President Javier Milei and his Economy Minister Luis ‘Toto’ Caputo celebrated the latest deal with the International Monetary Fund as if it had been a major political victory, dedicating it to their enemies. These include the group of people that, according to them, are conspiring against their administration in order to see it tumble. It includes politicians from different political parties, journalists, and any other public persona that essentially disagrees with them.
Last week, they enjoyed the star presence of Scott Bessent, a former hedge fund manager who cut his teeth alongside George Soros before making the jump into the political sphere. Interestingly, Soros is an historically Democratic donor with a strong liberal/progressive slant who has been accused by Donald Trump of being a shadowy figure that has supported some of the worst the United States and the global agenda has to offer in his view: wokeism. Bessent, who hasn’t been “crowned” a billionaire by Forbes magazine but is a very wealthy man — he lives in a US$22 million mansion in Charleston, South Carolina — is a rarity in Trump’s cabinet. He’s the first openly gay Treasury Secretary in US history and is actually married to former prosecutor John Freeman, with whom he has two kids. He is said to be a moderate figure within the cabinet, facing off with Secretary of Commerce Howard Lutnick over Trump’s tariffs-based trade war. Lutnick had actively lobbied for the post of Treasury Secretary and rumours of Bessent’s resignation have been rampant.
The highest-ranking US official to visit Argentina since the G20 meetings held during the Mauricio Macri administration (2015-2019), Bessent rejected the idea that the US could add to the “fresh funds” Caputo had secured from the IMF and other multilateral institutions (he later softened that position) while suggesting that Argentina should close its currency swap with China. His comments sparked a response from the Chinese Embassy in Buenos Aires, which issued a rare communiqué to accuse Bessent of having “secret motives” and attempting to disrupt Beijing’s relationship with Argentina. Less than a week before the US Treasury secretary’s visit, the Milei administration had renewed Argentina’s currency swap with the People’s Bank of China. Milei, a former China-hater (“I don’t deal with Communists,” he once famously said), has praised Beijing after personally meeting President Xi Jinping at the G20 summit in Rio de Janeiro last year. Caught in the middle of the trade war, it seems Milei is learning to become a pragmatist in certain realms of international relations.
The Milei administration sold the IMF deal and Bessent’s presence as a major political victory. It didn’t matter that in the past the self-proclaimed “anarcho-capitalist” had indicated that countries went to the IMF only when their economic policies had failed. This time around, a visibly excited Caputo gave a press conference where he named his whole team one-by-one, while the President gave a national broadcast in which he celebrated the end of the ‘cepo’ currency controls, which were actually only partially lifted. Moments later, he joined the officials of the Economy Ministry in a wild celebration akin to the euphoria sparked by a last-second goal in a gridlocked football match – the need to let it out after having burnt through US$3 billion in reserves in the last month days in order to avert a run on the peso.
The four-year US$20-billion Extended Arrangement with the IMF was also celebrated by Managing Director Kristalina Georgeiva. This is her second deal with Argentina after having signed a restructuring with then-economy minister Martín Guzmán in 2022. Before that, it was Christine Lagarde who led the multilateral lender of last resort, who as managing director inked the Macri-era bailout with Nicolás Dujovne. Georgieva is betting her legacy on Milei and Caputo: this is Argentina’s 23rd IMF deal spanning all the way back to 1956, making it the country with most IMF programmes in history, none of which can be deemed successful. Argentina is the IMF’s largest creditor by far and in 2018 gave Argentina the largest loan it has ever made, signing a US$50-billion deal (later US$57 billion), of which US$44 billion was actually disbursed.
Georgieva, Milei and Caputo all say that “this time is different,” which is actually the title of an influential book about 66 countries across five continents throughout eight centuries that succumbed to financial crises, written by economists Ken Rogoff and Carmen Reinhart. While neither economist has commented on Argentina’s latest IMF deal, President Milei insists that the scenario has changed given the consolidation of a budget surplus as a fiscal anchor. The IMF agrees and notes that the austerity measures, together with the credibility of the Milei administration in maintaining the budget surplus, generates considerable “upside risk,” even in a complex global economic moment. They go on to note the need for tax, revenue-sharing funds and pension reform, together with productivity and labour market flexibility – the usual orthodoxy from the Fund. IMF technicians expect Argentina to add US$4.9 billion in international reserves this year, US$4 billion next year, US$8 billion in 2026, US$12.5 billion in 2027, US$16 billion in 2028 and US$19 billion in 2029. Seems a bit ambitious, particularly given Argentina’s history of disappointment, but no-one’s really looking that far out. Milei and Caputo are looking to the agricultural sector to liquidate their stocks and keep downward pressure on the peso-dollar exchange rate, penetrating the lower-range band (currently set at 1,000 pesos per dollar) in order for the Central Bank to become a net buyer of dollars on the open market. The partial opening of the cepo sparked a small devaluation that will feed into higher inflation, but their expectation is to push it back to a downward trajectory ahead of the upcoming midterm elections on October 26. In the meantime, the beleaguered purchasing power of Argentine society will take another hit.
Whether signing an IMF deal represents a “day of liberation” or one of mourning, it lifts a cloud of uncertainty and allows the political ecosystem to focus on upcoming elections. First we’ll see the Buenos Aires City legislative elections, scheduled for May 18, while Buenos Aires Province will hold its vote on September 7. The main battle is between Milei and the Macri tandem, the former president and his cousin Jorge, currently mayor of Buenos Aires City. There the battle lines have been drawn and Milei has accused cousin Jorge of being a traitor who speaks ill of his sister Karina, his presidential chief-of-staff. They are pushing to get his political strategist Antoní Gutierrez-Rubí – who had participated in Sergio Massa’s botched presidential bid in 2023 and now is overseeing PRO’s campaign in the City – kicked out of the country. Milei accuses him of orchestrating “smear campaigns” against him and seeking to do it again. Mauricio continues to try and tone down the battle, suggesting that an agreement is possible between his PRO party and La Libertad Avanza in Buenos Aires Province. Whenever he has the chance, he blames the other two vertices of the “iron triangle,” Karina and controversial political advisor Santiago Caputo, of feeding lies to the President.
The infighting among the different factions of Argentina’s “right”— even Milei’s former supporter Ramiro Marra and Macri’s former lieutenant, City ex-mayor Horacio Rodríguez Larreta, are adding to the balkanisation of their potential space — will allow the Peronists to have a good showing, with Leandro Santoro currently leading in the polls. The real battle will be played out in the province though, where Governor Axel Kicillof has finally twisted Cristina Fernández de Kirchner’s arm and split the provincial elections from the national vote. The former president appears to have begrudgingly accepted the decision, paving the way for unity candidate lists. If Macri and Milei don’t reach some sort of truce, then the Peronists are bound to score a potentially strong victory in the province. A one-two victory for the pan-Peronist front in the two most high-stakes elections would be a sign of weakness and also some sort of public disapproval of Milei’s economic plan. This would certainly put pressure on him and the IMF. Thus, the onus is on the President and Macri to negotiate some sort of deal.
Still, this by no means places Milei on track for an easy electoral victory that will help him secure re-election in 2027 on the back of a strong economic recovery that allows him to rake in US$12.5 billion in international reserves. Macri handily beat Cristina in 2017, only to be forced to seek an IMF bailout in 2018 and barely made it out of the Casa Rosada alive.
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