The government of Javier Milei This Monday it received a financial boost from its main international ally, the United States.
With an agreement of swap (currency exchange) for 20 billion dollars and a promise of additional credits for the same amount, Washington seeks to stabilize the economy of Argentina just six days before legislative elections considered key for the future of the country.
The elections, seen as a gauge for Milei’s controversial management, will also define the scope of the ultraliberal reforms promoted by the president, whose political party, La Libertad Avanza (LLA), does not have sufficient numerical reach in Congress.
However, the announcement of the agreement between Buenos Aires and Washington, far from dissipating tensions, revealed the fragility of Milei’s peso and political dependence on his American counterpart, Donald Trump, who warned: “If he loses the elections, we will not be generous.”
The agreement: a lifeline with conditions
The Argentine Central Bank confirmed the mechanism, designed to “strengthen the response capacity to episodes of volatility” in the exchange markets.
In simple terms, the swap allows Argentina to access dollars to cover debts or intervene in the market without depleting its reserves.
Milei explained it crudely: “If we cannot go out to the markets due to the high country risk, we will use this line to pay debt with more debt.” The objective, he said, is to “give security to investors” and lower interest rates.
However, the Argentine peso continued to depreciate (1.36%), bonds fell up to 4%, and the informal dollar touched 1,495 pesos, which shows the market’s skepticism about the real impact of the agreement.
Trump: between the rescue and the threat
US support is not accidental. Trump has turned Milei into his strategic ally in the region, and in recent days he deployed a financial arsenal to contain the crisis that Argentina is suffering.
The Republican president had the Treasury Department buy Argentine pesos in an undisclosed operation to curb demand for dollars and authorized an additional line of credit: another $20 billion from private banks and funds, as announced by Treasury Secretary Scott Bessent.
But support comes at a price.
At a lunch at the White House last week, Trump was blunt in his blackmail, one of his favorite negotiating weapons: “Argentina is fighting for its life. They have no money, they have nothing… If I can help them, I will.” But he added an electoral ultimatum: his Administration’s support will continue only if Milei obtains a favorable result in the elections.
Financial assistance to Argentina will depend on the electoral results, according to Trump
The perfect storm: fragile economy and tight elections
The markets fear a triumph of the Peronist opposition, which could block Milei’s labor, fiscal and pension reforms.
Currently the libertarian coalition is a minority in Congress, and polls anticipate a close fight in key districts such as Córdoba and Santa Fe, where former governor Juan Schiaretti is losing official support.
Meanwhile, an unstable political scenario aggravates the uncertainty with teaching strikes in Rosario due to university cuts, to which are added political scandals such as the resignation of candidate José Luis Espert, supported by Milei, for alleged links to drug trafficking, and internal struggles in the government over the economic direction.
“Remote control from Washington”
Some long-time economists, such as Jorge Carrera—former Deputy General Manager of Monetary Policy of the Central Bank of the Argentine Republic—warn that the United States could fall into a trap when trying to support the Argentine peso.
“It’s like getting into a swamp with no way out,” said the expert.
For its part, the opposition, led by former president Cristina Fernández de Kirchner, now under house arrest, summarizes the state of subordination of the Casa Rosada like this: “The economy is managed by remote control from Washington.”
Milei tries to calm political anxieties with “we need a third of the votes to defend our vetoes,” but if the defeat is extensive, he will not only lose legislative margin, but also Trump’s support. The message from Wall Street is clear: without reforms, there will be no sustainable financing.
Faced with this scenario, Argentina faces a historical crossroads: move towards the adjustment that Milei defends or return to the so-called Peronist populism. On Sunday, the polls will give the verdict.
