The United States is on shaky ground in most South American countries. Since libertarian Javier Milei became president of Argentina and Donald Trump took office in the White House, Argentina has been one of the clear exceptions.
The first sign came immediately after Trump's election victory in November, when Milei became the first foreign leader to visit him. Over the course of this year, the existence of a truly friendly line between the governments of both countries has become more pronounced.
In April, the day after Argentina secured $20 billion from the International Monetary Fund in the form of a four-year loan program, US Treasury Secretary Scott Bessent visited Buenos Aires. It was not a long business trip – he flew there specifically to express the United States' support for Javier Milei and his policies.
And since America has a significant say in the IMF, the international fund's initial reluctance to let go of the finances was apparently broken not only by the cancellation of key parts of long-standing currency restrictions, but also by the aforementioned good relations between the presidents of both countries.
The latest signal of American support came in September, shortly before the Argentine parliamentary elections. As usual, it played in favor of the incumbent president.
The United States bought Argentine pesos to slow down their decline, which has been going on for more than a decade and a half, while also giving the local central bank access to dollars through a currency swap line of up to $20 billion.
For a country still plagued by double-digit inflation and long-term currency depreciation, the ability to buy dollars on the foreign exchange market is a valuable achievement that Milei could claim credit for before the election.
This factor of having a strong American friend behind him probably helped the president to a surprising and clear election victory. His party even won in provinces that had long been strongholds of the left-wing Peronists.
Although Milei still does not have a majority in either chamber of the Argentine parliament and cannot push through key reforms without cooperation, he has gained enough lawmakers to block the opposition's wasteful proposals.
Why Argentina matters. Or how to prevent China's rise
Although it is clear that the sympathy between Milei and Trump is the basis for the current friendly relations between Argentina and the US, the world power is not helping him for altruistic reasons. Its interests are much broader.
South America is extremely rich in various raw materials. Especially those that will be increasingly needed for the electrification of transport and the construction of solar panels, wind turbines, and state-of-the-art chips. Brazil has large deposits of rare earths, copper, and nickel. Chile, Argentina, and Bolivia—the so-called lithium triangle—have the largest reserves of this metal in the world.
Several South American countries maintain close (primarily) trade relations with the United States' main rival. It is Chinese companies that dominate the mining and processing sectors globally. Up to 90 percent of rare earths are processed by Chinese companies. The Asian dragon's slightly lower but still absolute dominance can also be seen in lithium (around 60 to 70 percent). What is mined in South America usually ends up in the hands of the Asian superpower.
The United States is trying to combat this, as it is now largely dependent on Beijing for the materials needed to operate modern technologies.
"China has signed a series of these predatory agreements, labeled as aid, under which it has acquired rights to extract minerals," said Bessent himself, who believes that this trend is a form of exploitation of South America and a guarantee that "future generations will be poor and without resources."
The proposed solution for Buenos Aires is, of course, cooperation with the US. It will come as no surprise if pressure mounts on Argentina to distance itself from China. However, China is Argentina's second largest trading partner after Brazil. The question is whether Milei can afford to do so.
The soft power of a hegemon
More than three decades have passed since Harvard academic Joseph Nye defined the three main components of power that make a country a global hegemon. In addition to military and economic power, he also highlighted soft cultural and institutional influence, which a country can use to advance its goals.
It seems that this last component plays a key role in strengthening the US position in Argentina.
Milei is radically leading the country towards classic Western capitalism, following the US model. Less government, less public debt, and leaving initiatives to the private sector, which should have the best possible conditions for development. Argentinians, who have had enough of inflation and the Peronists' wasteful social policies, clearly want to go down this path thanks to the vision of American prosperity.
Since Milei took office in the Pink House, he has managed, in the words of The Economist magazine, to implement what are apparently the "deepest and fastest" spending cuts, which are so drastic that the "only comparison" is Greece after the debt crisis.
The central bank did not have to finance the national debt by printing new money, thanks to which price growth began to slow down gradually from a level reaching three hundred percent at the turn of 2023 and 2024 to less than 32 percent in September. At the same time, interest rates could also begin to fall. All of this helps to restore the confidence of foreign investors, thereby increasing the potential for economic growth.
Challenges and risks
The end of generous subsidies and social support programs is particularly painful for Argentinians. Just read some of the testimonials from ordinary people.
The reforms are therefore politically difficult to survive. The most complicated ones are still ahead of the president – simplifying the tax system, liberalizing the labor market, introducing a floating exchange rate, and transforming the pension system.
Despite the decline in living standards, a large part of the population still supports Milei in the hope of a better tomorrow. "We are suffering, (...) but next year we will be reborn. There will be investments, there will be jobs," quotes the French newspaper Le Monde a 70-year-old pensioner.
Much will depend on Argentina's relations with its most important partners. However, support from the US is not guaranteed forever. Not only because Trump is unpredictable, but also because of the question of what will happen when the ruling elite in the US changes.
No wonder Milei's critics accuse him of being too fond of Trump. This bromance could easily disrupt relations with future US administrations and cause a rift with important trading partners. Ultimately, this may not be in the country's best interest.
On the other hand, Milei is playing with the cards he has on the table. Rejecting the opportunity presented by "warm" contacts in the United States would probably not be a rational move. The question for the future is how well he will be able to maneuver out of the situation when the interests of Argentina and the US cease to coincide.