Buenos Aires (Argentina) (AFP) – Argentina and the United States signed off on a $20 billion financial lifeline Monday, hoping to avert economic meltdown and boost President Javier Milei ahead of tough legislative elections. President Donald Trump has plied Argentina with political and economic support ahead of the October 26 vote, which will decide whether his close ally Milei can force through labor, tax, and pension reforms.
Milei, once a global poster boy for budget-slashing libertarian politics, is on the ropes as Argentines head to the polls. Many of his reforms are languishing, his popularity is falling, and he is battling to avoid devaluing Argentina’s currency, the peso, before the vote, fearing that would drive up consumer prices. But markets see the peso as substantially overvalued, forcing Buenos Aires to use scant foreign reserves to defend its value. Now his friend in Washington has agreed to step in with a long-mooted $20 billion plan. Trump has also pledged another $20 billion in public and private funds to help Argentina weather market turmoil, conditional on a strong electoral showing by Milei. “If he loses, we are not going to be generous with Argentina,” Trump said as he hosted Milei at the White House earlier this month.
Milei outlined details of the bailout in an interview with Channel 8 that aired Monday, saying it would only be activated if needed.
– ‘Remote control’ – Trump’s support for Milei has raised eyebrows in Washington, where Argentina is seen as neither a vital trade nor security partner. US exports to Argentina are worth about $9 billion a year, versus $28 billion worth of exports to Colombia. In contrast to his support for Milei, Trump has vowed to cut aid and security support to Colombia because of a spat with leftist President Gustavo Petro.
Facing criticism in the United States, Trump snapped at a reporter on Sunday as he justified his largesse. “They’re fighting for their life. Do you understand what that means? They have no money. They have no anything.” Last week, the US Treasury intervened by buying up pesos, but failed to stop the currency’s decline.
Argentina’s opposition has also slammed Trump’s intervention. “The economy is being run by remote control from the United States,” former president Cristina Kirchner said Friday from her Buenos Aires apartment, where she is under house arrest for corruption.
US intervention has so far failed to halt the dollar’s surge against the peso: the greenback broke through the upper band of the exchange rate on Monday, hitting 1,495 pesos. Since Milei’s allies were defeated in Buenos Aires province legislative elections in September, the peso has lost seven percent of its value against the dollar. Most economists expect the government to make moves toward devaluation after the election.
© 2024 AFP
