American support for Argentina … a temporary residence for suffocating crises

Argentina Economy – Congress Building

The Argentine economy is witnessing one of its most turbulent stages in its modern history, in light of the stressful internal and external factors that make the country a financial and critical plate. Argentina has turned from a model of wealth earlier into a symbol of fluctuations and crises that threaten its economic and social stability.

Political and financial developments are accelerated in light of the extensive attempts by the current leadership to reassure the markets and persuade investors of the feasibility of the reforms offered. However, the accumulated challenges through decades of mismanagement and contradictory policies put the country in front of a difficult equation between the need for stability and the pressure of the harsh economic reality.

In the context, a report by the British newspaper “Financial Times” indicates that Argentina was one of the richest countries in the world. Today, it is considered an example for the exposed economy, which has failed to pay its international sovereign debts nine times. The American financial support show shows its deterioration.

The election of Javier Miley was supposed to lead in 2023 – who describes himself as a chaotic capitalist who used an electrical saw during his presidential campaign to symbolize his war on waste – to fold the page of this narration.

But after some initial success, it seems that the Miley Mile saw has been broken. The value of the Bezo fell to its lowest level ever this month after a strong defeat for his party in the local elections, which raised concerns about the future of his reform for the free market.

Investors abandoned bonds and stocks. The country’s standard of the country’s index increased its losses this year to 25 percent.

• In the midst of panic, the Argentine Central Bank spent more than a billion dollars from its foreign reserves to defend the Bezo last week.
• This week, US Treasury Secretary Scott Besent stated that the United States will do “everything necessary” to help Argentina, including swaps and direct purchase of Argentina dollar debt.
• This support is supposed to provide some temporary comfort for sales. But it does not address the essence of the Molly problem: the inherent tension between its strategy based on the use of strong bizo and financial austerity to curb inflation, while seeking at the same time to expand the economy and improve the country’s external budget.

The problem of the pursuit of the Biso power is that, while it reduces import prices, it also weakens the ability of Argentine companies exports to compete. This in turn limits the country’s ability to collect foreign currencies needed to pay its debts.

• Argentina has a dollar and euro debts with a value of $ 95 billion, compared to net reserves of about $ 6 billion, according to Barclays Bank.
• It must pay a debt worth $ 44 billion until the end of Miley state in 2027.
• It is not possible to bear the cost of using scarce foreign exchange reserves to support the peaso.

Complex

The international relations expert on Latin America, and a researcher in public law, Hamdi Ammar Haddad, tells the “Sky News Arabia Economy” website that:

• Argentina lives one of the most complex economic crises in its modern history, as it faces record inflation rates, a shrinkage in growth, and a chronic deficit in the budget, as well as the high public debt and the weakness of foreign exchange reserves.
• This situation created a state of political and social instability that reflected on the legitimacy of the ruling regime and the ability of President Javier Miley to implement his reform program.
• American support has emerged as an auxiliary worker through financing, credit and strong signals of the markets, but the central question remains: Is this support sufficient to save the Argentine economy?
• According to Haddad, the answer is “no”; This support represents an important factor, but it is not sufficient on its own, but rather it needs to be completed with structural reforms and courageous internal policies.

Haddad notes that “American and international support provides prominent strengths, including alleviating external liquidity crises, restoring market confidence and investors, and temporarily alleviating inflationary pressures, in addition to imposing a framework for reforms … but in return there are weaknesses, as it does not guarantee financial sustainability, and does not address the roots of inflation and poverty, as well as that it may raise a popular grumbling if associated with painful reforms As reduce subsidies or raising services. “

And he confirms that “the numbers highlight the size of the gap between the actual needs of Argentina and what the current package provides (…)”, by referring to the size of what Argentina needs to cover its reserves, serve its debts and finance its deficit.

“In the short term, American support can give the Argentine economy an important breath to stop the collapse, stabilize the currency, and calm the markets. But in the medium and long term, it is not enough alone. Deep structural challenges require radical structural reforms, export development, improve the investment environment, and expand social protection programs.”

He concludes by saying: “American support is only a temporary residence, and the real solution lies in a mixture of diverse international financing, comprehensive internal reforms, and rational governance, so that Argentina can get out of its crisis and put its economy on a sustainable path.”

Temporary support

A report by Bloomberg describes the US plans to extend a $ 20 billion exchange line for Argentina and its willingness to buy foreign bonds for the country, as it “provides the financial support that President Javier Millie needs strongly while trying to restore investor confidence and stop the decline of the bizo.”

US Treasury Secretary Scott Bessent said in a post on the X platform on Wednesday morning, which raised a short rise in the value of Argentine assets, that the conditions of the deal are still being negotiated. Pesent explained in an interview with Fox News that the financing was aimed at helping Miley before the decisive midterm elections next month, and supporting an ideological ally in an area where President Donald Trump does not have limited support in power.

“I don’t think the market has lost its confidence in it. I think the market is looking at the past and contemplating decades – about a century – from the poor mismanagement of Argentine.”

The report adds:

• Miley, the reformer supporter of the free market, has faced increasing financial pressure during the two and a half weeks since his party lost an important regional election by an overwhelming majority, and it is a bad ounce of one month before only one of the congressional elections.
• This defeat prompted investors to withdraw their money from the country, fearing that the following support he needs to continue his encouraging reform agenda, restraining inflation, and the stability of the currency in which crises have repeatedly ravaged in recent decades.

Pesent described aid as a “bridge towards elections”, referring to the October 26 vote in which Miley seeks to strengthen the presence of his liberal party in Congress.

In recent weeks, legislators there have moved to cancel the cassation of the president’s veto on spending bills, threatening the financial balance, which he considers its largest achievement so far.

In addition to the swap line, Bessent stated that the United States is “ready to provide” reserve credit from the Ministry of Treasury’s exchange rate. It was not clear if both swap and backup will come from the exchange rate stability fund.

American support is not enough

In turn, the professor of international economics, Dr. Ali Al -Idrisi, notes to the “Sky News Arabia Economy” website, that:

• American support alone is not sufficient to save the Economy of Argentina .. This support, whether it comes through direct financial aid, credit facilities, or American private investments, or even diplomatic support through institutions such as the International Monetary Fund, may provide temporary momentum, but it does not address the roots of structural crises in the country.
• Argentina has faced accumulated problems for decades (..), and therefore any external support will collapse if it is not accompanied by a realistic reform map that enjoys political and social acceptance.

It indicates that American or international support can perform three main functions (providing short and medium -term liquidity to pay emergency obligations and protect reserves, in addition to sending a positive political signal that enhances investor confidence and reduces the cost of borrowing, stimulating direct investments and technical initiatives to restructure some sectors).

However, according to Al -Idrisi, this support remains limited, unless the Argentine government adopts real financial and cash reforms, including raising the efficiency of spending, strengthening revenues with justice, relative independence for the central bank, a flexible exchange rate mechanism, and programs to support export with added value. It also stresses the importance of a social protection network for the most vulnerable groups, as well as steps that restore confidence to the private sector and encourage foreign direct investment.

Argentine.

Structural challenges

Professor of international relations and researcher specializing in Latin America, Dr. Mohamed Atif, told Sky News Arabia that the Argentine economy has faced deep structural challenges since President Javier Miley took power before the end of 2023, noting that the policy of “shock therapy” helped reduce monthly inflation, but did not prevent the survival of inflation at high annual levels.

He believes that the United States alone cannot solve the crisis, pointing out that the major risks lie in the erosion of foreign exchange reserves, which makes the intervention of the International Monetary Fund through a new rescue program necessary despite its strict conditions.

He adds that:

• Miley’s reforms have not yet achieved sustainable growth, which requires broader internal and legislative support, while avoiding the “full dollar” option that may weaken cash sovereignty.
• American support represents only a short -term boost, but it is not enough to save the economic program.
• Real success requires a comprehensive approach based on international coordination and deep internal reforms while maintaining the independence of the economic decision, especially in light of the geopolitical rivalry with China in Latin America.