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Chapter 1: What factors led to the collapse of Argentina's peso?
Argentina's peso has fallen to an all-time low against the US dollar and has now collapsed by 99.8% since 2009.
And now the Trump administration wants to provide a financial lifeline worth $20 billion to the far-right government of Javier Millet, who faces important elections this weekend. What's in it for America and is the Argentinian economy worth bailing out? John Farmer is editor-in-chief of Latin News and is on the line. Good morning, John. Morning, Jack.
What sort of shape is the Argentinian economy in?
Well, I mean, credit where credit's due. President Millet has reined in inflation, and that's no small feat. I mean, the monthly rate's now about 2%, so high by international standards, but very low by Argentina's standards.
Chapter 2: What is the significance of the $20 billion financial lifeline from the Trump administration?
He's also met his big sort of zero-deficit target that he set. But taking his sort of chainsaw to public spending has hit growth. International reserves are low. They're only about sort of $40 million. And his government's been burning through these to prop up the peso. So the peso took a battering after the Peronists.
That's the main national opposition in Argentina, won a big victory in legislative elections in Buenos Aires province last month. So it's soon after this that the Trump administration sort of stepped up with the $20 billion financial lifeline that you mentioned.
Joe, and it did calm the markets for a bit, but they're looking rattled again now, in part because it's just not clear that the US will stick around if this Sunday's midterm congressional elections don't go to plan for Milley. So Trump, he heaped praise on Milley when they met at the White House last week, and Milley's a close ideological ally.
Chapter 3: How is Javier Milei's government addressing Argentina's economic challenges?
But Trump loves a winner, and he said quite openly, if Milley wins, we're staying with him, and if he doesn't win, we're gone. And investors were a bit shaken by this. They're concerned that the Peronists, who they see as this sort of profligate and corrupt and responsible for Argentina, haven't been a serial defaulter over the years. Investors are worried that they'll win again in the midterm.
So these elections are massive. If Millet doesn't win seats and there are signs that public impatience is growing with his government, he'll be in for a really rough ride in Congress and pressure on the peso will be intense.
Yeah, ordinary Argentinians were sick of the status quo when they elected Millet two years ago. We'll soon find out whether they're tired of him this coming weekend.
Now, according to the Wall Street Journal, a bunch of major Wall Street banks, including JP Morgan, are struggling to put together this $20 billion loan facility because they don't want to be left holding the can if and when Argentina doesn't pay it back.
Yeah, well, absolutely.
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Chapter 4: What are the implications of the upcoming elections for Argentina's economy?
I mean, I think there's a huge risk that America is taking. As I say, Argentina, a serial defaulter over the years. There's absolutely no guarantee that Millet is going to win these midterms. I mean, I would expect that the Peronist opposition that, you know, they're up in the polls. I think they're going to win more seats.
But Millet's party, in fairness, is very poorly represented in Congress as things stand. So it should still pick up seats. But how many seats is, you know, that's the real key, because right now. You know, the opposition in Congress is really bossing proceedings. It's overridden three presidential vetoes of initiatives that would have ramped up public spending in recent weeks.
Chapter 5: How does the Mercosur trade deal impact Argentina's economic situation?
You know, you've got to go right back to 2003 before the last presidential veto was overturned in Argentina. And that needs a two thirds majority in both houses of Congress. So the bare minimum Mille needs is he's got to get a third of the seats in the lower house.
How important is the Mercosur trade deal between the EU and many South American nations for countries like Argentina?
Well, you know, Millet has been scathing of Mercosur. He's called it an iron curtain that member states have to submit to. He's attached far more significance to trying to get a trade deal with the US. But Yeah, Mercosur is more important for Argentina. There's no question about that.
Chapter 6: What are the potential risks of U.S. involvement in Argentina's economy?
Brazil is right next door, obviously. And it's Argentina's main trade partner, both for exports and imports.
Yeah. And Trump also says that America wants to buy Argentinian beef. I assume it's cheaper than local beef in America.
Well, yes, it would be, yeah. So I imagine that being the trade man that he is, that would very much appeal to him.
Yeah, indeed. And it would probably be dreadful for local farmers in the US. John, thanks very much for joining us. That is John Farmer, the editor-in-chief of Latin News.
News Talk Breakfast with Ciara Kelly and Shane Coleman. In association with AIR. Weekday mornings at 7 on News Talk.
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