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Argentina’s libertarian leader lavished praise on Donald Trump ahead of his first White House meeting with the US president on Tuesday.
It’s a tactic that has helped transform President Javier Milei’s cash-strapped country into one of the Trump administration’s closest allies.
The Trump-Milei bromance has already paid off for Argentina — most recently, to the tune of a US$20-billion bailout.
Experts say Milei comes to the White House with two clear objectives. One is to negotiate US tariff exemptions or reductions for Argentine products.
The other is to see how the United States will implement a US$20-billion currency swap line to prop up Argentina’s peso and replenish its depleted foreign currency reserves ahead of crucial midterm elections later this month.
The Trump administration made a highly unusual decision to intervene in Argentina’s currency market after Milei’s party suffered a landslide loss in a local election last month.
Along with setbacks in the opposition-dominated Congress, the party’s crushing defeat created a crisis of confidence as voters in Buenos Aires Province registered their frustration with rising unemployment, contracting economic activity, and brewing corruption scandals.
Alarmed that this could herald the end of popular support for Milei’s free-market programme, investors dumped Argentine bonds and sold off the peso.
Argentina’s Treasury began haemorrhaging precious dollar reserves at a feverish pace, trying shore up the currency and keep its exchange rate within the trading band set as part of the country’s recent US$20-billion deal with the International Monetary Fund.
But as the peso continued to slide, Milei grew desperate.
He met with Trump on September 23 while in New York City for the United Nations General Assembly. A flurry of back-slapping, hand-shaking and mutual flattery between the two quickly gave way to US Treasury Secretary Scott Bessent publicly promising Argentina a lifeline of US$20 billion.
Markets cheered, and investors breathed a sigh of relief.
In the days that followed, Argentine Economy Minister Luis Caputo spent hours in meetings in Washington trying to seal the deal.
Reassurance came last Thursday, when Bessent announced that the US would allow Argentina to exchange up to US$20 billion worth of pesos for an equal sum in dollars. Saying that the success of Milei’s programme was “of systemic importance”, Bessent added that the US Treasury directly purchased an unspecified amount of pesos.
For the Trump administration, the timing was awkward as it struggles to manage the optics of bailing out a nine-time serial defaulter in the middle of a US government shutdown that has led to mass lay-offs.
But for Argentina, it came in the nick of time.
Aware of how a weak currency could threaten his flagship achievement of taming inflation and hurt his popularity, Milei hopes to stave off what many economists see as an inescapable currency devaluation until after the October 26 midterm elections.
A devaluation of the peso would likely fuel a resurgence in inflation.
“Milei is going to the US in a moment of desperation now,” said Marcelo J. García, political analyst and Director for the Americas at the Horizon Engage political risk consultancy firm.
“He needs to recreate market expectations and show that his programme can be sustainable,” García added. “The government is trying to win some time to make it to the midterms without major course corrections, like devaluing or floating the peso.”
Milei was vague when pressed for details on his talks with Trump. He was expected to have a two-hour meeting with Trump, followed by a working lunch with other top officials.
There has been no word on how Argentina, the IMF’s largest debtor, will end up paying the US back for this US$20 billion, which comes on top of IMF’s own loan for the same amount in April. And that one came on top of an earlier IMF loan for US$40 billion.
Despite all the help, Milei’s government already missed the IMF’s early targets for rebuilding currency reserves.
“The US should be concerned that Argentina has had to return for US$20 billion so quickly after getting US$14 billion upfront from the IMF,” said Brad Setser, a former US Treasury official now at the Council on Foreign Relations.
“I worry that this may prove to just be a short-term bridge and won’t leave Argentina better equipped” to tackle its problems, Setser added.
AP
English (US) ·