Argentina’s peso slumps despite Trump’s financial aid for Milei – EL PAÍS English

Report on Argentina’s Economic Instability and its Implications for Sustainable Development Goals

Executive Summary

Argentina is currently experiencing significant financial instability, characterized by a rapid depreciation of the peso against the US dollar. This situation persists despite a substantial economic aid package from the United States. The ongoing crisis poses considerable challenges to the nation’s progress towards several key Sustainable Development Goals (SDGs), particularly those related to poverty, economic growth, inequality, and institutional stability. This report analyzes the current economic conditions, the international response, and the direct impact on Argentina’s sustainable development agenda.

Current Economic Situation and Policy Responses

The Argentine financial market remains volatile ahead of midterm elections, with the local currency facing sustained pressure. The government’s economic plan is under scrutiny, leading to widespread uncertainty.

• Currency Devaluation: The Argentine peso has devalued by approximately 25% since the removal of foreign currency trading restrictions in April. On Tuesday, the exchange rate reached 1,490.5 pesos per wholesale dollar.
• Central Bank Intervention: The Central Bank of Argentina (BCRA) has intervened in the foreign exchange market to stabilize the currency, selling $45.5 million from its reserves to maintain the price within the established floating band.
• International Financial Support: The United States has announced a significant aid package to support the government of President Javier Milei. This package includes:
  1. A $20 billion currency swap agreement.
  2. A $20 billion line of credit facilitated through private banks such as JPMorgan Chase, Bank of America, Goldman Sachs, and Citigroup.
  3. Direct intervention by the U.S. Treasury in the Argentine foreign exchange market.

Impact on Sustainable Development Goals (SDGs)

The economic crisis directly undermines Argentina’s ability to achieve its commitments under the 2030 Agenda for Sustainable Development.

SDG 8: Decent Work and Economic Growth

The persistent currency devaluation and financial market instability create an environment hostile to sustainable economic growth. This volatility deters investment, complicates business planning, and threatens job security, thereby impeding progress towards creating decent work for all.

SDG 1: No Poverty & SDG 10: Reduced Inequalities

The 25% devaluation of the peso severely erodes the purchasing power of ordinary citizens, especially those with fixed incomes in the local currency. This directly impacts efforts to eradicate poverty (SDG 1) and exacerbates existing economic disparities (SDG 10), as wealthier individuals can protect their assets by purchasing foreign currency.

SDG 16: Peace, Justice and Strong Institutions

Economic uncertainty surrounding the upcoming elections, coupled with allegations of government corruption, weakens public trust in national institutions. The Central Bank’s struggle to stabilize the currency, despite external support, highlights challenges in institutional effectiveness. This instability threatens the strong governance necessary to achieve sustainable development.

SDG 17: Partnerships for the Goals

The U.S. aid package represents a global partnership aimed at stabilizing Argentina’s economy. However, the effectiveness of this partnership in fostering long-term, sustainable development is questionable.

• U.S. Treasury Secretary Scott Bessent framed the support as a “bridge to a better economic future” and a measure to prevent a “failed state,” aligning with U.S. strategic interests rather than purely developmental objectives.
• The aid has been made contingent on the outcome of Argentina’s midterm elections, linking financial support to political results and potentially undermining national sovereignty.
• Private banks are reportedly seeking guarantees before structuring the loan, indicating a lack of confidence in Argentina’s ability to repay and raising concerns about future debt sustainability.

Conclusion and Outlook

Despite international partnerships (SDG 17), Argentina’s economic strategy has not yet achieved financial stability. The ongoing crisis presents a significant setback for achieving inclusive and sustainable growth (SDG 8), reducing poverty and inequality (SDG 1, SDG 10), and strengthening institutions (SDG 16). The outcome of the upcoming legislative elections is a critical variable that will heavily influence the country’s future economic direction and its capacity to advance the Sustainable Development Goals.

Analysis of Sustainable Development Goals in the Article

1. Which SDGs are addressed or connected to the issues highlighted in the article?

• SDG 8: Decent Work and Economic Growth: The article’s central theme is Argentina’s severe economic instability, including currency devaluation, financial market volatility, and the government’s struggle to implement a successful economic plan. These issues are directly related to achieving sustained and stable economic growth.
• SDG 17: Partnerships for the Goals: The article extensively details the financial partnership between the United States and Argentina. This includes a multi-billion dollar aid package involving currency swaps and loans, which exemplifies international cooperation to address a national economic crisis and enhance global macroeconomic stability.
• SDG 16: Peace, Justice and Strong Institutions: The text points to challenges related to institutional effectiveness and stability. The Central Bank’s interventions, the uncertainty surrounding the government’s economic plan post-elections, and the general “lack of confidence” in the government reflect issues with institutional capacity and public trust, which are crucial for sustainable development.

2. What specific targets under those SDGs can be identified based on the article’s content?

1. SDG 8: Decent Work and Economic Growth
   • Target 8.1: Sustain per capita economic growth in accordance with national circumstances. The article highlights the failure to meet this target, describing the economy as being “in jeopardy” and the local currency having “devalued by nearly 25%” since April, which is contrary to sustained growth.
2. SDG 17: Partnerships for the Goals
   • Target 17.3: Mobilize additional financial resources for developing countries from multiple sources. This target is directly addressed through the U.S. aid package, which includes a “$20 billion currency swap” from the U.S. Treasury and efforts to secure a “$20 billion loan” from a group of private banks like JPMorgan Chase and Goldman Sachs.
   • Target 17.13: Enhance global macroeconomic stability, including through policy coordination and policy coherence. The U.S. intervention is framed as a measure to prevent “another failed state in Latin America” and create a “strong, stable Argentina,” demonstrating policy coordination aimed at stabilizing a national economy to ensure regional and global stability. The “stabilization agreement” is a clear example of this.
3. SDG 16: Peace, Justice and Strong Institutions
   • Target 16.6: Develop effective, accountable and transparent institutions at all levels. The article implies challenges to this target. The Central Bank’s need to repeatedly intervene by selling its “meager dollar reserves” and the widespread market perception that the government will have to modify its economic plan show a lack of confidence in the effectiveness and stability of key economic institutions.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

1. For SDG 8 (Economic Growth):
   • Currency Exchange Rate: The wholesale dollar exchange rate reaching “1,490.5 pesos” is a direct quantitative indicator of severe currency devaluation and economic instability.
   • Devaluation Percentage: The statement that “the local currency has devalued by nearly 25%” since April serves as a clear indicator of negative economic performance.
   • Inflation Rate: The government’s achievement of a “slowdown in inflation” is mentioned as a positive indicator of progress towards economic stabilization, even if other factors remain unstable.
   • Central Bank Intervention: The Central Bank selling “$45.5 million” and a previous sale of “$1.1 billion” are indicators of the measures being taken by financial institutions to manage the crisis.
2. For SDG 17 (Partnerships):
   • Volume of Financial Aid: The specific figures of the U.S. aid package—a “$20 billion currency swap” and a “$20 billion loan”—are direct quantitative indicators for Target 17.3, measuring the mobilization of financial resources.
   • Existence of International Agreements: The signing of a “stabilization agreement” between the U.S. and Argentina is a qualitative indicator of policy coordination and partnership (Target 17.13).
3. For SDG 16 (Strong Institutions):
   • Market Confidence: The “widespread perception among Argentine financial market operators” and the “record purchase of dollars” as a safeguard against uncertainty are qualitative indicators of a lack of public and market confidence in the government’s institutions and economic plan.

4. Table of SDGs, Targets, and Indicators

Source: english.elpais.com