[Economics] Milei provokes a new Crisis - The work of the IMF and the Contribution of the Carry-Trade

Siehe auch:
[Wirtschaft] Milei provoziert eine neue Krise - Das Werk vom IWF und der Beitrag vom Carry-Trade

On March 19, the Argentine parliament voted to negotiate a new loan from the International Monetary Fund (IMF). And on April 11, Argentine President Javier Milei (La Libertad Avanza/LLA) announced that Argentina had agreed to a new IMF loan of $20 billion US Dollar and that it would abolish capital controls as a condition. [1] [2]

At the same time Argentina has a positive foreign trade balance, meaning it exports more than it imports. Furthermore Argentina has a neutral current account balance (+0.6% of GDP in 2024) meaning it has a neutral balance sheet when all capital flows are taken into account and consequently stable foreign currency reserves ($20 billion since 2024). Nevertheless an IMF loan consisting of foreign currency ist taken. [4] [5] [6]

And as a prerequisite for the IMF loan Argentina was required to abolish capital controls. This is happening while Argentina continues to maintain a high key interest rate of currently 29%. This creates the conditions for carry trade. [3]

This involves borrowing money in a low-interest currency and then investing it in a high-interest currency to earn the difference. Carry-Traders can make a profit as long as the interest rate differential exceeds the currency's depreciation. Internationally this is often referred to as emerging markets since money flows into the high-interest country. But then investments are confused with speculation. In addition Carry-Trades drive up the exchange rate of the currency of the high-interest country because demand for that currency has increased. There is therefore no market mechanism that prevents Carry-Traders and their disastrous consequences.

So Argentina did something that wasn't necessary to enable something that will harm Argentina. But in the end the blame will surely lie with the alleged socialism of Milei's predecessors.

Src:
[1] Argentina’s Lower House Approves Milei IMF deal 2025-03-21
https://eurasiabusinessnews.com/2025/03/21/argentinas-lower-house-approves-milei-imf-deal/
[2] Argentina secures IMF loan and ends most capital controls in key milestones for President Milei 2025-04-12
https://www.pbs.org/newshour/world/argentina-secures-imf-loan-and-ends-most-capital-controls-in-key-milestones-for-president-milei
[3] Argentina interest rate
https://de.tradingeconomics.com/argentina/interest-rate
[4] Argentina Balance of Trade
https://tradingeconomics.com/argentina/balance-of-trade
[5] Argentina Current Account to GDP
https://tradingeconomics.com/argentina/current-account-to-gdp
[6] Argentina Foreign Exchange Reserves
https://tradingeconomics.com/argentina/foreign-exchange-reserves