How will Trump save Argentina’s economy? : NPR

The Argentine economy is in full spiral. NPR’s Scott Simon speaks with economist Monica de Bolle about the Trump administration’s plan to save it.

SCOTT SIMON, HOST:

The Trump administration is throwing an economic lifeline to Argentina. Last month, President Javier Milei’s party lost crucial provincial elections. In turn, the Argentine currency plunged and stock prices collapsed. That jeopardized reforms undertaken by Milei, an ideological ally of President Trump, to try to balance Argentina’s budget and bring its triple-digit inflation under control. This week, US Treasury Secretary Scott Bessent formalized an agreement providing a $20 billion loan to Argentina, writing that the United States is, quote, “ready, immediately, to take whatever exceptional measures are warranted to ensure stability.” Monica de Bolle is an economist at the Peterson Institute for International Economics, specializing in Latin America, and joins us now. Thank you very much for being with us.

MONICA DE BOLLE: Thank you very much for inviting me.

SIMON: Just eight months ago, President Milei was at a conservative political conference here in the United States, brandishing a chainsaw on stage to symbolize his efforts to cut Argentina’s government bureaucracy. What has happened since then?

DE BOLLE: So Milei managed to downsize the Argentine government, and he also managed to implement some of the other very ambitious reforms that he had planned. Inflation has actually fallen quite substantially. Argentina also had a very high budget deficit and it managed to turn the situation around. The problem is that Argentina is a fairly unique country because it operates with two currencies, not just one. So they have their own currency – the peso – and they also use the dollar in the same way that we use the dollar in the United States.

And often, because of this system, they find themselves in a situation where they don’t have enough money for the economy to function properly. And one of the causes of this dollar shortage was a corruption scandal involving Milei’s sister, who is actually a key figure in her government. This, coupled with the provincial elections in Buenos Aires, which did not go Milei’s way, led to dollar outflows and therefore market turbulence that we have seen very recently.

SIMON: What would the $20 billion in aid that the United States will provide to Argentina be used for?

DE BOLLE: So it won’t do much. I mean, this will temporarily solve the type of dollar shortage that they are currently facing, which is making the markets very nervous and impacting the exchange rate and their national currency. The national currency weakens and when this happens, inflation usually begins to rise again. The $20 billion will therefore help to remedy this situation. But the problem is that in the longer term this will not solve Argentina’s problem because of the nature of its regime. Since it operates with two currencies and uses the dollar as if it were its own currency, it will likely face a new shortage of dollars, not far from where we are now.

And on top of that, the lifeline that the United States is now giving to Argentina – so the $20 billion – the idea behind that is to calm things down enough so that Milei can navigate the next few weeks, because next October 26 there will be legislative elections or congressional elections in Argentina. So there’s kind of a gamble behind this, you know, that by avoiding unrest, maybe that will give Milei a better chance of getting more support in Congress in the next election, and that would pave the way for his reforms to continue.

SIMON: Argentina has a long history of failing to meet its obligations. I mean, isn’t the United States taking a big risk here?

DE BOLLE: Yes. The United States is definitely taking a big risk. If there is a country in the world that surprised me when it comes to support from the United States, that country could not be other than Argentina, precisely because of its storied history.

SIMON: Of course, the decision to provide aid to Argentina has drawn criticism, particularly among Democrats. Is there an argument that it is in the interest of the United States to advance $20 billion to Argentina?

DE BOLLE: There is no economic argument to be made that this is in the interest of the United States. There is potentially a geopolitical argument to be made regarding China. China has therefore been, in recent years, very strongly involved in the region, very strongly involved in Argentina. I think it has now become a problem for the administration. So, in my opinion, the motivation for this 20 billion lifeline is to try to bring Argentina more into the zone of influence of the United States and to move it away from the zone of influence of China.

SIMON: Monica de Bolle of the Peterson Institute for International Economics. Thank you very much for being with us.

DE BOLLE: Thank you very much for inviting me.

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