September 25, 2025 • 17 mins
This week, President Donald Trump and Treasury Secretary Scott Bessent surprised markets when they signaled broad economic support — including a potential $20 billion swap line — for Argentinian President Javier Milei amid deep financial and political uncertainty in South America’s second-largest economy.
So, what’s behind this gesture and how would it work? On today’s episode, Bloomberg’s Patrick Gillespie joins Big Take host David Gura from Buenos Aires to unpack what US support could mean for Milei as he faces a referendum on his economic agenda.
Read more: US Readies $20 Billion Rescue to Help Milei Win In Argentina
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:09):
In a bilateral meeting on the sidelines of the United
Nations General Assembly on Tuesday, President Donald Trump reiterated his
support for one of his most prominent international allies.
Speaker 1 (00:19):
We're back in him one hundred percent. I think he's
done a fantastic job.
Speaker 3 (00:23):
Argentina's President Javier Malay.
Speaker 4 (00:25):
He, like us, inherited a mess, and what he's done
to fix it is good. And Scott is working with
their countries so that they can get good dead and
all of the things that you need to make Argentina
gread against.
Speaker 2 (00:38):
Trump's remarks come at a time of financial and political
uncertainty in Argentina. Mulay, who's a libertarian known for his
radical spending cuts and dramatic use of a chainsaw at
political rallies, saw his party suffer a crushing defeat in
elections in the Buenos Aires province that triggered a sharp
drop in the value of the Argentine pesos, rattled investors
(01:01):
who have grown concerned about what that political development could
mean for midterm elections next month.
Speaker 5 (01:06):
The Argentina dollar bonds plunge you the most in three years.
Speaker 1 (01:09):
That's after a provincial.
Speaker 2 (01:10):
The pesos freefall led to an unexpected move by US
Treasury Secretary Scott Bessant. This week, he surprised market watchers
by offering direct support to Argentina's economy. Everything he said
was on the table here he is speaking on Fox
Business on Wednesday.
Speaker 6 (01:27):
We are not going to let a disequilibrium in the
market the cause his backup in his substantial economic reforms.
Speaker 5 (01:38):
Secretary of Besson announced that the US was going to
sort of roll out the whole red carpet for our President.
Speaker 1 (01:43):
Hagymulay.
Speaker 2 (01:44):
Patrick Gillespie is the chief of Bloomberg's bureau in Buenos Aires.
Speaker 5 (01:48):
He announced that the US is negotiating a twenty billion
dollar swap line between the United States and Argentina. He's
also said the Treasury is willing to buy Argentina's bonds
that are sold on Global Maark Mars, and he might
also provide a separate standby credit or loan through a
certain fund that the Treasury has at its will that
it doesn't need congressional approval.
Speaker 1 (02:09):
To go through.
Speaker 2 (02:10):
President Malay thanked Secretary Besson and President Trump for that commitment,
which investors cheered. We saw the Argentine peso strengthen against
the US dollar.
Speaker 5 (02:20):
There's always been the rumor of would a US government
bail out or help rescue a Argentine government.
Speaker 1 (02:26):
It's never come to fruition.
Speaker 5 (02:27):
It's kind of an urban legend here, so it is
really shocking to actually see it happen in real time.
Speaker 2 (02:34):
I'm David Gera and this is the big take from
Bloomberg News Today. On the show, why the Trump administration
is putting money and political capital behind Argentina and itself
described a narco capitalist president, and how what happens next
could be make or break for one of Trump's closest
international allies. Argentina has faced deep economic difficult for decades.
(03:01):
When Javier Malay was elected in twenty twenty three, the
country's annual rate of inflation was around one hundred and
forty percent. For almost two years, he's been trying to
get inflation under control while contending with a skittish market
and some disappointing political developments domestically. Bloomberg Buenos Aires Bureau
chief Patrick Gillespie says that when Treasury Secretary Scott Best
(03:23):
signaled US support this week, it was a surprise. In
part because one of the methods of support the Secretary
said was up for consideration is a twenty billion dollars
swap line.
Speaker 5 (03:34):
The Central Bank of Argentina would open up an account
in the United States either at the US Treasury at
the US Federal Reserve, and deposit an equal amount of
twenty billion dollars in Argentine pesos in the United States,
while the US opens an account at the Argentine Central
Bank of Buenos Sorries.
Speaker 1 (03:53):
And deposits twenty billion dollars.
Speaker 5 (03:54):
So it acts on paper as nobody actually giving someone
else money, but in practice, since the Argentine paso is
so much weaker than the US dollar, it acts as
sort of a buffer for the Argentine peso, at least
in the near turn. That's the thinking behind it. But
usually these are loans that are done between the Federal
Reserve and central banks around the world. It's very unusual
(04:18):
that the loan is directly from the Treasury to a
central bank.
Speaker 2 (04:23):
You mentioned this exchange Stabilization Fund that the Treasury has.
Is that something that Treasury relies on a lot. The
Exchange Stabilization Fund started back in the nineteen thirties. It
actually originates from the Gold Act I believe of nineteen
thirty four, and it's been used over one hundred times
by the United States for different operations. It was tapped
in nineteen ninety five to give a twenty billion dollars
(04:45):
loan to the Mexican government during what was called the
Tequila Crisis back then when their currency was in the
sell off. But this is a very unusual sign of
support in a much different context. It hasn't been used
in recent years, at least in Latin America, and it
certainly hasn't been used to this extent between the United
States in Argentina. The United States has supported several IMF
(05:06):
programs of Argentina, and it should be important to note,
David that this twenty billion dollar potential loan from the
United States to Argentina is coming after Trump supported Argentina
securing a separate twenty billion dollar loan from the International
Monetary Fund just back in April, and that obviously hasn't
been enough to calm markets and assure people that Mele
(05:26):
has the firepower he needs to weather the market volatility
in the election volatility. As I think about the uniqueness
of this, the kind of unilateral nature of it stands
out to me. So you mentioned the IMF having done
I guess close to two dozen of these bailouts for Argentina.
Speaker 3 (05:43):
That's a multilateral institution.
Speaker 2 (05:46):
How rare or how extraordinary is that the US is
proposing doing this on its own.
Speaker 1 (05:50):
It's extremely rare, David.
Speaker 5 (05:51):
It also remains to be seen if this is truly
a loan or if this is a grand theatrical act
of support from the Trump administration. They actually have not
bought Argentine bonds, they have not loan twenty billion dollars.
They've only said that they're negotiating working on this. And
Scott Besson himself said that this is supposed to be
a bridge to Argentina's midterm elections on October twenty sixth.
Speaker 3 (06:16):
Here's Best on Fox Business on Wednesday.
Speaker 6 (06:18):
The plan is as long as President la continues with
his strong economic policies to help him to bridge him
to the election.
Speaker 5 (06:27):
So even the people advocating for this rescue package for
povery Malay's government are framing this as sort of a
patchwork to get through for the next four weeks. So
it remains unclear if this is a long term US
investment in Argentina or just trying to support an ally
while he's facing some political volatility.
Speaker 2 (06:47):
Let's play this out a bit, say, we get this
twenty billion dollar swap line, how are we going to
gauge whether or not it's had a positive effect on
the economy.
Speaker 5 (06:54):
Well, I think the hope from the Trump administration and
Javier Malaise government is that it stabilizes the currency in
the near term. We were dealing with a currency sell
off in the past few days, and the hope is
that this is enough to show for the people selling
off on the pace. So Hey, Argentina on paper, in theory,
could have the firepower to support the currency and stabilize
(07:16):
inflation in the near term. I should say stabilize inflation
in the Argentina context. By any global standard, Argentina has
extremely high inflation, but here it's been getting relatively better,
but at a significant economic cost to people here in Argentina.
Speaker 2 (07:33):
Patrick, in recent weeks, I know that Argentina itself has
taken some actions here to stem the crisis that's been
underway there. What is it done and how successful has
it been.
Speaker 5 (07:42):
Argentina has not been very successful in stemming the currency
crisis of the past few weeks, mostly because this isn't
really a monetary issue. This is a political problem. This
election in October is a referendum on his presidency, like
it is for so many other world leaders and people
have sort of run out of patients with his own
austerity campaign. And at the same time, while you've had
(08:03):
these historic change in economic policies in Argentina, Malay has
ignored the political class, the political elites that may have
won him some praise and respect early on in his presidency,
but ultimately these are the people and the parties that
have the machinery to get the vote out, to make
sure people vote. He doesn't have good relationships with the
other center or center right parties in Argentina, he doesn't
(08:26):
have a relationship with governors in Argentina are very important,
and he's really vilified Congress. Congress is now starting to
overturn some of Malay's vetos and David around this time
that we're seeing Malay's political strategy sort of go off
the rails. His sister and his most important advisor, Karina Melay,
is facing bribery allegations. It's a pretty classic case where
(08:48):
a government agency gives a bloated contract to a company,
and there's WhatsApp audio messages where people have alleged the
Karina is taking kickbacks from these far pmaceutical companies.
Speaker 1 (09:01):
This is at a.
Speaker 5 (09:01):
Time when Malay has actually vetoed a bill that would
have increased spending for disability medications in Argentina. So the
optics are all types of bad for Javier and Malay
and Patrick.
Speaker 2 (09:12):
We should note that Karina Malay has denied those allegations.
I want to dig a little bit more into the
rationale of this move by the US Treasury Secretary. He
called Argentina a systemically important US ally in Latin America.
Why Argentina and why now? Why is the Trump administration
so interested in getting involved in this way?
Speaker 5 (09:32):
If you think about at least Latin America, Donald Trump
and Javier Malay are lonely leaders in this region without
each other. Javer Malay has brewed tensions with Lula and Brazil,
Petro in Colombia, Shinbaum in Mexico, and Trump has done
the same through different tactics such as trade tariffs. Malays
(09:52):
mostly just sent very nasty insults at those leaders who
have also traded insults back at him. Right, Malayan Trump
really don't have any friends besides themselves in the region.
And if you think beyond sort of the fact that
Malay is a big MAGA supporter and in the conservative
circles in the United States, Malay is very popular.
Speaker 1 (10:13):
Why are they doing this now?
Speaker 5 (10:15):
There's a few geopolitical reasons to think about this, David.
Argentina since two thousand and nine has had a swap
line of eighteen billion dollars with the Chinese Central Bank.
It remains to be unclear, but it would certainly make
sense if the US is trying to counter China's influence
in the region. If a condition that we don't know
about yet could be that Argentina has to get rid
(10:37):
of or reduce its exposure to China via that swap
line and sort of replace it with this one. The
other thing long term, when you think about Argentina, David,
is it is strategic when it comes to resources. Argentina
has some of the world's largest lithium resources, shale oil,
shale gas reserves. So to have a friendly ally at
a time when the US obviously has a very tentious
(10:59):
relationship with Venezuela, one of the countries.
Speaker 1 (11:02):
With the world's largest oil reserves.
Speaker 5 (11:04):
From a resources standpoint, allying with Mala makes a lot
of sense, and Melay is willing to be Trump's biggest
fan in Latin America at a time when he doesn't
have a lot.
Speaker 1 (11:13):
Of friends.
Speaker 3 (11:15):
Coming up.
Speaker 2 (11:16):
How potentially extending a twenty billion dollar economic lifeline to
South America's second largest economy squares with President Trump's America
first foreign policy or dozen. Shortly after Scott Besson became
(11:40):
the seventy ninth US Treasury Secretary, one of the first
trips he took overseas was to Argentina. Bloomberg's Patrick Gillespie
says that was a surprise. It's certainly not a destination
Besson's predecessors prioritized in that way. Argentina isn't even Latin
America's number one economy.
Speaker 3 (11:57):
Patrick, you look at the trade.
Speaker 2 (11:58):
Relationship between the US and Brazil and I think that's
like ninety plus billion dollars. Argentine is a fraction of that.
Yet the US is treating Brazil in really a totally
different way that the tariffs that have been levied on
Brazil are huge by comparison.
Speaker 3 (12:13):
What do you make of that contrast?
Speaker 2 (12:14):
What does that tell us about this administration's approach to
Latin America.
Speaker 5 (12:17):
To me, it says that Trump is playing friends and
it doesn't matter really what the size of your economy is.
Trump wants political allegiance, political loyalty. He wants his allies
in the region to kiss the ring and bend the knaate.
And what you're seeing is an emboldened Lula in Brazil,
the president of Brazil, who is now in his third
(12:38):
presidential term. This is effectively a golden egg for him
politically going into Brazil's election next year, where he can say,
look at the United States, they are meddling in our
domestic affairs. What Trump is saying is that I'm going
to apply a fifty percent terriff on some Brazilian goods
for the fact that Brazil's Supreme Court has a convicted
(13:00):
one of Trump's allies, Giota bol Sonado, the former president
of Brazil, of plotting a coup on Lula and leading an.
Speaker 1 (13:07):
Insurrection a few years ago.
Speaker 5 (13:08):
So when you think about the trade relationship, the economic
size of Brazil, Brazil is several times the size of
Argentina economically and from a population standpoint, and it's a
behemoth on the world stage, especially when it comes to commodities.
You would think that the United States and Brazil want
to have a relatively positive relationship as the two largest
economies in the Americas. But Trump is thinking about his
(13:31):
own priorities, and that priority right now is Javier and
Mela and making sure that his top MAGA ally in Latin.
Speaker 1 (13:38):
America gets through at least for the next four weeks.
Speaker 2 (13:42):
When I saw those posts by the treachery Secretary, you
can count me among a group of a lot of people,
I think who kind of wondered where this came from
and saw it is kind of out of step with
the kind of overarching ethos foreign policy ethos that we've
seen from this White House, which is of course America.
For there is something inherently counter to that in what
(14:04):
Scott Besant is proposing here, that is offering this kind
of economic outreach to a country of I guess you
could say debatable economic importance to the United States.
Speaker 5 (14:13):
David of America first policy certainly didn't include buying other
countries bonds and sending out twenty billion dollar checks in
other countries. There's definitely a contradiction, and if you heard
Trump when he was meeting with me La, he said,
we're going to help him, but I don't think he
needs a bailout.
Speaker 1 (14:28):
Well, we're going to help them. I don't think they
need a bailout. He's done a fantastic job.
Speaker 5 (14:33):
So you can almost hear a bit of Trump's own
hesitancy to say that he's going to be sending a
check to Argentina while this is an administration that wants
to focus.
Speaker 1 (14:43):
On bringing money in.
Speaker 5 (14:44):
Winning to them is collecting money from tariffs, not from
bailing out other countries, or I should say, at least
politically bailing out other countries. Of Course, it remains to
be seen if this is smoking mirrors or if the
US is actually going to follow through on this. I think,
at least in the initial stage, they're hoping that just
these words from Bessett could help Malay in the near
term to stabilize the currency and the markets.
Speaker 2 (15:07):
We are about a month out from that midterm election
you mentioned on October the twenty six. Of course, present
lay not on the ballot in those elections, But what
is that election going to tell us about his prospects
and the future of his approach to the Argentine economy.
Speaker 3 (15:20):
More broadly, Malay is going.
Speaker 5 (15:21):
To have a really short honeymoon, if that at all,
after these midterm elections, because he needs to start making
some very difficult decisions after this election that are going
to be even more politically costly. It's pretty clear to
everyone that the currency is overvalue, the peso is too strong,
and Malay is going to have to loosen his grip
(15:43):
on the currency, which has been sort of a part
of his formula for bringing down inflation. And as inflation
has come down, his popularity had maintained relatively high considering
the austerity campaign.
Speaker 1 (15:54):
He went into. He's going to keep going on the
austerity that doesn't seem to be changing.
Speaker 5 (15:58):
But what's clear is that he needs to let the
peso really float and really trade freely like most currencies
in the world.
Speaker 1 (16:05):
And inevitably that's a.
Speaker 5 (16:06):
Good thing in the long term in the sense that
it would allow the central bank to rebuild its buffer
of cash foreign reserves, your rainy day stash of money
to prevent the next big crisis in markets. But in
the near term, if you're not if you're buying dollars
in the economy, that means you're pushing pesos in there
as well, and that soaks inflation. Malay has been saying
(16:28):
to voters, this is always worth it. Inflation is coming down,
and all of a sudden after this midterm election, inflation
starts going back up. Well, it certainly doesn't seem like
Melais is delivering on his promises to voters. So this
is a crucial vote for him, both from Argentine's society perspective,
whether they want to go back one hundred and eighty
degrees in the other direction just two years after they
(16:50):
gave Melay this mandate to change the course of the economy.
And it's also a big moment for foreign investors who
are focused on Argentina because malay Is just has an
even implemented most of his big economic reforms that he's
promised to deliver, and that would really reshape Argentina in
a more structural way.
Speaker 3 (17:07):
Patrick, Thank you very much.
Speaker 1 (17:09):
Thank you, David.
Speaker 3 (17:15):
This is the Big Take from Bloomberg News. I'm David Gura.
Speaker 2 (17:18):
To get more from the Big Take and unlimited access
to all of Bloomberg dot com, subscribe today at Bloomberg
dot Com Slash Podcast Offer.
Speaker 3 (17:26):
Thanks for listening. We'll be back tomorrow
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:09):
In a bilateral meeting on the sidelines of the United
Nations General Assembly on Tuesday, President Donald Trump reiterated his
support for one of his most prominent international allies.
Speaker 1 (00:19):
We're back in him one hundred percent. I think he's
done a fantastic job.
Speaker 3 (00:23):
Argentina's President Javier Malay.
Speaker 4 (00:25):
He, like us, inherited a mess, and what he's done
to fix it is good. And Scott is working with
their countries so that they can get good dead and
all of the things that you need to make Argentina
gread against.
Speaker 2 (00:38):
Trump's remarks come at a time of financial and political
uncertainty in Argentina. Mulay, who's a libertarian known for his
radical spending cuts and dramatic use of a chainsaw at
political rallies, saw his party suffer a crushing defeat in
elections in the Buenos Aires province that triggered a sharp
drop in the value of the Argentine pesos, rattled investors
(01:01):
who have grown concerned about what that political development could
mean for midterm elections next month.
Speaker 5 (01:06):
The Argentina dollar bonds plunge you the most in three years.
Speaker 1 (01:09):
That's after a provincial.
Speaker 2 (01:10):
The pesos freefall led to an unexpected move by US
Treasury Secretary Scott Bessant. This week, he surprised market watchers
by offering direct support to Argentina's economy. Everything he said
was on the table here he is speaking on Fox
Business on Wednesday.
Speaker 6 (01:27):
We are not going to let a disequilibrium in the
market the cause his backup in his substantial economic reforms.
Speaker 5 (01:38):
Secretary of Besson announced that the US was going to
sort of roll out the whole red carpet for our President.
Speaker 1 (01:43):
Hagymulay.
Speaker 2 (01:44):
Patrick Gillespie is the chief of Bloomberg's bureau in Buenos Aires.
Speaker 5 (01:48):
He announced that the US is negotiating a twenty billion
dollar swap line between the United States and Argentina. He's
also said the Treasury is willing to buy Argentina's bonds
that are sold on Global Maark Mars, and he might
also provide a separate standby credit or loan through a
certain fund that the Treasury has at its will that
it doesn't need congressional approval.
Speaker 1 (02:09):
To go through.
Speaker 2 (02:10):
President Malay thanked Secretary Besson and President Trump for that commitment,
which investors cheered. We saw the Argentine peso strengthen against
the US dollar.
Speaker 5 (02:20):
There's always been the rumor of would a US government
bail out or help rescue a Argentine government.
Speaker 1 (02:26):
It's never come to fruition.
Speaker 5 (02:27):
It's kind of an urban legend here, so it is
really shocking to actually see it happen in real time.
Speaker 2 (02:34):
I'm David Gera and this is the big take from
Bloomberg News Today. On the show, why the Trump administration
is putting money and political capital behind Argentina and itself
described a narco capitalist president, and how what happens next
could be make or break for one of Trump's closest
international allies. Argentina has faced deep economic difficult for decades.
(03:01):
When Javier Malay was elected in twenty twenty three, the
country's annual rate of inflation was around one hundred and
forty percent. For almost two years, he's been trying to
get inflation under control while contending with a skittish market
and some disappointing political developments domestically. Bloomberg Buenos Aires Bureau
chief Patrick Gillespie says that when Treasury Secretary Scott Best
(03:23):
signaled US support this week, it was a surprise. In
part because one of the methods of support the Secretary
said was up for consideration is a twenty billion dollars
swap line.
Speaker 5 (03:34):
The Central Bank of Argentina would open up an account
in the United States either at the US Treasury at
the US Federal Reserve, and deposit an equal amount of
twenty billion dollars in Argentine pesos in the United States,
while the US opens an account at the Argentine Central
Bank of Buenos Sorries.
Speaker 1 (03:53):
And deposits twenty billion dollars.
Speaker 5 (03:54):
So it acts on paper as nobody actually giving someone
else money, but in practice, since the Argentine paso is
so much weaker than the US dollar, it acts as
sort of a buffer for the Argentine peso, at least
in the near turn. That's the thinking behind it. But
usually these are loans that are done between the Federal
Reserve and central banks around the world. It's very unusual
(04:18):
that the loan is directly from the Treasury to a
central bank.
Speaker 2 (04:23):
You mentioned this exchange Stabilization Fund that the Treasury has.
Is that something that Treasury relies on a lot. The
Exchange Stabilization Fund started back in the nineteen thirties. It
actually originates from the Gold Act I believe of nineteen
thirty four, and it's been used over one hundred times
by the United States for different operations. It was tapped
in nineteen ninety five to give a twenty billion dollars
(04:45):
loan to the Mexican government during what was called the
Tequila Crisis back then when their currency was in the
sell off. But this is a very unusual sign of
support in a much different context. It hasn't been used
in recent years, at least in Latin America, and it
certainly hasn't been used to this extent between the United
States in Argentina. The United States has supported several IMF
(05:06):
programs of Argentina, and it should be important to note,
David that this twenty billion dollar potential loan from the
United States to Argentina is coming after Trump supported Argentina
securing a separate twenty billion dollar loan from the International
Monetary Fund just back in April, and that obviously hasn't
been enough to calm markets and assure people that Mele
(05:26):
has the firepower he needs to weather the market volatility
in the election volatility. As I think about the uniqueness
of this, the kind of unilateral nature of it stands
out to me. So you mentioned the IMF having done
I guess close to two dozen of these bailouts for Argentina.
Speaker 3 (05:43):
That's a multilateral institution.
Speaker 2 (05:46):
How rare or how extraordinary is that the US is
proposing doing this on its own.
Speaker 1 (05:50):
It's extremely rare, David.
Speaker 5 (05:51):
It also remains to be seen if this is truly
a loan or if this is a grand theatrical act
of support from the Trump administration. They actually have not
bought Argentine bonds, they have not loan twenty billion dollars.
They've only said that they're negotiating working on this. And
Scott Besson himself said that this is supposed to be
a bridge to Argentina's midterm elections on October twenty sixth.
Speaker 3 (06:16):
Here's Best on Fox Business on Wednesday.
Speaker 6 (06:18):
The plan is as long as President la continues with
his strong economic policies to help him to bridge him
to the election.
Speaker 5 (06:27):
So even the people advocating for this rescue package for
povery Malay's government are framing this as sort of a
patchwork to get through for the next four weeks. So
it remains unclear if this is a long term US
investment in Argentina or just trying to support an ally
while he's facing some political volatility.
Speaker 2 (06:47):
Let's play this out a bit, say, we get this
twenty billion dollar swap line, how are we going to
gauge whether or not it's had a positive effect on
the economy.
Speaker 5 (06:54):
Well, I think the hope from the Trump administration and
Javier Malaise government is that it stabilizes the currency in
the near term. We were dealing with a currency sell
off in the past few days, and the hope is
that this is enough to show for the people selling
off on the pace. So Hey, Argentina on paper, in theory,
could have the firepower to support the currency and stabilize
(07:16):
inflation in the near term. I should say stabilize inflation
in the Argentina context. By any global standard, Argentina has
extremely high inflation, but here it's been getting relatively better,
but at a significant economic cost to people here in Argentina.
Speaker 2 (07:33):
Patrick, in recent weeks, I know that Argentina itself has
taken some actions here to stem the crisis that's been
underway there. What is it done and how successful has
it been.
Speaker 5 (07:42):
Argentina has not been very successful in stemming the currency
crisis of the past few weeks, mostly because this isn't
really a monetary issue. This is a political problem. This
election in October is a referendum on his presidency, like
it is for so many other world leaders and people
have sort of run out of patients with his own
austerity campaign. And at the same time, while you've had
(08:03):
these historic change in economic policies in Argentina, Malay has
ignored the political class, the political elites that may have
won him some praise and respect early on in his presidency,
but ultimately these are the people and the parties that
have the machinery to get the vote out, to make
sure people vote. He doesn't have good relationships with the
other center or center right parties in Argentina, he doesn't
(08:26):
have a relationship with governors in Argentina are very important,
and he's really vilified Congress. Congress is now starting to
overturn some of Malay's vetos and David around this time
that we're seeing Malay's political strategy sort of go off
the rails. His sister and his most important advisor, Karina Melay,
is facing bribery allegations. It's a pretty classic case where
(08:48):
a government agency gives a bloated contract to a company,
and there's WhatsApp audio messages where people have alleged the
Karina is taking kickbacks from these far pmaceutical companies.
Speaker 1 (09:01):
This is at a.
Speaker 5 (09:01):
Time when Malay has actually vetoed a bill that would
have increased spending for disability medications in Argentina. So the
optics are all types of bad for Javier and Malay
and Patrick.
Speaker 2 (09:12):
We should note that Karina Malay has denied those allegations.
I want to dig a little bit more into the
rationale of this move by the US Treasury Secretary. He
called Argentina a systemically important US ally in Latin America.
Why Argentina and why now? Why is the Trump administration
so interested in getting involved in this way?
Speaker 5 (09:32):
If you think about at least Latin America, Donald Trump
and Javier Malay are lonely leaders in this region without
each other. Javer Malay has brewed tensions with Lula and Brazil,
Petro in Colombia, Shinbaum in Mexico, and Trump has done
the same through different tactics such as trade tariffs. Malays
(09:52):
mostly just sent very nasty insults at those leaders who
have also traded insults back at him. Right, Malayan Trump
really don't have any friends besides themselves in the region.
And if you think beyond sort of the fact that
Malay is a big MAGA supporter and in the conservative
circles in the United States, Malay is very popular.
Speaker 1 (10:13):
Why are they doing this now?
Speaker 5 (10:15):
There's a few geopolitical reasons to think about this, David.
Argentina since two thousand and nine has had a swap
line of eighteen billion dollars with the Chinese Central Bank.
It remains to be unclear, but it would certainly make
sense if the US is trying to counter China's influence
in the region. If a condition that we don't know
about yet could be that Argentina has to get rid
(10:37):
of or reduce its exposure to China via that swap
line and sort of replace it with this one. The
other thing long term, when you think about Argentina, David,
is it is strategic when it comes to resources. Argentina
has some of the world's largest lithium resources, shale oil,
shale gas reserves. So to have a friendly ally at
a time when the US obviously has a very tentious
(10:59):
relationship with Venezuela, one of the countries.
Speaker 1 (11:02):
With the world's largest oil reserves.
Speaker 5 (11:04):
From a resources standpoint, allying with Mala makes a lot
of sense, and Melay is willing to be Trump's biggest
fan in Latin America at a time when he doesn't
have a lot.
Speaker 1 (11:13):
Of friends.
Speaker 3 (11:15):
Coming up.
Speaker 2 (11:16):
How potentially extending a twenty billion dollar economic lifeline to
South America's second largest economy squares with President Trump's America
first foreign policy or dozen. Shortly after Scott Besson became
(11:40):
the seventy ninth US Treasury Secretary, one of the first
trips he took overseas was to Argentina. Bloomberg's Patrick Gillespie
says that was a surprise. It's certainly not a destination
Besson's predecessors prioritized in that way. Argentina isn't even Latin
America's number one economy.
Speaker 3 (11:57):
Patrick, you look at the trade.
Speaker 2 (11:58):
Relationship between the US and Brazil and I think that's
like ninety plus billion dollars. Argentine is a fraction of that.
Yet the US is treating Brazil in really a totally
different way that the tariffs that have been levied on
Brazil are huge by comparison.
Speaker 3 (12:13):
What do you make of that contrast?
Speaker 2 (12:14):
What does that tell us about this administration's approach to
Latin America.
Speaker 5 (12:17):
To me, it says that Trump is playing friends and
it doesn't matter really what the size of your economy is.
Trump wants political allegiance, political loyalty. He wants his allies
in the region to kiss the ring and bend the knaate.
And what you're seeing is an emboldened Lula in Brazil,
the president of Brazil, who is now in his third
(12:38):
presidential term. This is effectively a golden egg for him
politically going into Brazil's election next year, where he can say,
look at the United States, they are meddling in our
domestic affairs. What Trump is saying is that I'm going
to apply a fifty percent terriff on some Brazilian goods
for the fact that Brazil's Supreme Court has a convicted
(13:00):
one of Trump's allies, Giota bol Sonado, the former president
of Brazil, of plotting a coup on Lula and leading an.
Speaker 1 (13:07):
Insurrection a few years ago.
Speaker 5 (13:08):
So when you think about the trade relationship, the economic
size of Brazil, Brazil is several times the size of
Argentina economically and from a population standpoint, and it's a
behemoth on the world stage, especially when it comes to commodities.
You would think that the United States and Brazil want
to have a relatively positive relationship as the two largest
economies in the Americas. But Trump is thinking about his
(13:31):
own priorities, and that priority right now is Javier and
Mela and making sure that his top MAGA ally in Latin.
Speaker 1 (13:38):
America gets through at least for the next four weeks.
Speaker 2 (13:42):
When I saw those posts by the treachery Secretary, you
can count me among a group of a lot of people,
I think who kind of wondered where this came from
and saw it is kind of out of step with
the kind of overarching ethos foreign policy ethos that we've
seen from this White House, which is of course America.
For there is something inherently counter to that in what
(14:04):
Scott Besant is proposing here, that is offering this kind
of economic outreach to a country of I guess you
could say debatable economic importance to the United States.
Speaker 5 (14:13):
David of America first policy certainly didn't include buying other
countries bonds and sending out twenty billion dollar checks in
other countries. There's definitely a contradiction, and if you heard
Trump when he was meeting with me La, he said,
we're going to help him, but I don't think he
needs a bailout.
Speaker 1 (14:28):
Well, we're going to help them. I don't think they
need a bailout. He's done a fantastic job.
Speaker 5 (14:33):
So you can almost hear a bit of Trump's own
hesitancy to say that he's going to be sending a
check to Argentina while this is an administration that wants
to focus.
Speaker 1 (14:43):
On bringing money in.
Speaker 5 (14:44):
Winning to them is collecting money from tariffs, not from
bailing out other countries, or I should say, at least
politically bailing out other countries. Of Course, it remains to
be seen if this is smoking mirrors or if the
US is actually going to follow through on this. I think,
at least in the initial stage, they're hoping that just
these words from Bessett could help Malay in the near
term to stabilize the currency and the markets.
Speaker 2 (15:07):
We are about a month out from that midterm election
you mentioned on October the twenty six. Of course, present
lay not on the ballot in those elections, But what
is that election going to tell us about his prospects
and the future of his approach to the Argentine economy.
Speaker 3 (15:20):
More broadly, Malay is going.
Speaker 5 (15:21):
To have a really short honeymoon, if that at all,
after these midterm elections, because he needs to start making
some very difficult decisions after this election that are going
to be even more politically costly. It's pretty clear to
everyone that the currency is overvalue, the peso is too strong,
and Malay is going to have to loosen his grip
(15:43):
on the currency, which has been sort of a part
of his formula for bringing down inflation. And as inflation
has come down, his popularity had maintained relatively high considering
the austerity campaign.
Speaker 1 (15:54):
He went into. He's going to keep going on the
austerity that doesn't seem to be changing.
Speaker 5 (15:58):
But what's clear is that he needs to let the
peso really float and really trade freely like most currencies
in the world.
Speaker 1 (16:05):
And inevitably that's a.
Speaker 5 (16:06):
Good thing in the long term in the sense that
it would allow the central bank to rebuild its buffer
of cash foreign reserves, your rainy day stash of money
to prevent the next big crisis in markets. But in
the near term, if you're not if you're buying dollars
in the economy, that means you're pushing pesos in there
as well, and that soaks inflation. Malay has been saying
(16:28):
to voters, this is always worth it. Inflation is coming down,
and all of a sudden after this midterm election, inflation
starts going back up. Well, it certainly doesn't seem like
Melais is delivering on his promises to voters. So this
is a crucial vote for him, both from Argentine's society perspective,
whether they want to go back one hundred and eighty
degrees in the other direction just two years after they
(16:50):
gave Melay this mandate to change the course of the economy.
And it's also a big moment for foreign investors who
are focused on Argentina because malay Is just has an
even implemented most of his big economic reforms that he's
promised to deliver, and that would really reshape Argentina in
a more structural way.
Speaker 3 (17:07):
Patrick, Thank you very much.
Speaker 1 (17:09):
Thank you, David.
Speaker 3 (17:15):
This is the Big Take from Bloomberg News. I'm David Gura.
Speaker 2 (17:18):
To get more from the Big Take and unlimited access
to all of Bloomberg dot com, subscribe today at Bloomberg
dot Com Slash Podcast Offer.
Speaker 3 (17:26):
Thanks for listening. We'll be back tomorrow
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