The recent decrease in country risk in Argentina to below 600 basis points, reaching its lowest level since 2018, has been presented by Javier Milei’s government as a significant achievement in the economic field. However, a more detailed look reveals that this “financial summer” is sustained on weak foundations, marked by fiscal adjustment at the expense of workers, money laundering that favored speculators and a growing dependence on external debt.
Fiscal adjustment and debt: the other side of the decline in country risk
Milei’s government has prioritized fiscal adjustment as a central policy to generate “confidence” in financial markets. This adjustment includes cuts in key social areas, affecting the most vulnerable sectors, such as retirees and working families. At the same time, the National Treasury has allocated resources to guarantee the payment of interest on the foreign debt, consolidating a strategy that favors international bondholders and speculators.
A clear example of this policy is the REPO agreement recently signed with international banks to inject $1 billion into the Central Bank’s reserves. This type of maneuver not only reinforces the country’s dependence on foreign capital, but also generates a scenario of economic fragility, given that it reinforces the country’s dependence on organizations such as the IMF that impose strict conditions that limit economic sovereignty.
Additionally, in January, the government will make a payment of more than $4 billion to private bondholders. This disbursement, which validates a debt of fraudulent origin, is part of a logic of prioritizing the interests of financial capital over the needs of the people.
Weak foundations on the financial front
The apparent success reflected in the reduction of country risk and financial stability has foundations that can hardly be sustained in the medium term. One of the pillars of this stability is the money laundering carried out in mid-2024, which allowed undeclared funds to enter the banking system. However, foreign currency will not enter again through this route in 2025 and a part of those dollars are already being withdrawn from banks.
On the other hand, the Central Bank’s net reserves continue in negative territory, with projections indicating a deficit greater than 10 billion dollars by the end of January. This situation limits the country’s ability to meet its external commitments without resorting to new debts.
The carry trade strategy, which has allowed some investors to obtain large profits from exchange rate delays, also has its limits. Changes in the international scenario, such as an increase in interest rates in the United States, could reverse this trend, generating a massive outflow of capital and putting even more pressure on the exchange rate.
Trump’s inauguration in the United States, with policies aimed at strengthening the dollar and increasing trade tariffs, is creating an adverse context for dependent economies. The fall in raw material prices and the devaluation of currencies in key countries for Argentine trade, such as Brazil and China, further complicate the entry of dollars into the country during 2025.
End hateful debt
Faced with this panorama, the Left Front maintains a position that opposes the fiscal adjustment and debt policies implemented by the Government. From this perspective, the payment of the foreign debt, illegal and illegitimate, is one of the main causes of the economic and social crisis that the country is going through.
The Left Front raises the need to break with the IMF and sovereignly ignore the debt, as part of a strategy to reorganize the economy based on the needs of the working majorities. This proposal includes measures such as the nationalization of banking and foreign trade, to guarantee that the country’s resources are at the service of the people and not of speculators.
The adjustment of the Milei and Caputo government is not inevitable. Popular mobilization and worker organization are key tools to confront these policies and build an alternative that prioritizes the needs of working people. It is time to bet on a path that breaks with the logic of indebtedness and adjustment, and that makes way for an economy at the service of the majority.
Source: www.laizquierdadiario.com
