Exchange rates and make Argentina great again.

Useful video from the WSJ if you are teaching exchange rates.

Argentina has a history of debt defaults, inflation, exchange‑rate volatility; the $20 billion package is portrayed as partly economic and partly ideological:

• the economic side is aimed at stabilising Argentina’s finances (currency, reserves, inflation) and

• the ideological side emphasises free‑market reform, alignment with U.S. conservative politics, and reducing state role in the economy.

Milei intially used a crawling peg which is an exchange rate system where a currency is fixed to another currency (often the U.S. dollar) but is allowed to gradually adjust over time according to a pre-set schedule or in response to inflation or other economic indicators. Unlike a fixed peg (where the rate is constant) or a floating currency (where the market decides the rate), a crawling peg moves slowly to prevent sudden shocks. He then set a peso trading band (floor and ceiling) against the US$ but the problem here is that you have to have enough foreign currency reserves in order to defend the peso – constantly intervene in the foreign exchange market to maintain its value. This is where the US$20bn currency swap comes into play to prop up the peso.

Milei, with his radical free‑market/anarcho‑capitalist rhetoric, is positioned as the Argentine counterpart of the U.S. conservative movement; Trump sees supporting him as both an investment and a political signal.