There is a local saying that goes: “Leave Argentina one month and everything seems to have changed. Leave for 20 years and everything seems to be just the same.”
Never has that saying rung truer than this past week. Last weekend, the President Javier Milei administration seemed lost and trapped in a crippling run on the peso that was jeopardising its future. This weekend, the government exudes confidence after getting a golden lifeline of billions in help from the Donald Trump administration. Yet 25 years ago – or seven if you don’t want to go that far – the country was very much in the same economic and political maze it is now: out of cash to repay debt and overspending at the same time.
As has happened before in his political career, Milei appears to be the right person, in the right place, at the right time. He was the anti-establishment presidential candidate with explosive language about corrupt politicians and a promise to kill inflation in the context of virtual hyperinflation in 2023. He is now a firebrand ultra-right president using anti-Communist language at a time the United States is increasingly concerned about Chinese influence in a region that is mostly run – at least for now – by centre-left leaders.
It is not only luck, of course. Milei built his anti-establishment stance for a few years as a media commentator and, more recently, sided with Trump very early on, even before he was the Republican nominee in 2024. Those two bets paid off.
The next question is what Milei does with his ‘earnings.’ The massive endorsement he got this week from Trump and US Treasury Secretary Scott Bessent has saved the Milei administration from the abyss of a run on the peso and an eventual debt default that was incubating. It is the third time in just over a year that Milei and Economy Minister Luis Caputo have pulled a rabbit out of their hat to extend the life of the government’s economic programme.
Nevertheless, having markets swerving from gloom to euphoria – and vice-versa – is never a healthy indication. Given the background and track record of Milei’s economic team, this is what the government most cares about. But markets don’t vote, at least not on election day. The fate of the Milei programme will be determined by what the government does from now on.
The road map continues to be clear and it will require the Milei government to quit the bullying and adopt sounder economics and better politics. This week, in the midst of the market celebrations over the promised US cash, Gita Gopinath – a person who until three weeks ago was the deputy managing director of the International Monetary Fund, put it in black and white: “US support is certainly helpful to prevent speculative currency moves. However, durable progress will require Argentina to move to a more flexible exchange rate regime, accumulate reserves and build support for its reforms at home.”
Gopinath surely made those same suggestions when she was part of the IMF management. Most likely she was overruled by the political decision of the IMF’s board to stick to supporting Argentina regardless, despite the inconsistencies. Maybe this is one of the reasons she ultimately left and decided to put her real thoughts out, now that she can see things clearly from a teaching position at Harvard University.
The one thing the government should not do is assume its lucky streak will continue forever. Voters in Buenos Aires Province telegraphed earlier this month that the economic programme, even if relatively successful, has electoral limits. If it goes wrong, those limits will burst out, and defeat would turn into a fact, rather than a threat, when 2027 comes around.
In his speech to the United Nations General Assembly this week, Milei said that the world was facing a contradiction between present and future. He said it was a dilemma of “political, economic and philosophical dimensions.” The problem, he stated, is that political leaders are choosing to enjoy the present even if that means destroying the future. “Today’s bread means tomorrow’s hunger,” he said, poetically.
Milei was referring to his government’s top achievement of banking a fiscal surplus. Conversely, he might want to apply the same formula to his government’s endless need to swallow more and more US dollars in the form of unpayable foreign debt.
