Argentina: Forging a New Era of Friendship with the U.S.

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Javier Milei, elected as the President of Argentina on November 19, is actively championing his endorsement of the United States government and the conflicts in Ukraine and Israel. Even before assuming the presidential role, he is fervently supporting these wars, which the US has backed extensively with significant financial, intelligence, and military resources. US President Joe Biden assured Argentine President Javier Milei of US support, expressing confidence in South America’s second-largest economy’s ability to overcome its current crisis. The leaders engaged in a six-minute phone conversation on November 22, with Biden highlighting areas for collaboration and expressing anticipation for future engagements. The call was confirmed by both the White House and a top adviser to Milei. Diana Mondino, Milei’s foreign policy adviser, described the conversation as “very friendly,” noting discussions on the Qatari-brokered deal for the release of Hamas-held hostages in Gaza, as well as addressing food and energy issues, including those concerning Argentine citizens in Israel who are among the hostages.

Milei, an unconventional figure advocating libertarian principles and pledging bold measures to address Argentina’s economic challenges, secured victory in the election with a 56 percent majority. However, during their conversation, the specifics of Argentina’s $43-billion loan from the International Monetary Fund and Milei’s proposals to adopt the dollar as the national currency and close the Central Bank were not extensively discussed, according to the US official.

Additionally, emphasizing the positive relationship between the two nations, US National Security Council spokesman John Kirby stated on November 21, 2023, “Argentina is a terrific partner in the region. And there’s an awful lot of things we share in terms of values: value of democracy, human rights, and just hemispheric security and economic concerns that we look forward to working with him and his team on.”

Prior to assuming office, Milei plans to visit the United States and Israel. He has expressed admiration for Israel and steadfastly supports its recent conflict, aligning himself with the stance of prominent US political figures. Milei envisions strengthening Argentina’s connections with the United States and Israel, prioritizing these nations in his diplomatic efforts. Conversely, he aims to curtail ties with countries identified by the US as adversaries and subjected to sanctions.

Milei, a staunch advocate for Ukraine in its conflict with Russia, has gone beyond expressing support by proposing a post-election phone call with Ukraine President Volodymyr Zelensky. In this conversation, Milei suggested hosting a summit between the Ukrainian government and various Latin American governments. Despite arguments suggesting that Argentina’s military and financial position might limit the impact of Milei’s foreign policy, this proposal indicates his intent to broaden influence. Milei aims to involve new nations and bolster the contributions of existing ones in supporting Ukraine’s war effort. At the very least, he is positioning himself as a prominent government leader actively championing Ukraine and its struggle.

The various signals, including Milei’s strong backing of Ukraine and the proposal for a summit with Latin American governments, align with predictions made by some observers. It appears that Milei is poised to deviate significantly from Argentina’s previous foreign policy approach, which often avoided automatic and enthusiastic support for US-favored military endeavors. This shift is seen by some as a new age of closeness with the USA, suggesting a departure from the more cautious stance traditionally taken by Argentina in alignment with global conflicts supported by the United States.

Dollarization: Forging a New Era of Friendship with the USA

Javier Milei’s bold proposal to dollarize Argentina’s economy has sparked intense debate, signaling a potential seismic shift in the nation’s financial landscape. The plan, if implemented, would see Argentina abandoning its national currency, the peso, in favor of adopting the U.S. dollar. While similar strategies have been successfully employed by smaller nations like Ecuador and Panama, the prospect of a country of Argentina’s scale embracing such a drastic economic overhaul has ignited a contentious discourse among critics and proponents alike.

At the heart of the debate is the question of national sovereignty. Many argue that embracing the U.S. dollar as the official currency would strip Argentina of its economic autonomy, limiting the government’s ability to influence the economy through tools such as interest rate adjustments. The power to control monetary policy, including interest rates, is a crucial lever governments traditionally employ to navigate economic challenges and stabilize financial conditions. Dollarization, as proposed by Milei, would entail relinquishing this tool, raising concerns about Argentina’s ability to respond effectively to economic fluctuations.

Opponents of dollarization contend that tying the country’s fate to the U.S. dollar would expose Argentina to external economic forces beyond its control. The nation’s economic policies would be subject to the decisions of the U.S. Federal Reserve and global market dynamics, potentially leaving Argentina vulnerable to the impacts of policies that may not align with its specific economic needs and priorities. This, experts argue, compromises the country’s ability to tailor its economic strategies to address unique challenges and capitalize on opportunities.

Furthermore, concerns about potential social implications have also been raised. Dollarization could exacerbate income inequality, as the shift may disproportionately affect lower-income individuals who could face challenges adapting to a system where the U.S. dollar becomes the primary medium of exchange. The potential social ramifications of such a monumental economic transformation need to be carefully considered, as they could have far-reaching consequences for various segments of the population.

While Milei’s proposal is driven by the desire to curb hyperinflation and break free from the cyclical pattern of economic volatility that has characterized Argentina’s recent history, critics argue that the potential benefits may be outweighed by the risks. They emphasize the importance of preserving national sovereignty and the ability to implement nuanced economic policies tailored to Argentina’s unique circumstances.

In conclusion, the debate surrounding Milei’s dollarization proposal underscores the complex interplay between economic pragmatism and national autonomy. While the potential benefits of stability and inflation control are enticing, the associated risks, including the surrender of key policy tools and potential social repercussions, demand careful consideration. As Argentina contemplates this significant economic pivot, the nation stands at a crossroads, balancing the pursuit of financial stability with the preservation of its ability to shape its economic destiny. The journey toward a potential new era of economic friendship with the USA is fraught with challenges and uncertainties, making the decision-making process a critical juncture in Argentina’s economic history.

– Syed Raiyan Amir is a Research Associate at the KRF Center for Bangladesh and Global Affairs (CBGA).

Published in The Geopolitics [Link]