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Wall Street Banks Come to the “Rescue” of Milei’s Argentina Just Days Before Make-or-Break Elections

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A government largely run by former JP Morgan executives takes out a loan from current JPM executives (and other US banks). What could possibly go wrong?

JP Morgan Chase CEO Jamie Dimon landed in Buenos Aires this week to attend an event the Wall Street lender is holding, precisely at a time that the bank is in negotiations to arrange a $20 billion loan for the Argentine government. The timing was apparently pure coincidence, given the event was organised long before talk of a rescue package, reports Bloomberg:

[B]ut it means some of the bank’s top brass will be on the ground just as doubts grow that US Treasury Secretary Scott Bessent will be able to pull off the second half of his rescue package for the Javier Milei government: a $20 billion bank-led loan.

Other Wall Street banks involved include Goldman Sachs, Bank of America and Citigroup. If they were to activate credit lines for Argentina, it would bolster the USD 20 billion currency swap that was formalised on Monday, notes Bloomberg. Time is of the essence, however, given the country will vote in mid-term legislative elections on Sunday and the country’s peso continues to sink despite the Trump administration’s rescue package.

There’s a lot riding on the results, including that rescue package:

Dimon will be joined on his visit by the current joint chairman of JP Morgan’s International Council, Tony Blair, who will be taking a few days out from his new role as “modern-day high commissioner” of Gaza, and former US Secretary of State Condeleeza Rice, who also sits on the council. On the weekend, he will take part in a polo tournament.

Before that, Dimon is expected to meet with members of Milei’s senior economic team during his stay. He should receive a warm welcome considering all four of them, including Economy Minister Luis Caputo and Central Bank Governor Santiago Busilli, are former JP Morgan Chase executives. The following photo has been doing the rounds in recent days.

What were the odds of all four of them having previously worked for the same New York-based mega lender whose operations in Argentina are apparently expanding quite nicely right now? That same bank is now helping the Milei government carry out a sovereign debt buyback operation ostensibly aimed at “reducing the country’s cost of financing and strengthening investment in education”?

An Oligarch’s Libertarian

It was Milei’s appointment of Caputo and Bausili back in December 2023 that was the obvious tell that the fix was once again in, that Milei’s government was not going to honour his main electoral pledges to abolish Argentina’s central bank or adopt the dollar. As Yannis Varoufakis argues in an excellent piece for Unherd (and as we’ve been arguing for the past two years), Milei is not a libertarian by any means but is instead beholden to Argentina’s oligarchy:

Milei never really broke with Argentina’s sad oligarchic practices of the past. He merely rebranded a type of heist practised by a long succession of his predecessors — from Peronist Carlos Menem and anti-Peronist Fernando de la Rúa to hapless Adolfo Rodríguez Saá, whose presidency lasted a mere seven days, and, more recently, neoliberal Mauricio Macri who now supports Milei. While Milei used libertarian narratives successfully to distance himself from these people, his actual policies fail the most important libertarian litmus test.

Before you, dear reader, dismiss me as a Marxist (that I admittedly am) intent on dismissing a political opponent’s success as a dismal failure (something I avoid like a mortal sin), let me put it to you in simple, libertarian terms. If you (unlike me) truly believe in the markets’ superior wisdom, and want to rid Argentina of political constraints placed on the market mechanism, which market do you liberate first? The money market, surely. Which price distortion do you drive your chainsaw through first? The fixed (or bounded) exchange rate, unquestionably. And what is the last thing you do? Precisely what Milei did: borrow zillions of dollars, pile them up on top of an already unbearable heap of public debt, to prevent the money market from choosing freely the exchange rate of your currency.

Defending a currency as weak as the peso for almost two years is, of course, a fool’s errand, and the results have been depressingly familiar. In less than two years, the Milei government has burnt through tens of billions of dollars of foreign exchange reserves in a futile bid to keep the peso artificially high and, by extension, inflation artificially low. It has brought misery for the man in the street while making a mint for financial speculators.

Yes, Milei’s austerity has reduced inflation, but at the cost of smothering economic activity for two long years and squandering the country’s limited currency reserves. It is also utterly unsustainable. Everyone knows the moment the elections are over, the government will once again devalue the peso, sending inflation soaring once again — that’s why everyone is buying dollars despite the US’ direct support of the peso.

To avert an all-out currency collapse, the Milei government has needed not one, but two, massive $40 billion bailouts in the space of just six months — the first from the IMF, World Bank and InterAmerican Development Bank, the other from the US Treasury Department’s Exchange Stabilisation Fund and Wall Street Banks. The half-lives of the financial interventions are growing dangerously short.

From Benign Neglect to Malign Meddling

Both of these bailouts came with big strings attached, but it is the latter that has the most onerous terms — including Trump’s exhortation to Argentine voters to choose the right party in Sunday’s election. Otherwise, he warns, the bailout funds will be withdrawn, tipping Argentina’s economy over the edge.

This, lest we forget, is occurring at the same time that the US is bombing speedboats into smithereens in both the Caribbean and the Pacific while beating the drums of war for direct military intervention in Venezuela. In recent days, it has threatened “very serious actions” against Colombia’s left-leaning governments as well as crippling tariffs against Nicaragua.

After two decades of benign neglect of Latin America (while it bombed the Middle East, Libya and Afghanistan to pieces), the US is back to its traditional practice of malign meddling in its resource-rich “backyard”. The old policy of plata o plomo (silver or lead) is back on the agenda as the Trump administration tries to drive a wedge between Latin America and China. Take the money or take a bullet: that is the option on offer.

This is not a new thing, of course. The US has been meddling in Latin America for nigh on two centuries. As Chomsky told the British journalist Seamus Milne back in 2009, US foreign policy has long been “straight out of the mafia”:

[S]ince government officials first formulated plans for a “grand area” strategy for US global domination in the early 1940s, successive administrations have been guided by a “godfather principle, straight out of the mafia: that defiance cannot be tolerated. It’s a major feature of state policy.” “Successful defiance” has to be punished, even where it damages business interests, as in the economic blockade of Cuba – in case “the contagion spreads”.

Will Trump’s overt election meddling and outright extortion practices concentrate the minds of Argentine voters, helping to tip the balance in Milei’s favour this Sunday? It’s unlikely but you never know. Milei still has millions of fanboys and girls (despite scamming thousands of them in his Libra meme coin con) and the opposition is still broadly reviled.

However, Trump’s meddling is just as likely, if not more so, to have the opposite of the intended effect. A large majority of Argentines (60%) already have a negative image of Donald J Trump while 56% have a negative image of the United States overall, according to a poll conducted for Bloomberg in April.

Imagen

What’s more, the last six months of economic crisis and non-stop scandals have taken their toll on Milei’s approval ratings. The following exchange, from a recent interview of Milei on a friendly news program by Eduardo Feinmann, a presenter with a strong pro-government bias, shows just how quickly Milei’s carefully crafted image as an expert on economic matters is unravelling:

Presenter: Eighty percent of Argentineans barely make it to the end of the month, and 60 to 70% of them only make it to the 20th of the month.

Milei: How do you want me to fix that? How can I get money to the people?

Interviewer: You are the economist. You are the expert in economic growth with or without money.

In recent days, even with make-or-break elections looming, an allegedly heavily medicated Milei has refused to do any more interviews with the media, presumably at the insistence of his campaign team. As Luis Majul, another pro-government news presenter put it (emphasis my own), “Milei was going to do an interview (with us) but he took the decision not to come on in case there were questions he could not answer, which seems reasonable to me.”

An analysts’ report published by JP Morgan notes that the markets are already discounting a bad election result for Milei’s ruling Libertad Avanza party, which will make it even harder for the government to govern. However, the analysts do not rule out a sharp rebound in Argentine stocks from next week if the result exceeds expectations. As El País reported a month ago, Argentina’s stock market is the world’s worst performer in 2025.

Analysts from Wells Fargo have warned that the current exchange bands scheme “does not seem sustainable” and have predicted a further depreciation in the peso of close to 30% by the end of 2026 — the largest among all emerging currencies analysed. They also cautioned that the US Treasury’s support may offer a few days of stability – or even strength – for the Argentine peso, but it does not constitute a sustainable exchange rate policy.

In the meantime, the private sector-led rescue agreement still faces obstacles. The banks involved — including JPMorgan Chase, Bank of America, Goldman Sachs and Citigroup — are demanding clear guarantees to back the loan, either from the US Treasury or the Argentine State itself. From Perfil (translated by yours truly):

At the crux of the negotiations is the question of who will serve as guarantor of the loan: the Argentine government or the US Treasury itself. Banks are pushing for tangible backing, whether with assets, reserves or official coverage from Washington, that minimizes the risk of losses.

In this context, The Wall Street Journal points out that Argentina could offer sovereign bonds or future tax revenues as collateral, although those options are considered unviable. Local bonds are worth well below their face value, and compromising future collections could generate political rejection within the country.

Throughout history, this type of operation had solid collateral. In 1995, for example, Mexico guaranteed a $20 billion loan with oil exports during the so-called “Tequila Crisis.” By contrast, the currency swap between the Treasury and Argentina, which is also part of the $40 billion package, does not legally require collateral, increasing risks for the U.S. Treasury.

At the same time, the Trump administration is facing a gathering backlash from its MAGA base for trying to rescue Argentina, a major agricultural competitor, while the economic pain from Trump’s tariffs intensifies.

Trump’s recent call to buy beef from Argentina could be, if you’ll excuse the pun, the final straw for some of his America-first voters, and is heaping pressure on Republican lawmakers. From Fortune:

Trump proposed on Sunday that the U.S. could purchase beef from Argentina as a way to bring down prices for American consumers. Beef costs have ballooned as much as 12% in the past year. The suggestion was met with exasperation from U.S. cattle ranchers, who argued the move would disrupt the free market and introduce unnecessary risk factors to domestic beef supply.

“This plan only creates chaos at a critical time of the year for American cattle producers, while doing nothing to lower grocery store prices,” National Cattlemen’s Beef Association CEO Colin Woodall said in a statement on Monday…

A potential intervention with Argentina would come just as the U.S. cattle industry was beginning to recover from a dismal 2024, in which it saw its smallest herd since 1951, a result of severe droughts withering pastures and hiking up livestock feed costs. U.S. beef imports have also shrunk due to a ban on Mexican beef in an effort to prevent the spread of screwworm, a flesh-eating parasite found in cattle across the border…

Cattle ranchers join the chorus of soybean farmers, who have been outspoken about the impact Trump’s ties with Argentina have on the soybean industry.  Amid proposals to offer financial assistance to Argentina last month, the South American country also dropped several export taxes as an effort to stabilize its economy—including its soybean tax. As a result, China, which previously purchased about a quarter U.S.’s soybean exports, ordered several cargoes of the crop. China has not ordered U.S. soybeans since May.

“The frustration is overwhelming,” the American Soybean Association (ASA) President Caleb Ragland said in a statement last month. “The farm economy is suffering while our competitors supplant the United States in the biggest soybean import market in the world. 

Jamie Dimon has a different take, joking that Argentina has “professionals, land, education… even meet.” On the political level, he remarked that Argentina has a real opportunity to become a strategic partner of Washington. “Argentina should be an ally of the United States; Trump and Milei are close, and I celebrate that effort to shorten the distance.”

Dimon also contrasted the US presence in Latin America to China’s “Belt and Road” initiative promoted by China, expressing concern about Washington’s lack of a clear strategy to boost economic development in the region. (NC: When has it ever done that?) By contrast, the Chinese initiative — based on free trade, investment in infrastructure and international cooperation — has massively strengthened Beijing’s influence in Latin America.

This is one of the reasons why the US is so keen to prop up the Milei government, even if it risks alienating a core section of Trump’s electoral base: the potential advantages of “driving a wedge between Argentina and China” (as the WSJ puts it) outweigh the political and economic costs. At least that’s the calculation.

In the following interview with Democracy Now, the Argentine author and journalist Pablo Calvi offers three possible explanations for Washington’s support of the Milei government: geopolitics (removing China from the equation as much as possible); the interests of Trump-adjacent tech bros in Argentina, including Peter Thiel, Elon Musk and Sam Altman; and the ideological affinity between Trump and Milei.

One other possible explanation that Calvi doesn’t mention is the personal and business interests of US Treasury Secretary (and former hedge fund manager) Scott Bessent. As the NYT reported a couple of weeks ago, some hedge fund managers, including Stanley Druckenmiller and Robert Citrone, both former colleagues of Bessent at Soros Asset Management, bet large on Argentina and will indirectly benefit from a financial rescue of Argentine assets.

Another major beneficiary will be the IMF, given Argentina now owes the Fund close to $60 billion. Another Argentine default, which may be inevitable anyway, could cause the institution serious embarrassment given that both of the last two bailouts, in 2018 and April 2025, were strongly opposed by senior members at the Fund, some of whom were even prepared to sacrifice their jobs rather than sign along the dotted line.

Another source of embarrassment for the Fund:

Neither the people of Argentina nor the people of the United States stand to benefit from this bailout. As reader Rabid Gandhi pointed out in a comment to Curro’s post yesterday on Latin America, the money will “barely even touch Argentine soil before being whisked away to the Caymans accounts of various hedgies and oligarchs, some of them nominally Argentines, others not even that”:

When this capital flight occurs, once again as it always has in the past, it will not be a surprise to Messers Bessent, Trump, Caputo…, because it is by design… What Argentina, the 45 million Argentines, will be getting as their ‘reward’ is a debt in USD, a central bank bereft of reserves and the concomitant austerity/cuts to social services that inevitably follow. With friends like these…

So, this leaves us with one final question: what will the Wall Street banks be asking for as collateral for its $20 billion loan? Or put another way, what does Argentina have left to plunder?

The last time the US Treasury used ESF funds to bail out another country, it was for Mexico during the 1994-5 Tequila Crisis. Not only are the Mexican people still paying off the debt for that bailout today, 27 years later, but the total amount outstanding has almost doubled in size despite the fact that the country has already paid $200 billion pesos more than the principal: the magical wonders of compound interest.

In its bailout of Mexico, the US government made sure the Mexican government put up as collateral for the loan the revenues from oil exports of Mexico’s state-owned oil company, Pemex.

Will the Wall Street banks be demanding the same sort of treatment from Argentina’s state-owned company YPF? In its Vaca Muerta (Dead Cow) field, Argentina boasts the world’s fourth largest reserves of shale oil and more shale gas than anywhere except China.

Such a move could be complicated, however, by a ruling issued a few months ago by US federal judge Loretta Preska — yes, the same judge who persecuted US lawyer Steven Donziger for daring to represent the people of Ecuador against Chevron — ordering the Milei government to hand over 51% of YPF to firms affected by the oil firm’s 2012 nationalisation. That ruling has been put on hold by a US appeal court but is hanging over Argentina like a sword of Damocles.

Alternatively, the Milei government could be asked to put up Argentina’s vast lithium deposits, the second largest in the world, as collateral, or even its uranium deposits. The negotiations between the Milei government and the US Treasury Department have reportedly included demands to restrict Chinese access to critical resources and prioritise agreements with U.S. companies in infrastructure and telecommunications.

The Milei government has already begun the process of privatising Argentina’s four hydroelectric power plants, and there will presumably be a lot more of that sort of thing to come — unless, of course, the people of Argentina vote overwhelmingly against Milei’s party on Sunday.

If that were to happen, Milei would effectively be stripped of the ability to rule by decree and veto, as he has done for the best part of the past two years. In which case, Bessent’s rescue package will presumably be withheld. And in that case, all bets are off.

 

 

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One comment

  1. LY

    Austerity and borrowing money in a foreign currency… it’s like the economic version of getting into a land war in Asia.

    Is there Spanish translation of Mark Blyth? And is there an equivalent of his book on national governments borrowing in a currency they don’t control? Varoufakis certainly has first hand experience, with Greece and the Euro.

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