What do countries pay for US financial aid? | policy

Argentina has concluded a currency exchange agreement with the United States worth up to $20 billion, with the aim of “contributing to the stability of the Argentine economy,” according to what the Central Bank of the Latin country announced.

This deal came as part of a huge financial support package from the administration of US President Donald Trump, who is considered one of the most prominent supporters of Argentine President Javier Meli, at a time when the latter is facing increasing pressure ahead of the midterm elections scheduled for October 26, as Meli’s “Freedom Advances” party seeks to expand its limited share of congressional seats.

The Argentine peso is witnessing sharp fluctuations in its value ahead of the vote, which has raised fears of a further deterioration in the value of the currency in the coming weeks, with expectations of rising inflation rates, in a way that Argentina has been exposed to more than once over the course of recent decades.

In addition to the currency swap agreement, US Treasury Secretary Scott Picent announced last week efforts to secure additional financing worth $20 billion from “private banks and sovereign wealth funds” to support the faltering Argentine economy.

Milley enters the elections in a weaker position than he was, after failing to stabilize the exhausted peso, despite depleting almost all of the central bank’s dollar reserves to try to support the currency.

Monthly inflation, which Milley succeeded in curbing temporarily after assuming power in December 2023, has risen again in recent months, exacerbating the economic crisis in the country.

While President Trump hosted President Milley at the White House last week, the US President made an explicit threat to Argentine voters to withdraw US aid if his ally lost the elections, saying: “If he loses, we will not be generous with Argentina.”

Trump stressed that the US aid package allocated to Argentina is conditional on Milley’s political success, adding: “If he wins, we will stay with him, and if he does not win, we will leave.”

In a post on the Truth Social platform, Trump wrote: “I hope that the people of Argentina realize how good a job he is doing, and that they will support him in the upcoming midterm elections, so that we can continue to help him realize the tremendous potential of Argentina. Javier Milley has my full and absolute support.”

These statements clearly show the political dimension in American support for Buenos Aires, as the financial package is seen not only as economic aid, but also as a means to consolidate Washington’s influence in Latin America and support a leader who is seen as an ideological ally of the Trump administration.

Since its victory in World War II, the United States has emerged as a superpower controlling the new global economic order. The International Monetary Fund, established in 1944 during the Bretton Woods conference, was one of the main tools used by Washington to enhance its global influence.

American control mechanism

The United States has a crucial voting share in the IMF of 16.5%, effectively giving it veto power over important decisions that require an 85% majority.

This voting superiority, coupled with the location of the Fund’s headquarters in Washington and the dependence of the global economy on the US dollar, enabled the United States to direct the Fund’s policies according to its interests.

The United States, through dollar transactions that are imposed through American banks, monitors the largest proportion of transfers, commercial payments, and investment flows, in addition to the dollar’s ​​continued possession of nearly two-thirds of global foreign exchange reserves, which gives it a competitive advantage that is not available to any other country.

Examples of the Fund’s political employment

Over time, US intervention in the Fund’s decisions to aid distressed countries increased, as dictated by the strategic interests of the world’s superpower.

The case of Chile (1970-1973)

When Salvador Allende, with socialist tendencies, was elected president of Chile in 1970, the United States pressured the Fund to stop loans to Chile, after the president adopted economic policies that conflicted with American interests and nationalized the copper industry that was controlled by the United States.

After the military coup led by Pinochet in 1973, aid quickly resumed despite the human rights violations that marred his reign, which certainly did not escape Washington’s attention, which undermines the narrative of US support for democracies and freedoms.

The case of Greece (2015)

The Greek debt crisis reached its peak in 2015, and the leftist credit government led by Alexis Tsipras, which came to power at the time through fair elections, tried to negotiate with the IMF and the European Union to obtain better conditions for financial rescue, but the Fund insisted, at the urging of the United States, on a strict austerity program in exchange for saving the European country from bankruptcy.

Impacts on credibility and policy effectiveness

The Fund’s employment as an instrument of US foreign policy has undermined its credibility as a neutral international organization, as it is often viewed as an instrument of US political pressure.

By tracing the path of US interventions through the International Monetary Fund, recurring patterns emerge that reflect the selective use of financial aid.

Financial support is often directed to governments loyal to Washington, even if their human rights records are controversial, while aid is withheld from governments that oppose American policies, regardless of the economic and humanitarian conditions of the people, which confirms that aid is often linked to political and military alliances more than to real development needs.

American influence, whether associated with providing direct financial aid, or through international organizations such as the International Monetary Fund, raises fundamental questions about the integrity of American financial support policies for poor countries, which clearly shows the importance of dealing with caution with American aid, while seeking to reform the governance structure within the Fund, to be more representative of developing and emerging countries, and closer to improving the effectiveness of its reform programs in those countries. countries.