Burning Bridges

Milei has made many overtures to the United States. As a candidate, he promised to cut ties with Venezuela and Cuba. To the shock of many, he said he would do the same with Brazil and China, the nation’s first- and second-largest trading partners, only one of which is even nominally communist. Though he has maintained trade with both nations, he has reneged on the commitment Argentina made last year to joining BRICS. Moreover, he has declared that Argentina’s public sector will not engage in any economic activity with China.

His economic policies at home reflect an equal commitment to drawing US attention. As Julio Burdman described in Argentina’s edition of Le Monde Diplomatique, he has acted as the consummate “fiscalist economist,” focusing on balancing budgets at the expense of actual economic health. His extreme austerity reflects his libertarian commitments but also his concerted effort to curry favor with Washington and the International Monetary Fund (IMF). Since taking office, he has tried to privatize numerous national industries and to permit the sale of large parts of Patagonia to businesses abroad, which would allow foreign interests to own parts of the country’s precious oil and lithium reserves. He has also pointedly called for the US dollar to replace the peso as the nation’s official currency.

His efforts haven’t gone unnoticed. In January, Milei once again spoke at the World Economic Forum in Davos. In February, he met with Gita Gopinath, the IMF’s second-in-command, who praised the country’s progress under Milei but expressed concern that the severity of his austerity might disproportionately harm more vulnerable parts of Argentine society. The following day, US secretary of state Antony Blinken paid a visit to the president’s Casa Rosada office, speaking positively of the country’s viability for American mining interests and of the government’s ability to reduce its deficits. Milei wrapped up his eventful week by speaking at the Conservative Political Action Conference (CPAC), where he met Donald Trump, who told him to “Make Argentina Great Again.”

One only needs to look at recent history to know that Milei’s attempts to make Argentina a ward of American hegemony will not free the country from the economic challenges it has now faced for decades. In fact, looking back even to the nation’s founding, one finds a centuries-long morality tale of the dangers of relying on a single foreign patron.

Boom Years, Bust Years

In the nineteenth century, industrialization in the Global North created robust demand for exports of various crops and livestock products. This led to rapid growth in Argentina’s economy, especially in the second half of the century. There was another important ingredient in the country’s rise to power, however: British capital. Britain had long been an important (and illicit) trading partner of the River Plate region. Following Argentina’s independence from Spain, Britain got an opportunity to make that relationship much more substantial — and extractive.

When Argentina established a stable central government in 1820, it rolled out an economic program known as “La Feliz Experiencia,” which removed all domestic protections against UK imports, allowed British firms to extract natural resources, and created a central bank funded and controlled by British capital. In this period, Argentina did not have its own merchant fleet, meaning that London was able to control a significant portion of maritime trade. Under the thumb of British interests, Argentina’s government was forced to borrow at exploitative rates, leading to the country’s first currency crisis by the end of the 1820s, which saw the peso devalue by 80 percent between in 1827–29.

Problems like these continued to plague Argentina for the length of its dependence on English power. German economist Gerhart von Schulze-Gaevernitz argued in 1906 that, in the decades leading up to the Panic of 1890, Argentina could be considered “almost an English colony” due to the degree of its dependence. British capital stimulated the development of refrigerator technology for transporting beef and formed the backbone of Argentina’s currency and banking system. It fueled the construction of Argentina’s railway system between 1850 and World War II, by which point the UK owned about 66 percent of the country’s entire network.

When the Panic of 1890 arrived, growing national debt, mainly to English firms like Baring Brothers, caused the country to default on its debt for the first time. The flow of British capital into Argentina fell significantly and only got worse upon the arrival of World War I, which permanently depressed British investment. Though many debate the myriad factors behind Argentina’s relative economic decline in the twentieth century, its reliance on British capital — and the eventual disappearance of that capital — played no small part.

Vultures Circle

Today, Argentina runs the risk of repeating the same mistakes it did in its first century of economic development. The United States is Argentina’s third-most important trade partner. Its policies toward Argentina in recent decades do not, however, indicate that this partnership can form the basis of a more substantive relationship.

Washington was directly responsible for the rise of the country’s last military dictatorship, through Operation Condor. The junta, infamous for torturing and disappearing thirty thousand Argentinians, liberalized Argentina’s financial markets and acquired massive amounts of foreign debt, both of which would lead in part to the hyperinflation of the 1980s and 1990s and the eventual default in 2001. Though the country’s economic woes are manifold in kind and source, this American interference played an integral role in setting the country on its current path.

Since then, the US courts and financial systems have been further sources of Argentine penury. Argentina has long had to depend on the American legal and financial system to issue bonds. (The country had already been issuing bonds from New York since 1976, the same year the dictatorship rose to power.) This created grave problems for Argentina, specifically with “vulture funds” — hedge funds and other financial institutions that buy distressed bonds and then sue to receive full payment on those bonds.

In 2005, Argentina restructured its defaulted debt and made deals with its bondholders in order to pay some rather than all of the amounts owed through the bonds it had previously issued. Though most bondholders had accepted reduced settlements, these vultures secured court rulings in the United States that forced Argentina to repay them at the full price of the bonds. As a result, Argentina could not make repayments on previous settlements without also paying the holdouts (7 percent of bondholders) in full. Moreover, if it did repay the holdouts at face value, the other 93 percent of debtholders would then have the right to sue for that same bond price, which would require a $100 billion outlay on Argentina’s part. The difficulties limited Argentina’s access to foreign credit outside of the IMF and World Bank for a decade.

By the time the right-leaning neoliberal administration of Mauricio Macri settled with these holdouts, the government had to take out a new IMF loan to finance its debts — a situation exacerbated by limited economic growth due to a lack of access to credit. This was the largest loan in IMF history. Given that the IMF itself found deep flaws in both its own and Argentina’s management of IMF loans throughout the 1990s, you may guess that the IMF would have structured the loan to avoid the mistakes of the past. But you’d guess wrong. Eighty-three percent of the funds from this “development loan” went to servicing external debt, creating a brand-new debt problem with the IMF that left Argentina with 211.4 percent annual inflation in 2023.

The US government has, at every step of the way, been in a position to help. It could have intervened to resolve Argentina’s difficulties with US vulture funds. Instead it said that Argentina’s difficulties with holdouts constituted nothing more than a “contractual dispute.” It could have intervened in 2018, when the IMF was preparing to give a loan that not only breached the IMF’s charter, but was observably a disaster waiting to happen. The United States is, after all, the largest single contributor to the organization, and as the IMF openly admits, has veto power over certain decisions the organization makes. Washington has instead chosen to stay out of the fray — because it has no reason to do otherwise.

Cold War Is Over, If You Want It

Despite what Milei seems to think, the Cold War is over. The United States will not flood the country with money in order to stave off Chinese interests or Russian trade. When Argentina struggled to settle debts in the wake of the 2001 default, it was not the United States that bought billions of Argentine bonds: it was Venezuela. When Argentina was having trouble making IMF payments last summer, it was not the United States that stepped in to help alleviate pressure: it was China that initiated (another) currency swap, so that Argentina could make the payment without dipping into its currency reserves. As inflation soared last year and the country’s economic prospects worsened, it was not the United States that offered a helping hand: it was BRICS.

Argentina cannot maintain the dignity of its working people if its goal is to become a ward of US capital. It has already seen what that kind of dependency would look like. When Secretary Blinken expresses enthusiasm for the opportunities Argentina presents to American companies, it is an echo of the dynamics of British investment that long held Argentina back. It is an echo of the extractive economic policies the United States has implemented throughout the Americas. The country will not dig itself out of this hole by letting lithium and gas profits flow back to the United States, all while the country struggles to make debt payments.

The invitation to BRICS that Argentina received last year represented a path forward. As Javier Lewkowicz wrote for Página 12, BRICS countries are markets in specific need of the things Argentina exports most: foodstuffs, minerals, and energy. They account, moreover, for half the world’s GDP, and more than half of the world’s economic growth since 2020. They can provide knowledge and expertise as Argentina restructures its economy. China already consumes 75 percent of Argentina’s beef exports, 93 percent of its soy, and almost 100 percent of its barley and sorghum. It funds solar farms, hydroplants, lithium mines, railway construction, and agricultural infrastructure. The United States will not pick up that slack should Argentina decide to stop soliciting investment from other sources.

Argentina’s future leaders must understand that it is impossible to achieve a balanced, equitable economy so long as you play lackey to the whims of the global financial system. What Milei misunderstands when Trump tells him to “Make Argentina Great Again” is that in the eyes of the United States and its hedge funds, and in the eyes of the IMF and foreign capital, Argentina can never be “great” in the way the United States is. It can only be a debtor state, a site of extraction, an exporter of raw materials, food, and minerals. Another path is needed. The twenty-first century offers new opportunities for development that bypass the burdens of American hegemony. If Argentina is ever to achieve economic prosperity for its working class, if it is to end inflation and its dependence on the caprices of foreign power, it must embrace these opportunities — and abandon Milei’s anachronistic vision of a Cold War world.