Congratulations to Javier Milei and, just as importantly from some vantage points, Scott Bessent: Argentines voting in crucial legislative elections decided to stick with austerity.
“Decided” might be a misnomer. And that’s the crux of the issue. Bessent spent something on the order of $1.5 billion this month trying to shore up the peso, including hundreds of millions last week when the beleaguered currency traded near the weak end of the band.
The Trump administration agreed to prop up Milei financially after a devastating setback at the ballot box last month, when his bloc lost provincial elections in Buenos Aires by 13ppt. That result spooked markets which assumed the worst for Milei and his allies in this month’s midterms.
Milei’s a fan of Trump’s, or at least pretends to be, and he’s also in good with Elon Musk. If there were an application form for a patron-client relationship with the modern American right and its ruthlessly transactional ayatollah, Milei would check a lot of boxes: He’s eccentric, he’s controversial, he presents as a fanatical free-marketeer, he’s cartoonishly outspoken, he’s social media-savvy and he claims to be a libertarian.
At the same time, the Trump administration’s hell-bent on a return to mid-20th century Latin American interventionism, a risky endeavor which dovetails with Trump’s geopolitics: He views the world through a “spheres of influence” lens.
It’s hard to know whether Trump and Bessent actually believe their own narrative about Argentina’s strategic significance. It’s an important country in some respects, and its reputation as the world’s foremost defaulter is paradoxically alluring for someone like Trump who’s both sympathetic to strategic bankruptcy and also inclined to “fixing” the world’s most vexing problems. But Trump would be far better served to focus on America’s relationship with Mexico and Brazil than fritter away political capital on a quixotic project at the southern tip of the continent.
Contrary to the already-standardized critique, it’s not about the money. Nobody cares about a lousy $20 billion. (And no, that’s not “the largest American bailout of another country since Mexico in 1995,” as Axios put it. Axios is adopting a very, very narrow interpretation of the term “bailout.”) The problem with Bessent’s gambit is that it’s loosely akin to “loaning” your perpetually wayward, misfit son $2,000 to get his life back on track because he finally found the “right” politics instead of giving the money to your Ivy League grad student daughter who’s successful on any measure but who delights in wearing a “Feel The Bern” shirt to Thanksgiving dinner knowing full well it drives you crazy.
Ideological alignment’s important, sure, but there are other considerations. Milei’s had some success curbing inflation, but to say the jury’s still out on his program would be an understatement of epic proportions. Argentina’s a basket case, always has been and likely always will be. The leftist undercurrent there’s very strong, and like a lot of other places in Latin America, a 100-year history of the country’s political arc includes a brutal military dictatorship.
Unlike Jair Bolsonaro in Brazil, there’s no evidence that Milei’s inclined to kill anybody if it means preventing a leftist resurgence, but that’s really not the point. The issue for Bessent is that picking sides down there — where “down there” means anywhere in Latin America — in an effort to protect US interests by interceding in the democratic process to bolster right-wingers is fraught with peril. Not necessarily for Americans, but rather for locals, and disregarding their plight isn’t just heinous, it’s tragically ironic: “We’re looking out for your best interests — by playing an active role in your suffering.”
It’s impossible to know how much, if any, credit goes to Bessent for Milei’s remarkable outperformance at the polls on Sunday and Monday, but it’s fair to suggest that without the Trump administration’s support, his bloc wouldn’t have exceeded the most optimistic electoral forecasts by 10ppt.
Specifically, Milei’s party racked up 41% of the vote, won a majority of the country’s provinces and ran 9ppt ahead of the opposition. As a result, the country’s legislature won’t be able to override Milei’s veto, which in turn means he’s free to pursue his agenda. He’ll also claim (indeed he already has claimed) the surprisingly strong showing gives him a mandate to push even harder on his priorities including reforms which, if perhaps more popular than they appeared last month, aren’t popular like, say, vanilla ice cream is popular.
If this election truly represented the will of the people in Argentina, then more power to them. My concern is that one way or another, Trump influenced the vote. Media coverage which lampooned Bessent for failing to arrest the currency’s slide earlier this month failed to ask the only question that mattered: What would’ve happened (i.e., how much worse would it have been) were it not for Bessent? And what might the outcome of the congressional vote have been in the event the situation (the currency situation) had spiraled completely out of control?
Milei serenaded supporters (literally) before offering predictable predictions about a new dawn. “Today we passed a turning point,” he said. “Today begins the building of a great Argentina.”
Trump was excited. For himself. “BIG WIN in Argentina for Javier Milei, a wonderful Trump Endorsed Candidate!” he shouted, on TruthSocial. “He’s making us all look good.”
And that’s what really counts, right? As a great man once exhorted the world, “Ask not what America will do for you, but what together we can do for Donald Trump.”
I think encouraging Argentina to stick with reform and undermining Venezuela’s illegitimate government are worthy goals, even if the means being used are somewhat between puzzling and reckless.
Undermining Saddam was a “worthy goal” too on many vectors. Same thing with Gaddafi. And all else equal, it’s a good idea to encourage people to stick with reforms when the alternative’s hyper-inflation. But at the end of the day, it’s none of our business. We just can’t get that through our heads, even when we have a president who ran on a non-interventionist platform: It’s none of our business. And when we make it our business, stuff tends to go wrong.
I mean, look: Some people would argue our government’s “illegitimate” and if the standard’s fiscal rectitude, we’re lacking severely. Should a foreign country intervene?
I think there are some experiments under way already. China is working on this approach, at least from some POVs.
I think what is and isn’t sensible to do is more grayscale than bright-line. US actions vs Venezuela are clearly over the line – gunboat diplomacy is a bad idea, I suppose we’ll be okay with China acting similarly in SE Asia now? US actions in Argentina are maybe on the grayscale – will probably lose some $BNs but not a lot.
+1.
There’s a universal problem that happens in decision situations. One makes a choice to achieve a specific objective and in the end the objective is met. From the point of view of the decision maker, the conclusion is that the choice made was correct one. However, often if the DM obtains the originally desired result that outcome may not actually represent a “win.” One never actually knows if a given decision was or was not the correct/optimal one. Even worse, one can’t go back and check the alternative. Conditions will have changed and new outcomes will arise. Regardless of what happens when one makes a given choice, we can never know if the outcome was optimal.