"Whatever is Necessary"

United States backs Milei's Argentina with "all options" on the table...

(Image: Substack AI)

“Argentina will be Great Again.”

~ US Treasury Secretary Scott Bessent yesterday

Joel Bowman with today’s Note From the End of the World: Buenos Aires, Argentina...

What a change a fortnight can make...

Following a couple of dramatic weeks here on the Pampas, during which telenovela-style politics and whipsawing markets saturated the news cycle, sentiment on the street appears to have done an astonishing about face.

But wait. Let’s back up a moment...

As dear readers know, it’s “bread and circus” season down here in the Paris of the South, which is to say, that time of the year when politics takes center stage and calm, rational discourse takes a long walk off a short plank.

We’ve been following along from the frontlines, with the cheerful curiosity of a bonobo winding a jack-in-the-box.

A couple of Sunday’s ago, Javier Milei’s La Libertad Avanza party was handed a minor political setback: it did not win as many seats as it had hoped in an important – though hardly critical – provincial election.

That is to say, the libertarian party – which is barely four years old – only gained 18 seats in the local election, while the opposing Peronists – which have had the nation’s most populous province in an electoral sleeper hold for decades – won 21 seats.

Naturally, markets reacted with characteristic Latin grace and poise... by promptly pulling an Amber Heard bright and early the following Monday. Argentine stocks dropped by 10... 20... 30% and more... bonds plummeted... the peso began its familiar, weak-kneed wobble... while commentators clutched their pearls and local lefties (known here as “kukas”) looked around for graves on which to tango.

Never mind that voter turnout in the election was at its lowest level in half a century... or that Milei’s party lost the very same province in 2023... by a much wider margin... before proceeding to romp home in the general election shortly thereafter...

The die was cast, declared the kukas. Liberty was dead! Long live serfdom!

Popular Press Panic

The media, for its part, was only too happy to hype up the hysteria. Here’s Zerohedge, jumping on the burning bandwagon yesterday morning:

Milei Admits "The Market Is In Panic Mode" As Argentine Capital Exodus Accelerates

Following his government's resounding loss in local elections - seen as a harbinger of next month's congressional races - Argentine President Milei is facing a renewed crisis as the embattled South American country's currency is collapsing amid fears that he will scrap his defense of the peso (which has already cost hundreds of millions of dollars) and let it plunge as so many of his predecessors have done.

“The market,” Milei said when collared by a local journalist for a brief interview late Friday, is “in panic mode.”

Well, yes... the market was in “panic mode,” insofar as “panic” is properly defined (per dictionary.com):

Panic (noun): A sudden overwhelming fear, with or without cause, that produces hysterical or irrational behavior, and that often spreads quickly through a group of persons or animals.

(Bonus Nerd Note: As budding etymologists well know, the word panic derives from the Greek panikos, literally “of Pan,” he being the flute-playing, nymph-courting half goat-half man god of the pastures, who was said to inspire irrational fear in the shepherds and animals he surprised in the fields.)

An alternative title for the very same Zerohedge article might as easily have read:

“Milei declares markets behaving irrationally after panicked selloff in Argentine assets.”

Of course, such a banal headline isn’t likely to instill much fear... dread... anxiety... hysteria... or should we say, panic, among the flock... and so rarely enjoys the light of day. Continued Zerohedge:

“Longtime Argentine observers see few options for Milei to stem the tide and regain confidence.”

A Little Help from Our Friends

Hmm... perhaps “longtime Argentine observers” were not observing very closely. While Zerohedge was going to press, Milei himself was conducting meetings with US Treasury Secretary Scott Bessent.

Shortly after the market opened yesterday, Secretary Bessent assuaged frayed nerves by declaring Argentina to be a “systemically important U.S. ally in Latin America,” adding that “the @USTreasury stands ready to do what is needed within its mandate to support Argentina. All options for stabilization are on the table.”

Continued Bessent, in an extraordinary thread of posts in X:

These options may include, but are not limited to, swap lines, direct currency purchases, and purchases of U.S. dollar-denominated government debt from Treasury’s Exchange Stabilization Fund.

Opportunities for private investment remain expansive, and Argentina will be Great Again.

We remain confident that President @JMilei’s support for fiscal discipline and pro-growth reforms are necessary to break Argentina’s long history of decline.

My April comments [which you can read here] make clear our commitment to Argentina's people and to President Milei.

Fast-forward to this morning... after a little help from some friends in high places... and all of a sudden the press is singing a different tune...

From El Pais...

US announces it will do ‘whatever is necessary to support Argentina’

And establishment newswire, Reuters...

US ready to support Argentina with 'large and forceful' action, Treasury chief says

From The Buenos Aires Times...

Argentine assets soar as US support pledge halts market rout

Javier Milei and Donald Trump are meeting in New York today. We’ll have more as details emerge...

Beneath the Surface

Needless to say, we have no idea how this telenovela will play out. But we do know politics is often less about reality itself and more about the perception of reality, at least in the public’s eye.

More importantly, while the politicking continues on the surface, beneath the waves, Milei’s administration appears committed to the mission at hand: abrogate... deregulate... liberate...

Less covered in yesterday’s news cycle was a quiet but important reality: in the face of strong market headwinds and political turmoil, Milei’s administration announced that – for the first time in half a century – it would remove all withholding taxes on agricultural exports.

From La Derecha Diario:

Javier Milei eliminated export taxes on the agricultural sector to strengthen the supply of dollars

The national government, in a historic measure for Argentine agriculture and economy, ordered the total suspension of export duties on grains. The measure is in effect until October 31 or until sworn export declarations reach USD 7 billion, whichever comes first.

Officials from the Executive Branch emphasized that the main objective is to inject dollars into the market. This will allow the Central Bank's reserves to be protected and macroeconomic stability to be guaranteed, in line with the reform program promoted by President Javier Milei.

As the president’s spokesman, Manual Adorni, put it:

This is the only government that, in the face of adversities, responds by lowering taxes.

Never a dull day on the Pampas, dear reader... and we’re just getting started!

Stay tuned for more Notes From the End of the World...

Cheers,

Joel Bowman

P.S. Wow… here’s an incredibly kind message from a Notes Founding Member…

Thanks, Jim! Your support is very much appreciated. Indeed, our glass overfloweth with gratitude.

Readers who wish to join Jim and the rest of our generous Notes members, may top up our glass (and keep us sane), below...