Don’t Cry for Argentina: Recent Insights into an ‘Economic Miracle’ and an American ‘Bailout’
Argentina’s President Javier Milei was handed a temporary reprieve on 9 October 2025, courtesy of his reliable and like-minded North American ally. On that day, US Treasury Secretary Scott Bessent finalised a $20 billion currency swap line with Argentina’s central bank (Banco Central de la República Argentina), via the Treasury’s $221 billion Exchange Stabilization Fund, and guaranteed to buy Argentine pesos on the open market along with Argentine dollar-denominated bonds, thereby giving Argentina access to much-desired US dollars in exchange for pesos. The aim was to prop up a depreciating peso in the face of dwindling foreign currency reserves, and to provide short-term liquidity for Argentina in a “moment of acute illiquidity.” It may be the wrong strategy to adopt, as an overvalued peso is making the country less competitive by increasing the prices of its exports. A strong focus on combating inflation is, however, behind Milei’s relentless driven to avoid a devaluation of the peso, even though the current exchange rate seems unsustainable.
After Milei took over as President, early results were promising as his “chainsaw economics” took effect. His shock therapy helped balance the budget, and a budget surplus was achieved for the first time since 2009; annual inflation, although still high at around 30%, fell steadily from triple-digit to double-digit figures, allowing serial interest rate cuts; and per capita GDP rose. These developments have, however, come at a high cost to both the state and the general public. Many government ministries have disappeared, tens of thousands of public sector workers have lost their jobs, and pensions have been frozen. “Fiscal prudence”, with lavish spending cuts, alongside a continued reliance on low-value commodity exports, are now biting back, as Argentina’s economy stagnates, with a drop in the purchasing power of the peso and in consumer spending.
Milei is currently under considerable pressure, with his popularity in freefall. His La Libertad Avanza (Liberty Advances) party holds just seven out of 72 seats in the Senate, the upper house of parliament, and 38 out of 257 seats in the lower house-the Chamber of Deputies. A number of setbacks this year have undermined Milei’s credibility. On 14 February 2025, Milei promoted a meme coin-$LIBRA-on his social media accounts, only for it to collapse shortly after. This cryptocurrency “scam” led to losses of $251 million for investors. In April, Argentina had to resort to a $20 billion loan from the International Monetary Fund (IMF), despite owing that body $44 billion under a 2018 loan agreement under market-friendly President Mauricio Macri. This injection of funds recognised Argentina’s “fiscal discipline” and came in exchange for relaxing currency controls. This loan was intended to replenish the country’s dollar reserves and to help end foreign exchange restrictions which were restricting access to the dollar. This happened to be the IMF’s twenty-third assistance package for Argentina.
In August, Karina Milei, the President’s sister, chief of staff, and top adviser, was alleged to have taken kickbacks from pharmaceutical companies in exchange for the issue of government contracts. The former tarot card reader and seller of cupcakes on Instagram wields considerable clout in an informal power-sharing arrangement with her brother as the de facto first lady. In an indication of his growing unpopularity, Milei’s convoy was attacked with stones and bottles on 27 August, as he visited the southern Buenos Aires suburb of Lomas de Zamora- a Peronist stronghold. On 6 September, Milei’s party was defeated by Fuerza Patria, a left-wing Peronist party, in the Buenos Aires provincial election. Around 40% of Argentina’s 44 million citizens live in this populous province. Fuerza Patria gained 39 out of 92 seats in the provincial Chamber and 24 out of 46 seats in the Senate, to 30 deputies and 16 senators for La Libertad Avanza. This substantial electoral defeat has further dented investor confidence in Milei’s Argentina.
On 2 October, the Senate voted 59-7 to block Milei’s veto on extra funding for public universities, and 58-7 to block a veto on added funds for emergency children’s healthcare. Then, on 6 October, José Luis Espert, chair of the Budget Committee in the Chamber of Deputies, withdrew his candidacy for the Chamber from Buenos Aires Province, after admitting to accepting a $200,000 payment from Federico Machado- who has been indicted by the US government for drug-trafficking and money laundering. Espert’s departure meant that 14.3 million ballot papers had to be reprinted. The flamboyant launch, at a concert at the capital’s Movistar Arena on 7 October, of La Construcción del Milagro (The Construction of the Miracle), a 573-page compilation of Milei’s speeches from the past year, may prove too late to convince Argentinians of their “miraculous” circumstances.
In the midst of a US government shutdown and at a time when Argentina is benefiting from the sale of soya beans to China at the cost of American farmers, Trump is busy rescuing a trusted ally and hoping to seal his chances of electoral success in the coming mid-term legislative elections on 26 October. A Democratic Senators’ proposal for a No Argentina Bailout Act is guaranteed to fail in a US Senate with a Republican majority. It is up to Argentinian citizens to judge Milei’s performance and thus decide Argentina’s future path of travel, when given the chance to do so at the ballot box. Meanwhile, Argentina’s fragile economy remains in a state of turmoil as might be expected under the circumstances.
Ashis Banerjee