Argentina's Dollarization Crisis Begins

How the US Treasury is getting ready to both "break it" and "buy it"

In recent days, the exchange rate band promised by the Argentinian peso has begun to waver under pressure, causing the US Treasury to step in through the promises of Scott Bessent to essentially backstop any irrecoverable currency deficit experienced by Argentina in the short term. This comes as Argentina’s economy continues to struggle through President Javier Milei’s “radical” free market reforms, dismantling of the welfare state and rollback of regulations and many of the price-fixing arrangements which had led to Argentina’s slow growth and high debt load for the previous few decades (nearly a century, truly, since Peron).

Not much discussed outside of X is the fact that most of Argentina’s gold reserves were transferred abroad, something the government acknowledged last year. Argentina has already seen bailouts from the IMF, essentially acting as a global beggar, with a 12 year gap between 2006 and 2018, but has experienced almost no fundamental change in its economic outlook up to the election of Javier Milei in 2023. In recent regional elections, opposition parties have seen a resurgence, which has in part undermined confidence in Milei’s economic reforms. The US treasury is coming to the rescue not simply as a matter of protecting stability in South America, but also because Milei is an ally in spirit to the Trump Administration, and the success of his agenda promises the success of a pro-business agenda overall.