Buenos Aires, Argentina — Javier Milei and Donald Trump appear to like one another. At the least, they’ve said as a lot. “I like him as a result of he loves Trump,” stated the present U.S. president on the marketing campaign path. Again in 2023, the president of Argentina took a couple of pages from the Trump playbook to succeed in the Casa Rosada as an outsider. Now, Trump is even taking a web page from Milei’s e-book, launching the Division of Authorities Effectivity (DOGE), which the president debuted in Argentina final yr.
Their bromance goes additional. The libertarian supported the Republican’s candidacy and was one of many choose international leaders invited to Trump’s inauguration. The rapport consists of intensive alignment with U.S. international coverage, together with most votes within the United Nations — a stark distinction to earlier Argentine administrations. Milei additionally expects help from Trump for his financial plan, particularly in key negotiations with the Worldwide Financial Fund (IMF), which is headquartered in Washington, D.C.
However will Trump’s financial imaginative and prescient truly profit Argentina and on a regular basis Argentines?
Heading into 2025, the libertarian faces a number of challenges. He goals to finish inflation and decrease costs whereas avoiding a recession and a surge in unemployment. Milei additionally must amass sufficient {dollars} to pay again international debt whereas protecting the alternate charge tied to a powerful U.S. greenback — a coverage that has strengthened the Argentine peso however stored costs for frequent items excessive.
Milei has made stunning advances in Argentina’s economic system in 2024, decreasing triple-digit inflation and ending a double-digit deficit whereas main a minority in Congress. The Argentine president has nonetheless confronted widespread criticism for the extent of the finances cuts, which have hit pension recipients and public sector employees the toughest.
His authorities should additionally negotiate a brand new settlement with the IMF, ideally one that features contemporary money circulate to replenish depleted treasury reserves. Milei can also be anticipated to elevate financial restrictions — often called the “cepo,” or clamp, on greenback exchanges — whereas avoiding a devaluation that would reignite inflation.
And he hopes to attain all of this whereas profitable October’s midterm elections, as a defeat may jeopardize his total program.
Trump’s help is essential to reaching these objectives. Negotiations between Argentina and the IMF have accelerated in latest weeks, thanks partially to American affect. An settlement is predicted within the first quarter of 2025, however selections concerning Milei’s future financial program — notably the top of the “cepo” — might have to attend till after October’s elections.
“We don’t but know if there can be new money from the IMF or whether or not we’ll have an settlement to get by way of the electoral yr after which anticipate selections after the elections,” Amilcar Collante, an economist from La Plata Nationwide College, advised Argentina Reviews. He doubts an eventual settlement will embrace “contemporary cash” or, extra seemingly, if it will likely be “an settlement for the electoral yr, topic to evaluate after the elections.”
“An settlement is simpler with Trump, it should speed up negotiations. I don’t foresee a big mortgage; $20 billion is the determine being talked about. I’d prefer to see the necessities. The IMF all the time asks for one thing,” defined Collante.
Milei’s program features a mounted 1% month-to-month enhance within the alternate charge, often called a “crawling peg,” and interventions within the various greenback markets. Collante believes an settlement with the IMF would seemingly require abandoning such practices. “I believe the federal government will keep on with its program,” he stated.
The hazard of Trumponomics
President Trump may love to assist Milei, however it stays unclear whether or not his program will profit Argentina, whose economic system depends closely on agricultural and vitality exports. Escalating commerce wars between the USA and China may hurt Argentina, which sells a good portion of its grains to Asia. Moreover, a strengthening U.S. greenback may go away the Argentine peso with uncompetitive export costs and better dwelling prices at house.
“Trump will most likely threaten extra tariffs than he’ll in the end impose,” stated Collante. “With OPEC, he’ll attempt to promote extra American oil, and he’ll threaten China with tariffs to barter on different points.”
Unconventional oil extraction and rising exports may assist include inflation, and “that may give [Federal Reserve Chairman] Jerome Powell extra room for a lax financial coverage and to decrease the Fed’s charge additional than what the market expects,” Collante added. In consequence, the greenback wouldn’t strengthen additional, which might profit Argentina.
Milei should wait to see what Trump’s financial program entails. “It’d respect the U.S. greenback if it will increase the fiscal deficit and the Fed can’t decrease its charge; that may complicate issues for Argentina,” stated Collante.
“Argentina’s technique with a 1% month-to-month crawling peg and inflation above that charge will proceed to strengthen its foreign money. It’s a scheme that may solely be short-lived — you’ll be able to’t lengthen it without end. The goal is reaching October’s elections,” defined Collante.
The economist doubts the commerce warfare will escalate to a harmful level, because the battle is already priced in. “China is rising much less, and an enormous tariff would have an effect on the yuan. It’s uncertain the tariffs will turn into extra of a coverage than a negotiating tactic. It may have an effect on the U.S. as nicely. If you wish to slash inflation however add tariffs to your individual imports, costs will rise. At that time, you’re enjoying with precise U.S. progress,” the economist concluded.
