The government is highly invested in the outcome of Tuesday’s elections in the United States. Javier Milei’s Casa Rosada is notably hoping for a Donald Trump victory, on the premise that ideological affinity between the two leaders would translate into concrete political and economic benefits for Argentina.
While that theoretical stance holds, the government has prudently hedged its bets so that a different outcome does not complicate its plans. After meeting with Trump at the Conservative Political Action Conference (CPAC) in Washington in February, Milei cooled political ties with Trump and stated that his total alignment with the United States would remain unchanged, regardless of who occupies the White House.
International relations, however, are a blend of intent and opportunity. Given Milei’s well-defined public persona, both at home and abroad, he might struggle to find common ground with a Kamala Harris presidency, which would likely emphasise issues such as climate change, women’s rights, and multilateral cooperation — all poisonous topics for the Milei administration.
The high hopes placed on a Trump presidency are not solely due to the expectation that the International Monetary Fund could be persuaded to lend Argentina additional support. The country has two goals with the IMF, potentially within a single programme: one is to roll over the remainder of the US$44-billion debt acquired in 2018 during Trump’s previous term, when then-president Mauricio Macri leveraged his personal connection with the Republican leader in the White House. The second goal is to extend this agreement to secure fresh cash to bolster the Central Bank’s international reserves. Milei has said he would lift capital controls, restrictions known locally as the “cepo,” and ease access to foreign currency — a measure totally at odds with his libertarian economic vision — if “somebody” gives him the necessary funds to do so. There’s no better “somebody” for that than the IMF.
For Argentina’s president, however, the economy is only one issue in his broader agenda that includes cultural conflict, terrain on which he and Trump see eye-to-eye. Indeed, it would not be surprising if the two leaders were to clash over economic issues if they meet again as heads of state.
Recently, Trump remarked, “To me, the most beautiful word in the dictionary is tariff, and it’s my favourite word.” In contrast, the Argentine government is working to eliminate as many tariffs as possible, claiming that inflation has decreased significantly thanks to imported goods.
On foreign trade policy, Milei’s rhetoric and his administration’s actions defy the global trend. This week, billionaire businessman Paolo Rocca stated that Latin America should protect itself from unfair Chinese competition — by imposing tariffs. Regarding Argentina, Rocca praised Milei’s fiscal austerity measures, warned against peso appreciation and noted that “the exchange rate should reflect the productivity of the economy, not short-term cash flows.”
Rocca’s point underscores the obvious reality that the peso is overvalued. According to the Big Mac index compiled by The Economist every six months, the Argentine peso was undervalued by 33 percent against the US dollar when Milei took office in December 2023, and by June it was overvalued by 15 percent (with an additional few points of appreciation since then).
A daily example, for those who don’t eat burgers: gasoline at the pump is now 20 percent cheaper in constant pesos (i.e., in real terms compared to other prices in the economy) than it was in January, but it is 20 percent more expensive in US dollars.
Trump or no Trump, the IMF is also aware of these imbalances and is unlikely to provide additional funds easily. This reality is one reason Milei has radically softened his stance on China recently, shifting from calling them “Communist murderers” to “very interesting partners.”
Argentina and China have a currency swap line totalling US$18 billion, of which Argentina has already utilised around US$5 billion. Net reserves at the Central Bank remain over US$6 billion in the negative.
The Milei government is also attempting to restart construction of two power dams led by a Chinese firm in the Patagonian province of Santa Cruz. These projects had stalled since Milei took office over concerns that his rhetoric against Beijing could cripple the projects.
In any case, Argentina — or Latin America, for that matter — will not be an immediate priority for any incoming US administration, though Milei may leverage his ideological rapport with a potential President Trump against other regional leaders, including leftists like Claudia Sheinbaum in Mexico, Gustavo Petro in Colombia, Luiz Inácio Lula da Silva in Brazil, and Gabriel Boric in Chile, not to mention Nicolás Maduro in Venezuela.
The government’s challenge, now resting with the new Foreign Minister Gerardo Werhein following the undignified dismissal of Diana Mondino earlier this week, will be to turn symbols into substance.
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