whether Milei’s ‘CEO diplomacy’ is likely to succeed in its aim of attracting significant FDI remains a key one. To try to answer it, it is crucial to examine what the world looks like in the 2020s, as the global environment is always a key constraint for the foreign policy success of any country, but especially peripheral ones. Is the world going towards a ‘Technopolar Moment’, as Ian Bremmer suggested, in which Big Tech companies will increasingly be the most influential actors in the geopolitical sphere?

As professor Stephen Walt noted, regardless of how important Big Tech companies are becoming, states still retain a power that puts them in an unparalleled position because of the power and loyalty they command. While firms’ investment decisions are rarely influenced by their home state’s political preferences, governments around the globe have been steadily gaining terrain in the domain of investment decision-making due to changes in global conditions.

A recent working paper from the IMF has shown strong evidence that flows of both trade and FDI are rapidly changing due to geopolitical tensions as well as a surge in trade-distortive measures that governments are implementing with a view to enhancing their supply chain resilience and ensuring its economic security. The most significant conclusion that can be drawn from this is that, if states are increasingly shaping FDI flows based on national security and supply chain resilience considerations, an effective diplomatic strategy aimed at attracting investment would give importance to state-to-state relations.

Will CEO Diplomacy prove successful?

Based on this evidence, a diplomatic strategy that undermines the relevance of heads of states and governments in the attraction of FDI flows does not seem to be the most pragmatic one in the current global environment. Milei’s radical views remain a constraint for the success of his agenda given the nature of current world affairs. The weight that his ideology has in his foreign policy and diplomatic strategy is likely to lead to failure due to its limited recognition of the importance of modern states as drivers of economic priorities and investment.

However, despite this analysis being primarily focused on Milei’s diplomacy and his foreign policy behavior given his worldview, it must also be acknowledged that a more nuanced foreign policy alone would not necessarily turn Argentina into an attractive destination for FDI. Conversely, foreign policy stands as a secondary, though increasingly important, factor for this goal, with domestic economic barriers as the most significant hurdle.

For Milei to deeply transform Argentina by, among other things, attracting important flows of FDI, it is imperative that his administration first tackle the urgent domestic problems the country faces. Enhancing the macroeconomic environment by drastically reducing public expenditure, tightening monetary policy, eliminating foreign exchange controls and creating a fiscal framework that incentivizes investment is crucial. Furthermore, a microeconomic approach that provides stimulus to specific sectors to attract more investment should also be a top priority. Key sectors should be tradable goods with a view to boosting exports, especially in those activities linked to natural resources and biotechnology, where Argentina has comparative advantages.

Therefore, to fully integrate into globalization by boosting its inward FDI and modernizing its productive infrastructure for sustainable growth, Argentina must implement many changes. Among them, the administration’s foreign policy requires review. Milei’s ‘CEO diplomacy’ is ineffective in maximizing the potential opportunities the world offers, as it is based on a flawed understanding of current global dynamics. A more pragmatic foreign policy should be coupled with structural reforms in the macro-level and appropriate incentives for specific sectors for Argentina to become a more business friendly and attractive emerging market poised to benefit from the opportunities provided by its natural resource-richness.

Fernando Prats is the Director at London Politica’s Latin America Program. He specializes in political risk in Latin America and has contributed articles and reports to various consultancy firms, think-tanks and publications in the US, the UK, Canada, and India.