Milei’s Argentina needs a financial lifeline

@OPRArgentina/X

Argentinian President Javier Milei is tight on cash, and everyone is mad at him. In an effort to stave off economic collapse, keep the bill collectors at bay, divert attention from a bribery scandal, and calm growing political tension before his country’s midterm elections next month, Milei asked a friend for help. President Trump met with the chainsaw-wielding leader yesterday (he left the chainsaw at home) at the United Nations General Assembly in New York, where he pledged his full support to the country—but said they don’t need a bailout: Milei’s allyship with the US is working in his favor: Treasury Secretary Scott Bessent promised to offer “all options for stabilization,” including a direct loan. The World Bank said it would speed up sending $4 billion to the country as part of a larger $12 billion package it announced in April. A drop in the bucket The continued allyship from Trump and his administration might buy Milei and his ultra-libertarian, free-market plan a little more time, but…it’s not looking good. When Milei was elected in 2023, he promised to bring down inflation from nearly 26% in 2023, which he did. It was 1.9% last month. But economists say Milei’s strategy—to overvalue the peso against the US dollar—was shortsighted and ultimately devastated Argentina’s economy in other ways. While Milei anticipated a V-shaped recovery, unemployment has jumped from 5.7% to 7.6% since he took office. Inflating the peso has also tanked economic growth and made it impossible for Argentina’s central bank to replenish its dwindling reserves: Last week, the central bank spent $1.1 billion of the reserve’s $20 billion in just three days to keep the peso’s value up. And next year, the country needs to pay roughly $9.5 billion in debt payments. The timing couldn’t be worse for Milei: As businesses in the country close and unemployment rises, his approval rating is plummeting ahead of the country’s October midterms, jeopardizing his support in Congress.—MM