In a fit of sincerity, Trump declared that “Argentina is fighting to survive, it has no money, it has nothing.” With that candor attributable to the union of contempt with anger over the questions about the purchase of Argentine meat that would affect the Republican vote in the countryside, the White House tightened the belt tied around Milei’s neck. A week before elections, the classic “don’t help me, compadre” fuels libertarian discouragement. And as Mexicans suffered through the work and omission of Salinas and Zedillo, the Argentine economy is “on pins and needles.”
Argentina is navigating a perfect storm. Inflation does not drop to single digits after two years, and instead rebounds in monthly terms. Foreign direct investment does not arrive, and instead manufacturing closes plants. Indicators such as the exchange rate, country risk, short-term interest rates deteriorate day by day. The GDP for the second quarter fell 0.1 percent on a quarterly basis and everything indicates that it could add an even more contractionary second period in the third quarter. In short, the fundamentals cry out for help.
That Argentina is a country without monetary sovereignty is a catastrophic aggravating factor. Although private sector debt is moderate, the public sector faces a cascade of expirations. Add to this the drop in international reserves accentuated by rural exporters who store production when they consider that the national currency is overvalued. In short, when political noise grows, the Argentine peso creates a loop of distrust that incites chaos. As if that were not enough, Washington’s involvement sends the wrong signals with recklessness like Trump’s.
To tango it takes two. In an unprecedented action, the US Treasury tied its political capital to the Argentine peso by selling up to 20 billion dollars and an equivalent loan from Wall Street. In exchange, Trump demanded to cut ties with China and guarantee the bailout with inscrutable assets. Once again, Washington undermines the monetary sovereignty of a country in a straitjacket. Without modesty, the White House conditioned the continuity of the relief program on an electoral victory for La Libertad Avanza. Rather than bail out the nation, Trump threw a life preserver to an exhausted Milei for a swim.
To Paul Krugman“Mileinomics is now in serious trouble. That’s why Bessent is offering large-scale aid, not to defend American interests, but to try to rescue the reputation of Trump’s preferred ideology and his cult of loyalty.” The economist attributes the problems to Milei’s budget cuts, which in addition to causing widespread suffering, were unable to gain support outside of their electoral base. “It is not surprising that he resoundingly lost the legislative elections in Buenos Aires and suffered several defeats in the national legislature. The fear of a political collapse of his project triggered the current peso crisis,” says Krugman.
Foreign capital distrusts the exchange rate regime. For example, Morgan Stanley warned in a published note on October 9: “We are skeptical that the band [cambiaria] as it is, it leads to a current account balance… another option is to let the peso float freely.” It sounds easy, but restricting the freedom of the Argentine peso would imply a probable resurgence of inflation, greater public debt in national currency and, of course, an erosion of confidence. By not devaluing before the election, Milei doubled the bet and fueled speculation.
One thing is certain: La Libertad Avanza will add more legislative seats, even without an outstanding vote. In Argentina, the terms of deputies last four years, while those of senators last six. That is, the legislative body is renewed by halves and thirds every two years. In Sunday’s midterm elections, Argentina will elect 24 of 72 senators and 127 of 257 federal deputies. Given that La Libertad Avanza had few deputies and senators four and six years ago, Milei’s conquests, however few they may be, would cannibalize votes from his ally in power (the PRO), the declining party of Mauricio Macri.
With a favorable vote, the ruling party could reform the exchange regime. But if Milei does not obtain a third in any of the chambers, he would lose the ability to raise vetoes and would become a lame duck (lame duck): a president in decline in the last stretch of his mandate. The toxicity of the President would play against him, insensitive to popular clamor and incapable of negotiating with opponents.
If the economy explodes, Argentina would lose a generational opportunity. Not because of the debacle of an extremist economic model, but because the country has enormous natural resources in a favorable cycle. Soybeans, lithium, oil, gas, corn, wheat and meat enjoy global appetite in a context of energy transition, food inflation and geopolitical conflicts. But this apparent blessing can become a curse in greedy – every day a new corruption scandal emerges – and dependent hands. For Axel KicillofPeronist candidate for the 2027 presidential candidacy: “If turning to the IMF is a failure, asking the United States Treasury for a bailout is a failure squared.”
However, the prematurely worn presidential image reveals the weaknesses of shock therapy and the chainsaw. Outwardly, Milei has become the hazmerreiterdubbed a “low-budget Wolverine” by CNN and compared to Austin Powers in the popular Saturday Night Live. Internally, with acts such as the purchase of dollars, Argentines are betting that the Treasury rescue is doomed to failure. In the event that the electoral result is unconvincing, only a miracle could save Milei’s parody of an economic miracle. This Sunday, Ricardo Salinas Pliego’s ultra buddy plays his rest.
The post Milei plays her rest appeared first on Veritas News.
