{"id":256012,"date":"2025-09-26T11:46:13","date_gmt":"2025-09-26T11:46:13","guid":{"rendered":"https:\/\/www.europesays.com\/us\/256012\/"},"modified":"2025-09-26T11:46:13","modified_gmt":"2025-09-26T11:46:13","slug":"argentina-took-a-chainsaw-to-its-economy-it-now-needs-us-help-page-sep-sitename-argentina-took-a-chainsaw-to-its-economy-it-now-needs-us-help","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/us\/256012\/","title":{"rendered":"Argentina Took a Chainsaw to Its Economy. It Now Needs US Help %%page%% %%sep%% %%sitename%% Argentina took a chainsaw to its economy. It now needs US help"},"content":{"rendered":"

Argentina<\/a>\u2019s economy, recently hailed by some as a poster child for radical free market reform, now finds itself seeking American goodwill to navigate its latest crisis.<\/p>\n

Since December 2023, the country and its economy have been overseen by President Javier Milei, a leather jacket-wearing supporter of free-market capitalism, who swept into power on a platform of price stabilization, debt reduction and paring down what he called a bloated state. The eccentric Milei brandished a chainsaw during his campaign\u2014symbolic, he said, of a ruthless desire to slash both public spending and federal bureaucracy.<\/p>\n

After years of inflationary chaos had severely crippled South America<\/a>\u2019s second-largest economy, Milei’s approach romanced the markets. Argentina\u2019s Merval index gained around 170 percent in peso terms in 2024, making the S&P 500\u2019s 23-percent gain seem paltry by comparison. The international community took notice as well, with President Donald Trump lauding the Argentine president.<\/p>\n

\"\"<\/p>\n

Newsweek Photo-Illustration Canva\/Associated Press<\/p>\n

Milei\u2014whom Trump has previously dubbed his \u201cfavorite president\u201d\u2014was the first foreign leader to meet the president after his victory over former Vice President Kamala Harris, and the Argentine’s radical reforms have been viewed as the inspiration for Elon Musk<\/a> during his time as symbolic chief of the Department of Government Efficiency (DOGE<\/a>).<\/p>\n

A Costly Economic Correction<\/strong><\/p>\n

Handling inflation has been Milei\u2019s crowning achievement, with the monthly rate now sitting at 1.9 percent as of August, compared to 25.5 percent it was at the month he took office.<\/p>\n

But despite this, and Milei\u2019s cost-cutting moves helping to bring the country\u2019s budget back into surplus, Argentina once again finds itself in economic turmoil. The currency is under attack, foreign reserves are dangerously low<\/a>, and the country\u2019s benchmark index has now fallen over 30 percent in the year-to-date<\/a>.<\/p>\n

Experts explain that the current woes stem from both structural issues and contemporary triggers.<\/p>\n

\u201cThe main problem is that Argentina has a large welfare state given the size and level of development of its economy, and a highly distorted tax and transfer system that funds it,” said political economist Jean-Paul Faguet. \u201cIt only manages to remain stable during good times; a bad international economy or specific international shocks throw it out of kilter and into crisis.\u201d<\/p>\n

Anah\u00ed Wiedenbr\u00fcg, senior policy adviser at the International Institute for Sustainable Development, told Newsweek that Milei\u2019s \u201cmain political achievement\u201d has been bringing down Argentina\u2019s runaway inflation, but that this \u201chas come at a steep cost.\u201d<\/p>\n

\u201cIn Argentina, fiscal consolidation has historically fallen disproportionately on the most vulnerable: Cuts to social spending, reductions in transfers to provinces, and an erosion of real wages,\u201d she said. \u201cFar from correcting structural asymmetries, these adjustments tend to deepen them.\u201d<\/p>\n

\u201cThe government was driven by the desire to maximize the speed of reduction in inflation because it believed this was the key to winning the national midterm elections in October,\u201d said Paul Segal, professor of economics at the IAE Business School in Argentina. \u201cBut most economists were aware that this economic regime was fragile.\u201d<\/p>\n

\u201cSo in September we had low inflation and a cheap dollar, but a fragile regime that everyone knew was vulnerable to any economic or political shock.\u201d<\/p>\n

This shock came in the form of a crucial provincial election in Buenos Aires, in which Governor Axel Kicillof’s centre-left Fuerza Patria coalition triumphed over Milei\u2019s Alianza La Libertad Avanza.<\/p>\n

\"\"<\/p>\n

The reasons behind the upset, according to Segal, included the deteriorating outlook for Argentina\u2019s economy, \u201cpublic distaste for the depth of the fiscal cuts,\u201d as well as a scandal in<\/a>volving Milei, his sister and the alleged embezzlement of public funds.<\/p>\n

\u201cThe provincial election of the province of Buenos Aires gave a clear signal that the \u2018honeymoon phase\u2019 that Argentine citizens gave to Milei is over,\u201d said Wiedenbr\u00fcg.<\/p>\n

America to the … Rescue?<\/strong><\/p>\n

With both the economy and Milei\u2019s chances in the upcoming legislative election now hanging in the balance, America has come in with an offer of fiscal\u2014and symbolic\u2014support.<\/p>\n

Speaking with Milei on the sidelines<\/a> of the United Nations General Assembly on Tuesday, Trump said that while he did not believe Argentina needed any outside assistance, the U.S. was more than willing to help the country secure \u201call of the things that you need to make Argentina great again.\u201d<\/p>\n

\"\"<\/p>\n

On Wednesday, Treasury Secretary Scott Bessent<\/a> praised the \u201cimportant strides\u201d Milei had taken toward stabilizing the economy, and said that the U.S. stands ready to purchase its dollar-denominated bonds and is in negotiations to extend the country a $20 billion swap line\u2014a currency-exchange agreement that could keep the economy stable in the short term.<\/p>\n

\u201cI will be watching developments closely, and the Treasury remains fully prepared to do what is necessary,\u201d Bessent posted to X.<\/a><\/p>\n

“Thank you, President @POTUS and Mr. Secretary @SecScottBessent, for your firm support and confidence in the Argentine people,” Milei wrote in response<\/a>. “We deeply value the friendship with the United States and your commitment to strengthening our partnership on the basis of shared values. Together we will build a path of stability, prosperity, and freedom. MAGA!”<\/p>\n

Trump and Bessent\u2019s commitments appear to have injected some short-term energy into Argentina\u2019s economy, Reuters <\/a>reports, with investors already piling back into Argentine assets. But beyond the political stigma that may follow the antiwelfare Milei relying on foreign goodwill, experts believe this may only delay Argentina\u2019s economic woes.<\/p>\n

\u201cNational elections are due in October, and the benefits to the government of the financial support from the U.S. face the counterweight of the fact that support from the Trump administration may be very unpopular, and harm the government\u2019s vote,\u201d Segal told Newsweek.<\/p>\n

\u201cA U.S. bail-out will buy him time, but will not do anything for the underlying problems,\u201d added Faguet. \u201cIn this sense, the US is like another naive foreign investor that stumbles in when all the locals are fleeing.\u201d<\/p>\n

Ernesto Talvi, senior fellow at the Elcano Royal Institute and Uruguay\u2019s former Minister of Foreign Affairs, said Bessent\u2019s offer of support, in essence, \u201creplaces old debt with new debt to ease immediate pressures,\u201d including the prospect of Milei\u2019s defeat in the October midterms.<\/p>\n

\u201cBut that alone is not enough,\u201d he told Newsweek. \u201cAt a minimum, Milei must rebuild a working coalition to sustain fiscal discipline and advance his pro-growth reforms to unlock investment.\u201d<\/p>\n

Argentines head to the polls on October 26, with Milei’s party hoping to gain seats and strengthen its minority position.<\/p>\n

Speaking at the United Nation\u2019s General Assembly this week, Milei espoused the benefits of national independence and decried the \u201coverreach\u201d of such supranational bodies. But for Argentina\u2019s economy, and his own political future, Milei may require a helping hand from one of his last remaining ideological and economic allies.<\/p>\n","protected":false},"excerpt":{"rendered":"Argentina\u2019s economy, recently hailed by some as a poster child for radical free market reform, now finds itself…\n","protected":false},"author":3,"featured_media":256013,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[2841,64,16470,69,79,66,24720,18244,4217,67,132,68],"class_list":{"0":"post-256012","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-argentina","9":"tag-business","10":"tag-doge","11":"tag-donald-trump","12":"tag-economy","13":"tag-elon-musk","14":"tag-javier-milei","15":"tag-scott-bessent","16":"tag-south-america","17":"tag-united-states","18":"tag-unitedstates","19":"tag-us"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@us\/115270437090433871","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/256012","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/comments?post=256012"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/256012\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media\/256013"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media?parent=256012"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/categories?post=256012"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/tags?post=256012"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}