Where is Our Milei?

https://elmundo.cr/mundo/se-estan-muriendo-trump-justifica-su-ayuda-a-argentina-y-oficializa-acuerdo-por-usd-20-000-millones/

They are dying": Trump justifies his aid to Argentina and formalizes agreement for USD 20,000 million

Washington and Buenos Aires signed an agreement on Monday, October 20, for a swap line - currency exchange - for 20,000 million dollars, as the government of Donald Trump had promised in recent weeks to that of Javier Milei. The pact – described by Buenos Aires as an "exchange rate stabilization agreement" – was made official a day after the Republican said that Argentines "are fighting for their lives" and less than a week before a key legislative election in the Latin American country.

Argentina and the United States seal with a signature the pact on a financing line of 20,000 million dollars, through a currency exchange (swap).

Through a statement, the Central Bank of the Argentine Republic (BCRA) confirmed on Monday, October 20, that it is an agreement signed with the U.S. Department of the Treasury and specified that the objective is to "contribute to the macroeconomic stability of the Latin American country, with special emphasis on preserving price stability and promoting sustainable economic growth."

According to the official note, the agreement "establishes the terms and conditions for the performance of bilateral currency swap operations between both parties."

The pact will allow the BCRA to "expand the set of monetary and exchange policy instruments available, including the strengthening of the liquidity of its international reserves," it added.

The announcement, which takes place in the midst of a run against the Argentine peso and comes after weeks of negotiations, joins other measures by the U.S. Treasury in support of Milei before the legislative elections on October 26, crucial for the president.

Trump had already conditioned aid to Argentina on the victory of Milei's party in those elections. "If Milei does not win, we will not be as generous," the White House leader had assured on October 14, during the Latin American president's visit to the Banking House.

However, on the eve of the agreement's officialization, Trump justified his economic support for the nation.

Trump's diagnosis of Milei's Argentina
On the night of Sunday, October 19, Donald Trump told the press that his government would "buy some meat from Argentina" with the aim of reducing domestic prices. Thus, he justified his economic support for the country.

Asked what he would say to "American farmers who feel that the agreement benefits Argentina more than they do," Trump said that the country "is fighting for its life" and that "nothing is benefiting Argentina."

He added that he will try to "help them survive in a free world."

Days after receiving President Javier Milei at the White House and warning that to continue his support the Argentine must win the elections, Trump again referred to the country during statements aboard Air Force One.

"The President of Argentina is trying to do his best, but don't make it look like you're having a good time," the president said.

Trump's qualms about his support for the Casa Rosada
Last week, however, Trump had conditioned his "generosity" on a victory of Milei's party,Freedom Advances, in the legislative elections of October 26, the result of which will be key to knowing whether or not the ruling party will have more seats in Congress to carry out structural reforms.

Last week Trump and Milei held an official lunch in Washington. In this context, the U.S. president gave a press conference in which he said: "If he loses the elections, we are not going to be generous with Argentina."

"I hope that the Argentine people understand how well he is doing his job and support him in the upcoming midterm elections, so that we can continue to help him reach Argentina's incredible potential. Milei has my total and absolute support. He will not let you down," Trump said last week after the meeting with Milei.

The Argentine president seeks to add the necessary seats in the Legislative to deepen his agenda in economic matters. In the government's sights is the labor, tax and pension reform, which is opposed by large sectors of the population.

In the government, however, they relativize the importance of getting large numbers in the elections.

A good result is "the one that allows me to get the third to be able to defend the government's measures," Milei said last Thursday, October 16, in reference to the votes necessary so that his presidential vetoes cannot be reversed.

Argentina's exchange rate vulnerability in Washington's sights
The U.S. Treasury had already begun to act to avoid an exchange rate 'shock' before the elections: in an unprecedented intervention in the Argentine foreign exchange market, it bought pesos - for an unknown amount - and injected dollars.

So far he has participated in three days, the last one last Thursday. This was reported by the head of the U.S. Treasury, Scott Bessent, on his account of the social network X and where he added: "We have the capacity to act with flexibility and forcefulness to stabilize Argentina."

In that intervention, the Treasury bought pesos in the "'blue chip exchange' and in the spot market," Bessent confirmed.

A "blue chips swap" allows an investor to buy a foreign asset, usually depreciated, and then sell it on a local market at a higher price.

However, the measure was not enough to stop the escalation of the price of the greenback.

The situation marked a relevant point on September 8 after the defeat of the ruling party in the legislative elections of the province of Buenos Aires and after Milei had to lower its candidate in that district, José Luis Espert, due to accusations of being linked to drug trafficking. Since then, the peso has lost 7% against the dollar.

The U.S. intervention aroused criticism in the Argentine opposition. "The economy is remotely controlled from the United States," said former President Cristina Kirchner, last Friday, October 17.

Due to the inconsistencies of the exchange rate scheme and the difficulties in accumulating monetary reserves, Argentina has been facing growing exchange rate pressures since the middle of this year, while investors' doubts increase about how the South American country will face next year's large debt maturities.

As part of his strategy to slow down high inflation, Milei has propped up the value of the Argentine peso, at the cost of losing billions of dollars in recent months from the Treasury and the Central Bank, whose reserves are insufficient.

In this context, Milei obtained last month the explicit support of Trump and the promise of Bessent of a loan through his Exchange Stabilization Fund (ESF) and a currency swap for 20,000 million dollars.