Argentina has once again found itself at the center of a financial crisis. The national currency, the peso, has lost over 40% of its value in the past year, and state reserves have dropped to a critical $9 billion, below the threshold required by the IMF. Although inflation has dropped from a peak of 200% to 35%, this came at a high cost: unemployment has risen to 8%, and average rent in Buenos Aires now consumes up to 45% of renters' income.
Exporters are holding back currency sales, awaiting a better exchange rate. The agricultural sector, which could generate $8 billion from soybean exports, is effectively freezing foreign currency inflows, creating a vicious economic cycle. This leads to a shortage of dollars, a weakened peso, and increased investor distrust: government bond yields now exceed 1,000 basis points, casting doubt on Argentina's ability to service its debt.
The political situation is no less tense. President Javier Milei is rapidly losing support after defeats in key elections in Buenos Aires province. His party and government are facing corruption scandals, with his negative approval ratings reaching record highs. Ahead of the October elections, there is a growing risk that the Peronists, who favor state control and closer ties with China, may return to power.
The US has announced its readiness to offer Argentina multi-billion-dollar support through the Exchange Stabilization Fund worth $30 billion. Possible mechanisms include currency swaps, direct peso purchases, and bond market interventions. While a successful implementation could stabilize the situation before the elections, the support is largely centered on Milei personally; should the opposition win, the risk to invested funds increases.
US interest reflects Argentina's strategic importance: the country holds the world's third-largest lithium reserves—essential for modern technology and energy—and large oil and gas reserves (Vaca Muerta). China already controls most lithium projects and import volumes in the region, putting US competitive advantage in green tech at risk.
If the Peronists return, reforms will stop, state control and corruption will rise, and ties with China will intensify—potentially a strategic defeat for the US in Latin America. US support for Argentina is not only an economic step but also a geopolitical move in the battle for key resources of the future.
