How the IMF and US Helped Loot and Entrap Argentina with Debt

Argentina is back in the news with renewed financial turmoil spurred by President Milei’s poor political standing. That poor standing is the product of anger with Argentina’s dire economic performance and massive corruption within Milei’s administration, and it augurs poorly for his party’s performance in the forthcoming October 2025 election.

In response, the IMF and US have jumped into action to save Milei’s government. The IMF had already provided a $20 billion bailout in April 2025. Now, the US government has provided another $20 billion (in the form of a central bank currency swap line). Furthermore, the US has expressed willingness to provide additional stand-by credit and even purchase Argentine government debt.

The media has focused on Argentina’s long troubled financial history, the difficult inflation situation President Milei inherited, and President Trump’s political affinity with Milei. However, that fails to explain why the IMF and US have provided such huge assistance to Argentina, given its lack of credit worthiness.

The support for Milei should be understood as a continuation of past lending to Presidents Macri (2015-2019), and Menem (1989-1999). The purpose is to entrench Neoliberalism in Argentina and entrap it with dollar debt. It is supported by local elites because they are the beneficiaries of Neoliberalism, and they also get to loot the Argentine state via the process of debt entrapment.

1. The complicated truth in Argentina 

Getting to the truth in Argentina is like “skinning an onion.” First one must uncover the real economic situation which is fundamentally different from that described by mainstream media. Next, one must introduce politics and surface the real agendas driving events. Then, one must explain how those events work and their consequences. 

Once the onion is skinned, the picture that emerges is IMF and US financial assistance are electoral interference aimed at saving President Milei and his extreme Neoliberal program; diminishing China’s economic influence; and financially handcuffing Argentina via entrapment with dollar debt. Additionally, the assistance enables tacit looting of the Argentine state by Argentine elites and US multinationals. That is a vastly different picture from that presented by the mainstream media and mainstream economists. 

2. The myth of a Milei economic miracle

The starting point is Argentina’s economic performance, which has been gushingly described by mainstream media as an “economic miracle.” For instance, The New York Times declares Milei was “on the brink of achieving an economic miracle” prior to the recent financial turmoil. That framing is critical because it twists public perception, giving economic legitimacy to the loans from the IMF and the US. 

The truth is there has been no miracle. Milei’s policies have been a catastrophe for both ordinary Argentinians and Argentina’s future. That reality explains Milei’s political unpopularity which has triggered financial market fears.

Milei took office in December 2023, and Argentina has been in deep recession since then. The recession has been caused by extreme fiscal austerity which slashed public services and investment; a hugely over-valued exchange rate which weakened the trade balance; and deregulation which increased profits at the expense of wages.

The recession is visible in the collapse of industrial output and GDP growth. Industrial output remains down, but some GDP growth has finally returned (as was always bound to happen because economies do not shrink forever). However, the rebound has been weak and the economy has shrunk.

Moreover, the picture is even worse because GDP does not capture misery, hunger, and insecurity. Food insecurity and hunger initially jumped, with scurvy increasing among the poor. The official poverty rate has now come down again, but it understates the situation by failing to recognize massively higher prices of water, gas and electricity. Retiree pensions have been decimated, prescription drug prices have ballooned, and the Milei government has also brutally repressed retiree protests. 

Not only have Milei’s policies caused an economic recession, but they have also sabotaged Argentina’s future. The collapse of public and private investment means a lower capital stock. The slashing of education and health spending means a less educated and more unhealthy population. And the slashing of support for universities and the arts is an attack on high-value industries of the future (such as information technology, medical sciences, and movie production), and it has contributed to further brain drain from Argentina.

Milei’s foreign borrowing also means increased future interest payments which will burden the government budget, limit economic policy possibilities, and perennially threaten financial crisis. 

The one positive economic outcome is the inflation rate which has come down significantly, but even here the story is complicated. Inflation initially increased significantly under Milei. Though it has come back down, it is still running at 35 percent annually. The previous Fernández government lost control of inflation, but it also inherited a 50 percent inflation rate from the prior Macri government. Moreover, inflation only accelerated in 2022 as the consequences of the Covid pandemic kicked in. Argentina’s inflation rate jumped five-fold, as also happened in other countries. However, given Argentina’s high initial inflation and structural vulnerability to inflation, the absolute increase was much larger.

In sum, there has been no “economic miracle.” Milei’s program never could or intended to produce shared prosperity in Argentina. Instead, it is an ultra-Neoliberal program aimed at lowering inflation via deep recession and an over-valued exchange rate; increasing profits at the expense of wages via deregulation and weaking labor; enabling capital to exploit Argentina’s natural resources; and using fiscal austerity to gut societal institutions that promote societal well-being and progress.

3. The IMF and US: the politics of looting and debt entrapment

The disastrous character of Milei’s economic program begs the question of why the IMF and the US have raced to provide a bail-out. That introduces politics. For Milei, a bail-out is essential for his political future. Argentina’s elites are also supportive as they are the beneficiaries of the program. But what about the IMF and the US?

3.a The IMF as a useful US tool

The IMF is easiest to understand. It is dominated by the US and has long been a Neoliberal bastion, helping spread and enforce global Neoliberalism over the past forty years. That makes it easy to support Milei who is both submissive to the US and aligned with extreme Neoliberalism.

The unusual aspect of the current moment is the openness of the IMF’s complicity, which has it violating its own protocols in ways that put it in future legal jeopardy. The fingerprints of political corruption are all over the IMF’s $20 billion loan.

First, despite significant opposition to the loan within the IMF Executive Board on grounds the loan did not meet credit standards, it was still pushed through by the US and its allies. When added to pre-existing loans, over 40 percent of total IMF lending will be to Argentina, which potentially puts the IMF’s financial solvency at risk.

Second, the new loan was granted without tough economic conditionalities which are a standard part of IMF loan packages. That absence is not because the IMF has changed its Neoliberal disposition. It is because such conditionality would have undermined the Argentine economy, thereby undercutting the political purpose of the loan which is to help Milei win the October 2025 election.

The nakedly political purpose of the IMF’s loan is evident in the April 2025 comments of IMF Managing Director Kristalina Georgieva, who publicly declared at the IMF’s annual spring meeting: “The country is going to go to elections in October and it is very important they don’t derail the will for change. So far, we don’t see the risk materializing, but I would urge Argentina: stay the course.” Her statements breach core IMF protocols prohibiting political interference.

3.b The US and electoral interference in Argentina

The US provision of financial assistance fails conventional economic tests, and its purpose is political. The goal is to save the Milei government, exclude China, and entrap Argentina with dollar debt.

The US has intervened on behalf of Milei because he is ideologically pro-US and pro-US business, whereas his rivals are pragmatic Argentine nationalists. They believe business (including US multi-nationals) should answer to the Argentine state, and they are willing to deal with China if it is to Argentina’s benefit. That is anathema for Washington DC. 

For the US, Milei is “our guy” who sides with the US and treats US multinational corporations favorably. Lending to Argentina is electoral interference. The hope is that a massive loan can stave-off a financial crisis until after October’s Congressional elections, thereby saving Milei’s government. 

Initially, the US thought it could get Milei across the finish line with loans from the IMF, the World Bank, and the Inter-American Development Bank (IADB). However, that has proven insufficient, compelling the US Treasury to intervene directly.

Parenthetically, this process of IMF (and World Bank and IADB) lending for electoral interference purposes is not new. The same tactics were used in 2019 to support President Macri who was the US’s favored candidate then. The IMF loaned $40 billion to the Macri government, which was the largest loan in IMF history. Macri lost the election, the $40 billion evaporated, and the next administration was saddled with the burden therefrom.

The anti-Chinese animus motivating US policy is evident in the condition that US assistance is conditional on Argentina replacing its existing currency swap arrangement with China for a US-backed arrangement. The China – Argentina swap arrangement was established in 2009. It is rooted in commercial logic as the countries have a massive mutually beneficial trade involving manufactured goods and Argentine agricultural products. The US wants to sabotage that relationship as it protects Argentina from the US, thereby reducing US power.

Lastly, there are suggestions of improper private dealings on the part of US Treasury Secretary Bessent. It is reported that Bessent pushed both the April IMF loan and the September US proposal to bailout his Wall Street business associate Robert Citrone and other Wall Street funds which had speculatively bet on Argentine bonds. Those bets had gone belly-up with Milei’s growing political difficulties. Bessent’s bailout fueled an Argentine bond price rebound that has saved and benefitted Wall Street.

4. The mechanics of looting and debt entrapment of Argentina

The obvious part of these dealings is electoral interference and dollar debt entrapment. The less obvious part is the mechanics of looting.

The looting process centers on the over-valued exchange rate which artificially makes the peso more valuable. That means those with excess pesos (i.e., the Argentine elite) can profit from over-valuation by buying dollars at a subsidized price. The bill is paid for by the Argentine state which sells dollars it has borrowed and becomes dollar indebted. This process has  been used repeatedly by past pro-business pro-US Argentine governments. It explains how the previous 2019 IMF loan of $40 billion to President Macri evaporated without trace.

The process was on display following the IMF’s new loan. Argentina immediately suspended most of its capital controls, allowing business and wealthy individuals to buy subsidized dollars.

The process was also on display following the US declaration of support. Argentina temporarily suspended the export tax on grain and soy, and there was an instant massive flood of exports. Those exports went out tax free, benefitting large agricultural exports who support Milei. The Argentine state lost a huge amount of export tax revenue which is central to Argentina’s public finances. Given the weaker capital controls, those bumper export sales could then be turned into dollars, making for a double hit. Agricultural exporters avoided taxes and bought subsidized dollars. The Argentine state lost tax revenue and became dollar indebted.

The over-valued dollar has also been used to loot Argentina’s middle class. Those families hoard dollars as a form of “rainy day” fund. The economic recession caused by Milei’s policies has compelled them to sell dollars to make ends meet. The over-valued exchange rate means they have received less, and their dollars have been vacuumed up by those with excess pesos. It has thereby contributed to further adverse wealth redistribution within Argentina.

5. IMF and US loans are “Odious debt”

Odious debt, also known as illegitimate debt, is a doctrine in international law whereby illegitimately incurred debt need not be repaid. Usually, it is viewed through the lens of the borrower’s character, but fraud can also be committed by lenders and borrowers who collaborate. Indeed, it is easier when they do. 

To  ensure proper use of credit, lenders have a legal responsibility and duty to ensure that funds are properly used and borrowers are capable of repayment. The loans by the IMF and US fail that fundamental test, making them odious debt. The loans have been explicitly made for political rather than commercial purposes, and they fail the appropriate credit-worthiness tests.

Additionally, the April 2025 IMF loan circumvented a 2021 Argentine law that required congressional approval for IMF loans. That law was explicitly passed to prevent a repeat of the looting that occurred with the 2019 IMF loan of $40 billion to President Macri. However, Milei authorized negotiations by executive decree which can only be over-ruled by a two-thirds majority in both houses of Congress. The IMF and US are both aware of that political maneuver, which further indicts them.

At this stage, to stop the further looting and dollar debt entrapment of Argentina, the political opposition should declare that the new IMF and US debts will be treated as odious and not repaid. Even if the declaration lacks immediate legal force, it should discourage additional lending and further delegitimize any additional lending that does take place.

6. Colonization by debt: quo vadis Argentina?

The story of Milei is the story of Presidents Macri and Menem, only more cruel. Each pursued extreme Neoliberal policies founded on an over-valued exchange rate, foreign borrowing, squeezing of the working class, and privatization and deregulation. 

Each was presented as an “economic miracle,” but that was never the case. Each time the Argentine state was painted as the fundamental problem, and each time the state was looted and further entrapped with dollar debt, while its wealth was transferred to economic elites. And every time, the IMF and US were key enablers. 

Presidents Milei, Macri, and Menem are all part of a common story. That story is the Neoliberal looting and debt entrapment of Argentina. IMF and US election interference may yet secure victory for Milei. If that happens, Argentina will become a US debt colony. It will also become even more unequal with entrenched extreme Neoliberalism. Mainstream media and economists will describe it as a miracle, but it will be misery for those living the miracle. 

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