Through its selective lending to struggling economies in Latin America, the IMF is helping Washington, once again, to reassert its strategic influence.
A couple of weeks ago, Argentina’s Milei government signed a $20 billion loan agreement with the IMF to help stall a run on the peso and allow it to keep servicing the $41 billion of debt it already owed the Fund. The deal included an unusually large $12 billion chunk upfront. The Washington-based World Bank and Inter-American Bank threw in additional emergency loans of $12 billion and $10 billion a-piece.
As we reported at the time, the IMF loan was granted despite fierce opposition from senior staff at the Fund. Even before the new loan, Argentina, which represents only 0.6% of global GDP, was already the Fund’s biggest debtor by a country mile — accounting for more than one-third of its entire global lending.
Pressure to Sign on the Dotted Line
Bloomberg has since revealed that half of the IMF’s board of directors was opposed to granting the new loan, presumably out of fear that: a) the loan would be used by the Milei government to fund its electoral campaign in the upcoming mid-term elections, just as the Macri government did in 2018; and b) Argentina would once again fail to meet its debt obligations, leaving the IMF in an even more dangerous place.
However, the board ended up buckling to pressure from the IMF’s President Kristalina Georgieva and the Trump administration, and signed on the dotted line. Days later, Georgieva urged Argentines to “stay the course” in the midterm elections in October, sparking accusations in Argentina of electoral meddling.
Georgieva’s words were also seen as confirmation that the $20 billion loan was indeed intended to help the Milei government reach October with the economy more or less intact, so that it could “stay the course”. Hours later, Georgieva had to qualify her words, insisting that she was not telling Argentines who they should vote for in the elections but rather emphasising the need for a continuation of economic policy.
Hours later, the photo below went viral showing Georgieva wearing a chainsaw brooch, in homage to Milei’s famous campaign prop. The man to her right, who gave her the accessory, is Federico Sturzenegger, Argentina’s minister of deregulation and government transformation. Sturzenegger, a graduate of the WEF’s Young Global Leader program and former central banker, apparently inspired Elon Musk’s Department of Government Efficiency (DOGE) and was recently appointed to the IMF’s Advisory Council on Entrepreneurship and Growth.
A Risky Relationship
However, Washington’s cosying up to Milei’s Argentina is not without its dangers. As the Bloomberg article notes, the more money the Fund throws at the serial defaulter, the more risks it heaps onto its own balance sheet:
There are risks for the lender in handing over so much cash upfront in a program that’s essentially refinancing large existing debts, according to Brad Setser, a former senior official at the US Treasury.
“The Fund would be raising its exposure when the peso is clearly overvalued and the country is repaying bonds,” he said. “It looks like the Fund is positioning itself as, de facto, the junior creditor.”
However, Argentina still has some valuable assets that have no doubt been pledged as collateral. They include vast deposits of both lithium and unconventional oil and gas.
But this is as much about politics and geopolitics as it is about finance and economics. As we reported a couple of weeks ago, the fact that Milei was visited by the US Treasury Secretary Scott Bessent just three days after the IMF deal was signed speaks volumes about Argentina’s importance to the US’ geostrategic ambitions.
On the one hand, it is on the doorstep of the Antarctic, with its vast stores of unexplored and unexploited resources, including the largest freshwater reserve on the planet. It also shares the “Triple Frontier” with Brazil and Paraguay, a key border in South America in terms of population, movement of people and international relations, making it an enticing prospect for a Trump administration looking to reassert US influence throughout the Americas.
The same goes for Argentina’s proximity to the Drake Passage, a wide waterway connecting the Atlantic and Pacific Oceans between Cape Horn (the southernmost point of South America) and the South Shetland Islands off Antarctica. If the US could control both the Drake Passage and the Panama Canal, it would control the two bi-oceanic passages on the American continent.
US Southern Command Pays a Visit
All this considered, it came as little surprise that Argentina was visited on Tuesday by the new chief of US Southern Command, Admiral Alvin Holsey, to discuss issues of “regional security.”
The next day, Holsey and his entourage went to Ushuaia, the capital of Tierra de Fuego, to inspect in situ the joint US-Argentine naval base and logistics hub being developed on the shores of the Beagle Channel, a privileged access route to the South Atlantic.
In April 2024, Milei travelled the 1,860 miles separating Buenos Aires from Ushuaia to meet briefly with the then-US Southern Command Chief, Laura Richardson, to announce the creation of the joint naval base. “This is a major logistics centre that will constitute the closest development port to Antarctica and will make our countries the gateway to the white continent,” Milei said at the time.
Kissinger once described Latin America as a “dagger pointed at the heart of Antarctica” (nice imagery). He also said this.
If Latin America is indeed a dagger, it is growing in value and importance to Washington as the Trump administration seeks to retrench from certain parts of the world back to the American continent as well as assert control over the continent’s two bi-oceanic passages. As El País explains in an article from yesterday, the main goal is to push back against China’s growing presence in Latin America:
Ushuaia is 620 miles from Antarctica. The Chilean base at Punta Arenas is 870 miles away. These are shorter distances than those of other countries in the Southern Hemisphere: South Africa, New Zealand and Australia.
The official purpose of [Admiral Holsey’s] visit was to “supervise firsthand the role of Argentine forces in protecting key maritime routes for global trade,” according to the statement issued by the Southern Command. The Trump administration is also interested in the Ushuaia bi-oceanic passage, in parallel with the pressure it is exerting on Panama to secure control of the Canal. In both cases, Trump’s move seeks to displace Beijing from strategic spaces in Latin America following the Asian power’s advance on the continent in recent years.
Through its lending to struggling economies in Latin America, the IMF is once again helping Washington to reassert its strategic influence in its backyard. It is probably no coincidence that three of the four countries in the region that have outstanding debts with the IMF — Argentina, Ecuador and El Salvador — all have governments that are not only completely aligned with Washington but are also completely on board with Israel’s genocide.
But these countries are currently in a very small minority…
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Nick Corbishley 