Humes Says US Rescue Plan for Argentina May Not Work

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00:00What do we know right now about, you know, the basic details that I always call you and ask you about?

00:05How much money does Argentina have left to back up the peso?

00:08How much money has the U.S. Treasury spent to back up the peso?

00:12And how much are we willing to spend to help them further?

00:16I mean, those are all really good questions.

00:19And, you know, it's a bit surprising in a way that we put together this program

00:25because, you know, in emerging markets when you have these countries that have an overvalued currency

00:32and you start to get stresses on the system,

00:37if things break on the foreign exchange side, things can get pretty bad pretty quickly.

00:45And the $20 billion headline number, if things really go sideways, won't be enough to sort of stop the bleeding.

00:55So what is expected is that there'll be some sort of conditionality,

01:01that you move the ban and then you, you know, float the peso.

01:05And if Malay starts heading towards some kind of dollarization,

01:09what you want to avoid is what happened in Ecuador when they dollarized.

01:17Interestingly enough, the president at the time was this guy, Jamil Mawad,

01:22so he had the same initials as Javier Malay, and there was an overvalued Sucre,

01:28some plans for a dollarization process, which Malay brought up quite a bit in his campaign prior to the election.

01:37But Malay lost control of it.

01:40They ended up dollarizing, but after a very disorderly devaluation,

01:45and it cost Mawad the presidency of Ecuador.

01:50So quite a few pretty accomplished economists have been applying on this

01:55and what needs to be done to stabilize the situation in Argentina.

02:01The headline number that the U.S. has won't be enough if it's disorderly.

02:04If there's a very well-executed plan of sort of a step-by-step devaluation,

02:11I think you can get the situation in order.

02:16A concern I think some people have is Trump coming out today

02:21and sort of tying the follow-through on the aid to the election results, the upcoming election.

02:27And I think there's a bit of an underappreciation sometimes in D.C. that, you know,

02:35if the U.S. is too prominent, it can be a disadvantage.

02:42There's an undertone of anti-imperialism in Latin America that people don't pick up.

02:46So let's see how the elections go.

02:48And I would assume, I mean, obviously, Secretary of the Treasury Besant knows about the valuations,

02:58and I would expect that there's a thorough plan on how to achieve some stability in Argentina.

03:03Well, Hans, to that point, I mean, what is your best guess as to what happens on the 26th

03:09when we finally get to those midterm elections?

03:11You make the good point that too much of anything is probably a bad thing.

03:14That could be the case with American support.

03:16But what the U.S. has done so far, what they've provided so far,

03:20do you think that's enough to get Malay over the line?

03:24Yeah.

03:27Yes and no.

03:28I mean, if you sort of sequence the announcement of the numbers and a program,

03:39you know, clearly the market rallied when the details of the program started coming out.

03:44But you're dealing with a country that's been through quite a few of these cycles,

03:50and you don't have to look too far back to see what happened under mockery

03:54when there was the IMF bailout,

03:56and they still had to go through a pretty severe restructuring.

03:59There needs to be a plan behind it, and again, it's not necessarily a positive that the U.S.

04:10is making themselves so prominent right now.

04:13It's also, I mean, you see a pretty big disconnect between some of the headlines that you see

04:19about the Argentina elections, the Buenos Aires election, what's coming up now,

04:23in the Argentine press versus what you see here.

04:27A lot of the spin around Buenos Aires was voters reject market reforms.

04:33If you talk to people in Argentina, it's, you know, corruption around Malay

04:37and sort of a lack of empathy.

04:40And the spin with him is this, you know, there, is this guy campaigning with Wall Street

04:49or with the Argentine population?

04:52So we'll see if there's any change in polling numbers.

04:56But my concern is that the election results won't benefit Malay,

05:02and it would not be a good thing for the U.S. to pull back too much and too obviously

05:08if the election results don't go the way Malay and Trump want.

05:13We don't have to get into the bribery allegations, but suffice to say, you know,

05:18Javier Malay and his sister Karina have had some issues along the lines of Tom Holman,

05:25and they were supposed to be cleaning out the corruption.

05:30I wonder, Hans, why the U.S. would be so interested in helping out Argentina,

05:35besides the fact that Trump thinks it's one of the most beautiful countries he's ever seen,

05:39and besides the fact that, you know, he likes Malay and especially that Malay likes him,

05:44is this to sort of stop the dominoes of Chinese communism spreading,

05:50or is it to get Argentina to refine our rare earth minerals?

05:55Why do we want to help them so badly?

05:56I mean, I think there definitely is a sense of sort of teaming up with leaders

06:03who are ideologically aligned with Trump and, you know, to some extent leaders in Latin America

06:12that are seen to be right-wing, Bukele, Novoa, Malay,

06:17are going to get more of a benefit with the Trump administration than, you know, leftist-centered politicians.

06:25But the China question is a good one.

06:28Going back to your prior segment, who's filling in the gaps on the soybean exports to China right now?

06:38It's Argentina.

06:39So the Chinese stopped buying soybeans from us, started buying them from Argentina.

06:46So, you know, we are playing, the United States is playing this in a lot of countries in Latin America,

06:53definitely in Africa, where any vacuum we leave, they step in and sort of fill the gap

06:59where they'll find another area.

07:01In terms of locking in, you know, obviously lithium supplies, you know, quite a few rare earths,

07:09Argentina is a critical producer, and I think that strategically it would be good for the U.S.

07:17to continue focusing on these countries that supply rare earths that we're going to need

07:23for the sort of next steps in, you know, AI, any kind of technology going forward.

07:29Right.

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