Argentina Gives a Thumbs-Up to Trump Lite

 

I remember thinking that I should have brought more cash to Buenos Aires.

It’s not that I intended to spend any more money on the vacation than I’d planned. It’s just that there were these nice young men, seemingly on every corner, offering me triple the official exchange rate for any American dollars in my wallet. If we’d thought to bring a few thousand in cash, a lot of our vacation could have been paid for.

This was a dozen years ago, but little has changed. The Argentine peso has long been a poster child for unstable currencies, and outrageous inflation has been a fact of life for much of modern history. This is why those young men were so eager to swap pesos — which would be worth less the next day — for dollars that would presumably hold their value for a while.

Now Trump has offered to do basically the same thing, but on a far grander scale. He’s promising a $20 billion “currency swap” with the Argentine government. Just as I did, he’s swapping good dollars for bad pesos, and hoping that will prop up the right-wing government of his new BFF, Javier Milei. Trump will be doing this illegally, with taxpayer money, and with no real American interests at stake. These are, to him, trivial issues.

But now the plot thickens, and not in a good way. Argentines went to the polls on Sunday, two days ago. It was their midterm election, involving both houses of the legislature, and it was very much a referendum on the two-year-old Milei government. Most of the reporting showed that voters were pissed off and ready to hand Milei a stinging loss.

The reporting was wrong. Milei’s party won big. Now it’s hard to know what happens, and as is often the case when Argentina is on the world stage, things are a mess.

Argentina is famous for economic underachievement. Lush and fertile, it’s a land blessed with abundant natural resources, and with people who habitually mismanage them. Even in the good times — times when military juntas weren’t “disappearing” people — the Argentine economy was anemic at best, disastrous at worst.

Two years ago, inflation was quite out of control by Election Day — as much as 180 percent per year — so in a spasm of national masochism, not unlike our own one year later, Argentina elected Javier Milei. Branding himself as a sort of Trump Lite, Milei promptly instituted savage spending cuts, bringing job losses and widespread economic pain to much of the nation. This endeared him to Trump — a big fan of other people’s pain — and made him a rising star with the international finance crowd, who are always looking for new fascists to underwrite.

Like Trump, Milei managed to tank his country’s economy in record time. He came to office promising to end runaway inflation, which he did, sort of — it’s still an absurd 30 percent — but only for a few months. Also like Trump, the honeymoon was over fast.

I’ll let Paul Krugman explain:

Milei has succeeded in reducing Argentina’s inflation rate, but only by keeping the peso overvalued against the dollar. This is a time-tested futile strategy — by which I mean that it’s a strategy that has been attempted many times and has consistently failed. Typically, there’s initial euphoria. Then, as the overvalued currency leads to rising unemployment and political backlash, money starts to flee the country in anticipation of a future devaluation.

Which is exactly what was happening just last week. Now, with the election bringing new respectability to Milei, who knows? That money could come flowing back, global currency markets could re-discover the joys of the Argentine peso, and — after just a few more years of pain — the Argentine middle class could live happily ever after. Not likely.

The election of Milei in 2023 was an inspiration to a certain kind of American investor, especially hedge funds buying into the fantasy of a right-wing economic miracle. They would show their confidence in the peso — and in Milei’s vision of austerity — by placing large bets on Argentine government bonds. It was that money that Krugman said was starting to leave the country, but now might not. Even so, those bets are hardly safe.

As with rightist economic policies the world over, there was initial “euphoria,” followed by the realization that it was mostly a mirage. The austerity measures required to bring down inflation that much were always going to mean widespread privation for much of the population. Sure enough, Milei’s slash-and-burn policies have, in a short time, brought sharp increases in utility bills, school fees, healthcare costs, drug costs, and food prices, all hitting the middle class especially hard. Sound familiar?

Add in the entirely predictable corruption scandals involving members of Milei’s cabinet, as well as his own sister, and you can see that Milei — in office for two years, but never particularly popular — is now breathing a big sigh of relief.

As is Trump, who has to be happy about the election, and who may or may not go ahead with his currency swap — you never know with him. But he already has big plans for Argentina, a country with little or no strategic significance to the U.S.

Specifically, he announced a massive increase in imports of Argentine beef. This would be good news for me personally — the steaks I had in Buenos Aires were uniformly sensational — but not for American cattle ranchers, most of them staunch MAGA supporters, who can do without the competition. Their flirtation with fascism is already souring.

Trump has made this move, ostensibly to bring down meat prices in this country, which is not high on the list of Trump-caused crises. But there’s a rumor, which I’m starting now, that this could mean a re-brand of Trump Steaks.

Regardless, the ranchers are not taking this well. Like most of the agriculture sector, they’ve already been shafted by Trump’s tariffs, which have whipsawed their markets and injected harrowing uncertainty into every phase of their business. The tariffs have also destroyed, perhaps permanently, their relationships with long-time customers, particularly China and Brazil, whose economic importance is exponentially greater than Argentina’s.

The ranchers are now openly criticizing their cult hero, in public and by name. There’s even a Republican senator, Deb Fischer of Nebraska, who is speaking up for her ranching constituency in a louder voice than MAGA generally permits these days. I’m sure she’ll be smacked down soon.

Trump has responded to the criticism by telling ranchers, in effect, that they’re too stupid to understand the multi-level global chess game he’s playing with tariffs, and that they should just shut up, close their eyes, and think about how they’re making America great again, again.

With the White House being vandalized, fishermen being murdered with impunity on the high seas, and troops being deployed in American cities, you could be forgiven if the corrupt bailout of Argentina has slipped beneath your radar.

But it bears watching, because the Argentine economy is about to become a testing ground for all sorts of bad ideas that Trump and his cronies would love to try here. Most economists would agree that Milei’s slash-and-burn style of governance invariably benefits the rich at the expense of everyone else.

Which is, in the Trump era, American as apple pie.