The New Colonialism of Milei’s Investment Plan

Approved amid harsh repression of protesters, the economic scheme at the heart of the Argentine government’s flagship legislation hands big perks to multinationals at the expense of territories, peoples, and the environment.

June 27, 2024

Argentina's Congress building, Buenos Aires. (Emiliorisoli / CC BY-SA 3.0)

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“Big business didn't ask for this much.” That’s how Argentine former vice-minister of economy Emmanuel Álvarez Agis described the Large Investment Incentive Regime (RIGI) promoted by President Javier Milei and approved on June 12 by the Senate. The RIGI is the most significant section of the so-called “Ley Bases,” which the government sees as essential to its libertarian project. After moving through the Senate, the law passed to the Chamber of Deputies, where it is expected to reach final approval before the end of June.

The investment incentive scheme is as controversial as it is radical. In a television interview, Álvarez Agis said that investing companies had included in the bill a clause that would allow 100 percent of foreign currency earned on exports to stay abroad, with the intention of negotiating down to 25 percent. However, the government kept the figure at 100 percent, a move unlikely to happen in any other country.

“In addition,” Álvarez Agis explained, “it lowers their taxes and gives them the possibility of filing lawsuits through the ICSID.” ICSID, the International Center for Settlement of Investment Disputes, is the World Bank’s arbitration body, through which corporations can sue governments over lost profits. “This is for an enclave economy. I know of only two countries, Angola and Nigeria, that regimes very similar to RIGI,” he concluded.

Senator Oscar Parrilli, of the Peronist Unión por la Patria coalition, argues that the RIGI amounts to “anarcho-colonialism.” His bloc voted against the bill. “It does not generate any benefit for the vast majority of Argentines. These are extractive measures for our natural resources, without producing added value, and with the aggravating factor that the foreign currency obtained by the companies will not enter the country and may be deposited in tax havens," he said.

Parrilli detailed the RIGI’s main characteristics. In addition to allowing 100 percent of foreign currency to be left abroad, it enables projects in activities that attract investments based on the country's natural comparative advantages; reduces taxes and export and import duties, creating imbalances with other national companies; guarantees tax, exchange, and customs stability for 30 years; discourages national production; allows the import of any good, without controls on place of origin or contents;  and does not require environmental protection measures.

In addition, it does not guarantee the fulfillment of the country’s own consumption needs before goods are exported. Thus, Argentina could export energy resources, produced at low cost, and import energy for domestic consumption at a much higher international price. The difference between the local cost and the international price will be paid by Argentines, to the benefit of investors.

New Colonialism and the Environment

“The RIGI is a regime of legal privileges that violates the environmental rights of the population,” said Ariel Slipak, research coordinator for the Environment and Natural Resources Foundation (FARN). “A province that adheres to the regime will not be able to impose any regulations that the beneficiaries consider counterproductive for their project. Any environmental or labor regulation can be considered null and void if a company claims that it is contrary to its investment project.” These privileges are considered unconstitutional, since the Argentine Constitution empowers provinces to govern their own natural resources.

The experts and politicians consulted for this article highlighted that the RIGI will modify Argentina's insertion into the global economy for decades. Senator Parrilli and Senator Martín Losteau, of Unión Cívica Radical, also describe it as an enclave model. Lawyer Carlos de la Vega, who specializes in technology and international relations, suggests that the RIGI “proposes a regime similar to the one that reigned in the Potosí of Upper Peru during the Spanish Empire between the 16th and 17th centuries.”

De la Vega explained this characterization with a series of comparisons. “The first occurs with mining, an exploitation of the territory marked by its non-renewability,” he said. The second corresponds to the fact that the RIGI is organized based on the interests of foreign groups to directly use and benefit from a resource as it is extracted, without adding local value. Third, the investment is made in the context of a global competition between big powers that fight to obtain these resources at the lowest possible cost. Finally, the comparison relates to the role of local political and economic elites, who function as a mere transmission belt for the interests of external powers and are thus disinterested in investments that further the country’s economic development. The free availability of goods and currencies enabled by the RIGI deepens this comparison: as was the case with the ancient metropolises, investment groups won’t leave resources in the country.

Among these resources are lithium and gas, of which Argentina has large reserves to exploit. This attracts electric vehicle manufacturers, who will be able to export lithium salt to their factories outside the country to produce batteries. Locally, no value will be added, the foreign currency products of that export will not enter Argentina, and there will be no protection or remediation of environmental damage.

“The productive mix in a given territory is a defining aspect of the use of public and private space, air quality, and water use,” explained Slipak. “Lithium mining uses high volumes of water in usually arid regions, changing the lifestyle of the local population.”

In the case of fracking and open-pit mining, if there is a shortage of water, the company will have priority access over the local population. For lawyer and university professor Natalia Salvo, “this is contrary to the constitutional principle of the preeminence of people over things.”

For environmental lawyer Enrique Viale, the RIGI “will accentuate the primarization of the Argentine economy.” He added: “In environmental terms, [RIGI] is dramatic because it will be very difficult for the territories to confront it, since… foreign courts may intervene.” According to an analysis by the Argentine Economic Policy Center (CEPA), “the only objective is the entry of fresh dollars in the short term, with the intention of freeing the exchange market, rather than laying the foundations for a new development pattern or agenda for the country.”

Diego Morales, director of litigation at the Center for Legal and Social Studies (CELS), said that “the main point” of the RIGI is “the absolute lack of any environmental consideration.” He continued: “Environmental impact reports are not required. Nor is there any obligation to consult Indigenous or peasant communities or those living in the territories where the activities are carried out. Indigenous communities will be in a situation of greater vulnerability regarding the protection of their territories.”

Furthermore, the approval deadlines for projects are very short under the RIGI. The government must respond within 45 days. According to Morales, this means it will be “impossible to carry out a consultation or produce the information necessary to analyze the environmental impacts of the projects.”

The Palace and the Street

As senators debated the “Ley Bases” bill on June 12, thousands of people peacefully mobilized against its passage. As typically has happened during demonstrations since Milei took office, the city awoke to the area around Congress fenced off and filled with hundreds of security agents. The first act of institutional violence was an attack on a group of opposition lawmakers. The representatives were in the street talking to police officers when, without warning, they were pepper sprayed. Some of them had to be rushed to the hospital to be treated for injuries.

In the afternoon, as protesters were leaving, the police began to arrest people who were far away from the congress building and who were not participating in any collective action. A total of 33 people were arbitrarily detained, without evidence against them. They were accused of “inciting collective violence against institutions,” “organizing or belonging to groups whose objective is to impose their ideas or combat those of others by force or fear,” and “crimes against public powers and constitutional order.” Days later, when the majority had been released due to lack of evidence, the minister of justice referred to them as “terrorists.” According to the security minister, the individuals had tried to commit a “modern coup d'état.”

Among those detained were a street food vendor, his daughter, and granddaughter; a well-known musician coming out of the subway; university students who were returning home; and a woman who had approached the demonstration alone. Despite the lack of evidence, most of the detainees were transferred during the early hours of the morning to federal prisons, without their families or lawyers being notified.

Gonzalo Duro, a visual artist and judiciary worker, shared the details of his arrest: “It was approximately 6 in the afternoon. The dispersal of the demonstration was already beginning. About 6 or 7 blocks from Congress, there was a police cordon and a person convulsing. I approached to help, and the police began making comments about my physical appearance. When I got a little closer to talk to them, they grabbed my hands, detained me, and hit me very violently. I was handcuffed until 10 am the next day. We were a group of 15 people who spent a day and a half lying in the courtyard of a prison, with nowhere to even sit, until Friday, when they took us to court.” A group of women were handcuffed for 25 hours, and during that time they were not given anything to eat or drink.

Two weeks after the legislative session, 28 people have been released, while five remain detained. The prosecutor in the case appealed their release, demanding that everyone be sent to prison again.

UN High Commissioner for Human Rights Volker Türk addressed the Milei government during a Human Rights Council session: “I urge the authorities to place human rights at the center of their policy making, to build a more cohesive and inclusive society. This also means full respect for the right to peaceful assembly and freedom of expression.”

RIGI and Milei’s Foreign Policy

The RIGI can be seen as an expression of the way President Milei relates to the world. He deploys a policy of confrontation with the leaders and states with which Argentina has an important commercial and cultural relationship—such as Brazil, China, Spain, and Mexico—and instead prioritizes the country’s relationship with corporations, for which he considers himself the second most important world leader. An example is his relationship with Elon Musk, to whom Milei seeks to get closer to legitimize himself within the world economy. While Milei demonstrates a kind of admiration bordering on fanaticism, however, Musk seeks to obtain a privileged position for lithium extraction.

With this view of the world—closer to a Cold War reality than to that of a complex multipolar world—the future depends on Argentina’s economic development and the lives of its inhabitants. The Large Investment Incentive Regime is a policy that, in line with this binary view, promotes shuttling the country back to the beginning of the 20th century, a time when, Milei has claimed, Argentina was the world’s leading power. The future of the country is being built by looking at a mirror that reflects back 100 years.

Translated from Spanish by NACLA.

Daniel Cholakian is a sociologist and journalist specializing in Latin America.

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