Why is Trump giving billions to Argentina?

0:00This is The Guardian.

0:09Today, Argentina's big, beautiful bailout.

0:25Earlier this month, Javier Malay, the president of Argentina, took to an arena in Buenos Aires in front of 15 ,000 adoring fans.

0:42This time he wasn't wielding his trademark chainsaw, but a microphone, as he belted out two hours of Argentine rock classics to the crowd.

0:56Argentina's dog-cloning, wild-haired libertarian leader is no stranger to political theatrics. But behind the bravado, his presidency is unravelling. He's now facing calls for impeachment. he promoted this little-known cryptocurrency on X. The price soared and then it collapsed after his endorsement. In recent weeks, he's faced a currency crash, corruption scandals and tanking approval ratings. A raft of economic reforms proposed by Argentina's libertarian president has been narrowly passed by the Senate. During the debate, there were violent protests outside by those who say the measures will expose people to poverty and unemployment.

1:37All before crucial midterm elections this weekend. Elections which could dictate his political future. The outlook was grim. Until... It's an honour to have you here. And I just want to tell you that your career has been an amazing one and it's going to continue with the election. You're going to win the election. We're going to endorse you. I'm going to endorse you today. Donald Trump swept in to save Malay, pledging to help him make Argentina great again. I'm with this man because his philosophy is correct. By pumping billions of US dollars into the Argentine economy. On one condition. If he loses, we are not going to be generous with Argentina.

2:21Vote for Malay or say goodbye to American support. From The Guardian, I'm Annie Kelly. Today in Focus, can Donald Trump save Malay and Argentina's economy?

2:40Harriet Barber, you're a journalist who has lived and worked in Argentina while reporting on the Malay presidency. So before we get into the current economic crisis affecting Argentina, could you just remind us who Javier Malay is and what were the promises he made to the Argentine people that got him elected? It's great to be here. So Millet is this very eccentric character. We all know him for his sideburns, his rock performances, his waving around of the chainsaw. And he sort of bursts onto the political scene at a really crucial and critical time for the country. For Argentina, for decades, there had been economic turmoil.

3:19It had defaulted on its steps several times. it was suffering from very high poverty rates. In particular, inflation had skyrocketed. It was well into the triple digits. And that was, of course, really difficult for people. Salaries could lose a huge deal of their value by the time that people received them. The middle classes would try and get hold of US dollars, and they would store them under their mattresses, such as the distrust of the banks following an earlier economic crisis. There was this black market for pesos. Prices were always written in chalk because the restaurants and the shops couldn't keep up with this inflation.

3:57And on a very basic level as to what that looked like, it meant that you could go to the shop in the morning and a broccoli would be a thousand pesos, back then maybe a pound. And by the next day, it would be two thousand or three thousand. So Argentina was really trapped in this cycle of debt and high inflation. And it's at this point that Millet really burst into the seen. He was a political outsider and he did like to frame himself as such. He had worked as an economist and a professor, but he first became famous as a TV pundit known for his fiery takedowns of what he called Argentina's corrupt political cast.

4:36Harriet, Argentina's been trapped in these cycles of economic chaos for decades. I lived there for a few years and even back in 2009, People seemed really, really sick of it all. What's Malay promising to do to fix this? It was all about the economic crisis. Some of the supporters I spoke to at his rallies, particularly the younger generation, they would say things like they had never been able to go on holiday, that they never earned enough money, that they couldn't really see a future in Argentina unless things changed. And he came along and promised that change.

5:17I went to some of his campaign rallies at the time and they were very intense. There was a lot of heavy rock music and crowd surfing and videos of explosions and bombs. And he'd talk about being Argentina's economic saviour. Hola a todos, yo soy el león. Ruggió la bestia en medio de la veridad. Corrió la casa. And he would wave around the chainsaw that I think most people are familiar with now to show how he was going to cut back this state spending. And he pledged not to raise taxes.

6:01He also did have some more contentious social policies. He said that the sale of organs should be just another market. People may be eligible to earn a living by selling a part of their body that helps keep them alive in Argentina. He suggested that he opposed abortion, which, considering Argentina has been quite a bastion of women's rights, that didn't go down very well. He denied climate change. He criticised Pope Francis, who was an Argentine, and that also really did not go down very well. But regardless of these more divisive social policies, and to a lot of people's surprise, he won. So he was promising some kind of Wild West, free market, economic future for Argentina.

6:45It must have been a testament to just how unstable people were feeling that they decided to take a punt on that. People were really, really tired of the crisis and it was bad. So other polling booths on the day of the second round, a lot of people I spoke to were really reluctant to vote for him. But they said they just really needed change and he was the only person really offering that change.

7:14How did he start delivering on those radical promises after he was elected to power? Well, during his inauguration speech, he said that it wouldn't be easy. He said that it wouldn't be pain-free.

7:31He had pledged to slash inflation and cut back the state and get rid of this corrupt political class. And he did a lot of that. He immediately slashed tens of thousands of public jobs. He halved the number of government departments, either by merging them or closing them entirely.

7:55For example, ministries like the Culture Ministry and the Women's Ministry. He halted a lot of public works. He slashed budgets for things like education and health. and he also removed a bunch of subsidies, which ultimately led to a spike in utility and transport prices for people. And he was a bit of an inspiration to Elon Musk and his Doge fans, wasn't he? He sent Musk a chainsaw, I seem to remember. Well, President Malay has a gift for me. This is the chainsaw for bureaucracy. Chainsaw! How did he manage to get all of these policies through? He didn't have the seats in Congress to do this, really.

8:36So he had to do it largely by ruling through decree. His party was still very new, of course, so he invoked emergency powers to address the economic catastrophe. And then he depended on these decrees and executive powers to advance his reforms. And how successful were those reforms in terms of doing what he promised to do, reducing inflation, reducing the presence of the state in people's economic lives? So inflation is down massively. September, I believe it was around 32 % annually. Which is still enormous, isn't it? It's still enormous, but down from 200 % or so a few years ago. People are really pleased with this.

9:12And Argentina's also recorded its first fiscal surplus in 14 years. But all of this now is masking a bigger problem that people's purchasing power has really decreased. Household budgets have declined and are declining. People are struggling to buy goods. A friend told me that she was in a shop recently and people were buying their bread on credit cards. So yes, inflation is down. But also when you look at what people are saying are their biggest concerns now, it's rising unemployment, it's household budgets, it's this thing that is now the problem. I think around 17 ,000 businesses have closed in the last year and a half, which is a huge, huge amount.

9:56So those are huge cuts to the state. Has there been an impact on how Argentina can now care for its most vulnerable? Yes, for sure. I mean, the pensioners have been the big story. They've been among the hardest hit by all of this reduced social spending. Thousands of people gathered in front of Congress to protest once again against Millet's government. President Javier Millet has managed to steady Argentina's economy and reduce inflation in the past year. But it's happening as he implements one of the harshest austerity plans in this country's history that is having a big impact on scientists, pensioners and anyone who depends on the state.

10:37Pension payments have repeatedly failed to keep pace with inflation, which has sort of eroded their retirees' real income. And the government had also cut back a programme which had provided free medications to low-income pensioners, meaning many of the drugs that were previously free and are not. The pensioners have been protesting every Wednesday for a very long time now in front of Congress to say all of this. And I was at a bunch of these at the beginning of the year and everyone was saying the same thing, that it was really impossible to survive on the minimum pension.

11:15And they just couldn't buy basic food items and they couldn't pay for their bills. So I was at the largest children's hospital in Argentina earlier on in the year. Back then, the doctors and the nurses were saying that it was becoming impossible to continue providing the quality of care that they had been able to. So they said that their delivery orders were not being filled. And in one case, a children's brain surgeon said to me that he did not have the correct screws for children's brain surgery. So he was having to resort to age old techniques, which are still safe, but they're outdated. And so it's having a real impact on people on the ground.

12:00And yes, people are not best pleased that the cuts will seem to be towards the elderly or towards programs for women or towards education and children. Millet has responded to these complaints by sort of most vulnerable people in society, the pensioners, for example, by saying that there's no money. It's been really intense for people that are suffering from the cuts. And how have people been responding to that? There was a Buenos Aires provincial elections back in September and Millet lost. And while that was somewhat expected, it wasn't expected how badly he would lose. The province is very politically significant.

12:43It houses around 40 % of Argentina's electorate, suggesting sort of growing voter dissatisfaction. It was at this point that things really started to go south for him. The markets panicked and they were unsure suddenly of his long term political future. Foreign investors began selling off their pesos and bonds of Argentine government debt. This forced the government to withdraw and it's already limited foreign currency reserves. Argentina also has a huge debt repayment due next year, around 15 billion pounds. So it's all led to these fears that the country is heading for another potential financial crisis, especially if it defaults and it's dead again.

13:26And so this weekend, Malay is facing these really important midterm elections. Can you just explain what these elections are and why they're so important in terms of his political momentum? So the midterms are widely seen as a referendum on his policies two years into his term. So if he does well in these, he could substantially increase his party's presence in Congress. That's really important for him because he's been having to rule by decree in these emergency powers because he does not have the support. Inflation is down, but with the wealth inequality gap rising, people are already saying that they thought the adjustments would be paid for by the elite, the wealthy, the politicians, but that it's hit the working classes.

14:10And then, so on top of that sort of growing sentiment, you have the corruption scandals. The first was back in February. He himself was embroiled in this crypto scandal. The government has said it will investigate what happened, including investigating the president himself about whether there are any allegations of sort of fraud involved. The next big one was this summer in August and it involved his sister Karina who is very close to Millet and he calls her the boss and she is said to sort of run the show really. There were leaked audios of the National Disability Agency head sort of accusing her of accepting bribes from medical and pharmaceutical company totalling a lot of money in exchange for state contracts.

14:55Millet and her sister, you know, they said it's a political smear campaign, they've denied it, but it really rattled people. And there was a campaign event not so long ago where people threw rocks at them because the anger was so much.

15:10These corruption scandals have really rattled people and we're sort of going into these midterms with those in the back of people's minds.

15:25This week, the Trump administration authorized a$20 billion financial lifeline for Argentina as it faces a deepening economic crisis. But the justification of the deal has raised major questions and criticism about its merits. Miguel Quiguel, you're an economist based in Buenos Aires. As fears have been growing that Argentina is heading into another potential financial crisis, A helping hand has been extended by someone unexpected, Donald Trump. Can you just tell us what this financial aid package that Donald Trump has said he will give to Argentina is? What is this currency swap and how will it help?

16:08Argentina today was in a difficult situation. Why was it in a difficult situation? Simply because it didn't have reserves. And you know that when the country doesn't have reserves, it doesn't have the ability to pay the debt, doesn't have the ability to import. So Argentina was desperate to get money and already had gone to the IMF before it got$14 billion. Those dollars basically had been spent in just a few months. So they went as a kind of lender of last resort to the U.S. Treasury. And the Treasury wanted to help Argentina, and it provided a number of different funds, lines of credit, if you want.

16:49So the biggest one is a currency swap. It's a 20 billion loan to the central bank in which Argentina gets dollars and the U.S. gets pesos. So they exchange money. Obviously, the U.S. doesn't want pesos, doesn't need pesos. It's basically a way to guarantee the loan to Argentina. Why does Argentina want this loan? mainly to boost reserves and have more dollars in order to pay the debt. Now, one of the reasons why this surprised markets and surprised everybody is because the Treasury has given this type of loan very few times in history. At least to Latin America, as far as I can recall, there are three.

17:30And the biggest one was to Mexico when it had what's called the tequila crisis in 1994. Mexico's economic crisis deepened today with stocks dropping sharply and the pesos still under fire. A government austerity plan announced yesterday in billions of dollars in assistance from the U.S. and others apparently have not bolstered the confidence. And it gave Mexico nine billion dollars. And that was a very unusual transaction operation. Then it gave another to Uruguay, a small operation of a billion dollars. And this is by far the largest one, 20 billion dollars. And the weird thing, if you want, or the unique thing, is this happened without an external crisis.

18:11In the previous episodes, the world was in trouble. And maybe because of higher interest rates or dropping oil prices, the US tried to help. This time, it basically was domestically made, if you want. It was made in Argentina and the US came to the rescue. Yeah, and it really is a huge intervention, isn't it? I mean, it's hardly Trump's America first policy, really. And how important is it for Malay that this has come for him at this moment? It is very important because Argentina was running out of reserves, which means that when a country gets out of reserves, the exchange rate many times gets out of control.

18:54And that would have effects on prices and inflation in Argentina. And this was happening two weeks before an election. So an election which was very important for Milley because it's a midterm election in which basically he needed support to maintain the policies. So in that sense, it was extremely important for us. And for the U.S., they want Milley to do well in the elections. At the moment, Milley is an ally of the Trump administration, mainly. In many ways, Millay is supporting Trump in basically all its foreign policy, basically against Venezuela, against Iran, against all the kind of left-wing governments.

19:39So I think he sees as a strategic ally in Latin America. I would call it more as a bridge to the election. I think that this is basically money that allows Millay to continue. So this is really a kind of sticking plaster that Trump has delivered Millet just before these crucial elections. I mean, Millet has actually delivered on some of these radical economic policies that he promised when he was elected. As an economist, what do you think of his policies? Do you think that they are going to set Argentina on the road to success? I mean, it's too early to tell, not because Millet policies are not the right policies, but mainly because Argentina has a history of going back and forth with policies.

20:24We've been having like on a pendulum between populism and conservative policies since the 90s. In the 90s, Argentina had a very open economy, very market friendly economy. Then for around 20 years, we have had very populist policies, lots of government intervention. And Millet is bringing back the hope that Argentina will move to a market economy one more time. The thing is, I think he's doing a lot of reasonable policies in terms of, I think, that the most important one is keeping the fiscal balance. I mean, he ended the fiscal deficit. But that's not enough. That's not enough to grow. Do you think that these midterm elections are going to be very damaging for Malay?

21:12I don't think he's going to be defeated. I don't think he's going to have a hard time. But he's not going to do what he was expecting, which is to achieve a big win, a landslide victory in this election. When you talk to people in his government two months ago, they were expecting to get 40 to 45 percent of the votes. Now I think they would be happy if they get 32 to 35 % of the vote. So it's going to be a very close election, probably. But with Donald Trump's help, he's maybe staved off a real currency crisis before those elections. Yeah, because the US Treasury is not only helping Argentina by giving the$20 billion swap, it is selling dollars in the market to stabilise the peso.

21:56So it's been a very unique support. I mean, it's incredible the support that we are getting from the Trump administration. So, Miguel, Trump couldn't have been clearer when he said at a recent press conference that the United States would not be generous with Argentina if Malay performed badly in the midterms. If that does come to pass and Trump does pull his support, then is the Argentine economy in real trouble, do you think? Yeah, we hope that doesn't happen. I think it's not in real trouble. What's going to be in trouble is the currency. I think that the risks are mainly if kind of Millet doesn't do well on Sunday.

22:37I think that there is a risk that there's going to be a sharp depreciation of the peso. That's the main risk. Is that the end of Millet? No. Is that the end of the programme? No. But it's going to be more difficult.

22:52Coming up, what might Trump's bailout mean for Millet's presidency?