Why Argentina Needs Bailout After Bailout After Bailout

Summary

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Odd Lots Podcast Summary

Episode: "Why Argentina Needs Bailout After Bailout After Bailout"

Date: October 15, 2025
Hosts: Joe Weisenthal (JW), Tracy Alloway (TA)
Guest: Gregory Makoff (GM), author of Default: The Landmark Court Battle over Argentina’s $100 Billion Debt Restructuring

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Overview

This episode tackles Argentina’s seemingly never-ending cycle of financial crises, bailouts, and defaults. With President Javier Milei in Washington, D.C., finalizing a $20 billion bailout from the US Treasury—a departure from the typical IMF lifeline—the hosts and guest Gregory Makoff dive into why Argentina, an upper-middle-income country, faces these recurring troubles. The conversation unpacks Argentina’s political and economic quirks, the roots and staying power of Peronism, lessons from previous reformers, and whether this latest crisis could mark a turning point.

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Key Discussion Points & Insights

1. Argentina’s Unending Crisis: “Why is Argentina Like This?”

• Opening Questions:

  • Why does Argentina keep defaulting and need so many bailouts, even compared to other struggling nations?
  • JW recounts a personal “blind spot” about Argentina (02:51), setting the tone for a candid, curious exploration.

• Makoff’s Core Thesis:

  • “They spend too much.” (05:17 – GM).
  • Unlike regional peers (Mexico, Brazil, Peru, Colombia), Argentina (and Venezuela) never successfully embedded reforms after crises in the ‘90s.
  • Persistent political divisions and a failure to sustain austerity post-crisis keep Argentina in a cycle of overspending and instability.

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2. The Role of Peronism and Machine Politics

• What is Peronism?

  • GM explains its roots (06:43):

    “Peronism is kind of a shapeshifter... [it] became a political machine that controlled the apparatus of government and the unions and everything. So it embedded itself.” (GM, 06:43)

  • Peronism has reformist (Menem in the ’90s) and more populist/profligate variants (the Kirchners, “Kirchnerism”).

• Machine Politics in Practice:

  • The system is sustained by distributing direct benefits, often physically handed out by party operatives in poor neighborhoods (08:19):

    "...the cash flow looks like a gift from the leader and the party. And then when the leader says, 'Oh, there’s a Peronist rally in Buenos Aires, we'd like you to get on a bus,' the people who depend on them for the check say, 'I guess I gotta go.'" (GM, 09:15)

  • This ingrained exchange makes sustained austerity politically toxic.

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3. Milei’s Shock Therapy: Ambitions and Obstacles

• Milei’s Mandate:

  • Came to power on an outsider, iconoclastic promise: “Pain now, success later” (09:56 – GM). He literally wielded a chainsaw as a symbol.
  • TA: “He lent that chainsaw to Elon Musk as well.” (12:03)

• On Previous Reformers:

  • Mauricio Macri (2015–19) tried gradual reform but failed due to the scale of fiscal imbalances and lack of political support.

• Why Another Bailout Now?

  • Even after deep cuts, Argentina is “always vulnerable to a speculative attack” given thin reserves and entrenched skepticism (16:37 – GM).
  • The current $20 billion US bailout is seen as a necessary backstop rather than a failure of policy.

• Nature of Reform:

  • GM highlights the importance of achieving a “primary surplus” (the budget balance before paying interest):

    “Milei’s program is carefully calibrated to stop monetary emission and stabilize the economy. There is nothing arbitrary about it... It is the kind of macroeconomic stabilization that you have to do. It makes sense and moreover, it is done sensitively.” (18:24 – GM)

  • Spending cuts have focused on slashing subsidies for transportation, utilities, and adjusting pension indexation (19:47).

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4. Role and Limitations of External Actors

• IMF, US Treasury, and the Courts:

  • Settlements or bailouts haven't incentivized fiscal prudence because Argentina can usually re-access markets or external help relatively quickly after each crisis.

• Makoff’s View:

  • True change has to come “from the soul of the Argentine people” (21:38). No IMF program or court settlement can force discipline long-term.

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5. Democracy versus Diligence: Hard Choices in Hard Times

• Do Democracies Struggle to Reform?
  • JW asks bluntly if democracy itself is the problem in sustaining discipline (23:14):

    “These things are like really hard in a democracy. They're really hard in a system in which every two years there’s a referendum on how it’s going.”

  • GM acknowledges “there's this challenge between democracy and running a balanced budget” but emphasizes: “Populations learn…when you've been in Argentina and you've suffered it, you want a government who says ‘I'm not going to overspend’ because you've lived the cost.” (24:23)

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6. The Politics and Optics of the Latest US Bailout

• Crisis Politics:

  • The “big bazooka” US Treasury intervention is seen as a bulwark against speculative attacks, especially amid election-related uncertainty (29:28).
  • Political rivals are accused of destabilizing Milei’s program for short-term gain.

• Bond Markets:

  • US support emboldens some investors, but memories of past defaults—especially under figures like Axel Kicillof and Cristina Kirchner—keep the market jittery.

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7. Why Do Investors Keep Buying Argentina Bonds?

• Memorable Moment:
  • GM recalls a US judge’s question from his court experience (32:46):

    “Why would anybody who can read ever buy a bond from Argentina?”

  • Answer: The perception that crises are not arbitrary and that high yields can be lucrative if timed well, despite the risks.

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8. What to Watch in Upcoming Elections

• Key Metrics:

  • The share of seats Milei’s party and center-right coalition secure to form a “veto-proof minority” or even a majority in the lower house (34:41).
  • A blowout for Peronists/Kirchnerists would trigger market fears.

• Political Engineering:

  • Peronist manipulation of election calendars and perception battles is a recurring theme (36:06).

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9. Milei: Austere Policy, Outrageous Persona

• Is Milei really a radical?

  • GM: Despite libertarian and “Trumpian” style, his team is composed of respected technocrats and the policies are “fairly normie, IMF style, regular economics” (39:04).
  • “You have to separate the political character from the policy… He has the tightest, best technical team behind him.” (GM, 39:04)

• Ironies:

  • TA: “It's totally ironic. They're total opposites. You have two characters who bind at an emotional, political character level, one of whom is massively overspending in the United States. Another one is running the most disciplined reform ever, and they're best friends.” (41:47 – GM responds)

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10. Predictions and Big Picture

• Makoff’s Outlook:

  • “I think they'll be fine... The people want normalcy. Argentina can always surprise you. But having looked at what they've lived through, they understand what's happening. And I'm hopeful that this shocking instability has reminded them of what's going to happen if they don't stick with the plan.” (41:02 – GM)

• Larger Themes:

  • The outcome rests on whether Argentine society is willing to endure short-term pain for future stability—something only the next electoral cycle can reveal.

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Notable Quotes & Memorable Moments

• "They spend too much." (GM, 05:17)
• "Peronism is kind of a shapeshifter... It became a political machine that controlled the apparatus of government and the unions and everything." (GM, 06:43)
• "The brilliance of Milei is he said, we spent too much, we print too much money, we have inflation. And that was true. And he symbolized it with a chainsaw because it was the problem and the solution." (GM, 11:41)
• Why buy Argentina debt? Judge Pooler: "Why would anybody who can read ever buy a bond from Argentina?" (32:46)
• "You have to separate the political character from the policy…He has the tightest, best technical team behind him." (GM, 39:04)
• "The people want normalcy." (GM, 41:02)
• "You can't make this up. So nonfiction. Who needs fiction when you have Argentina?" (GM, 41:48)

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Timestamps for Major Segments

• 01:48 - Hosts introduce topic: Argentina’s new US Treasury bailout
• 05:05 - Makoff begins core explanation: Argentina’s reform failures
• 06:43 - Origins and nature of Peronism
• 08:19 - Machine politics and how subsidies/payoffs sustain power
• 09:56 - Milei’s campaign and the desire for reform
• 16:37 - Why a new bailout was inevitable
• 18:24 - Details of Milei economic reforms and spending cuts
• 21:38 - The role of domestic will in achieving lasting reform
• 23:14 - The challenge of reform in democracies
• 29:28 - Implications of direct US bailout for Argentina
• 32:46 - Why do investors keep buying Argentina bonds?
• 34:41 - What to watch in the upcoming elections
• 39:04 - Separating Milei’s political style from his technical policy
• 41:02 - Gregory Makoff’s closing prediction: cautious optimism

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Final Thoughts

The episode leaves listeners with an understanding that systemic fiscal mismanagement, powerful machine politics, and a deeply ingrained culture of populist giveaways keep Argentina locked in a cycle of crisis. Short-term bailouts and external support are only stopgaps—the real question is if Argentine society is finally ready to demand and sustain painful reforms. As the midterm elections loom, the outcome will signal whether this time is different.

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Transcript

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[Gregory Makoff]

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[Tracy Alloway]

It's not easy to stand out from the crowd. Simplify how you stock up to get ahead. Go to amazonbusiness.com for support. Bloomberg Audio Studios Podcasts Radio News hello and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

[Joe Weisenthal]

And I'm Joe Weisenthal.

[Tracy Alloway]

Joe, we are in Washington, dc. Do you know who else is in our nation's capital?

[Joe Weisenthal]

Lots of people. Lots of people are in our nation's capital.

[Gregory Makoff]

Yes.

[Joe Weisenthal]

Right now. I could go on and on. There's a lot of people live there permanently, but also a lot of people visiting this week like we are.

[Tracy Alloway]

True. Okay, so one person in particular is visiting who is of note for this particular podcast, and that is Javier Millay. He is the president of Argentina and he's meeting with Trump today. They're supposed to finalize like the the $20 billion swap that Argentina just got from the US Treasury. Basically, Argentina is getting their like umpteenth bailout. I tried to count all of them, but then I stopped because I was like, I have a life. But normally a lot of those bailouts come from the imf. This one's coming from the treasury, so it's fairly unusual. It also comes with a lot fewer terms than some other deals. But this is a good time to talk about Argentina and why it's seems to constantly be in financial trouble and either defaulting or on the verge of a default.

[Joe Weisenthal]

You know, I'm like, traumatized by Argentina topics. Right? Wait, why? Well, I've probably said it once or twice before on the podcast, but, you know, the first time I applied for a job in New York City was with Brad Setzer. And he was like. And in the middle of the interview, he's like, how would you characterize. This is 2006 maybe? He's like, how would you characterize the struggles of Argentina? And I just totally blanked. I, like, literally didn't get a word out and I didn't get the job, obviously. So I've sort of. This is a huge blind spot for me, and it's almost like a blind spot I'm afraid to revisit. But we have to dove in. I have to learn more eventually. One more bailout. This one's going to work, right?

[Tracy Alloway]

This one's going to be the last one. One more Lane, bro. Yes. So. And you know, the other interesting thing about this is Milei was he was initially praised for reducing inflation. I think it was something like over 200% and it got down to 33%, which by US standards still. Still pretty high. But he did that by slashing government spending and selling Argentina's FX reserves to prop up the peso. And now fast forward a little bit of time and that approach doesn't seem to be working anymore. So again, there's lots to talk about.

[Joe Weisenthal]

There's so much about Argentina that confuses me, including, like, why is it like this? Because there are lots of countries that have institutional struggles of various sorts. There are a lot of countries that are poor. There are a lot of countries that, whatever. I can't think of any other country that just is always, always at the trough like this. It's not that poor of a country, et cetera. I don't really understand why this is this persistent thing distinct to this country.

[Tracy Alloway]

All right, our first question will be why is Argentina like this?

[Joe Weisenthal]

Yeah, why is Argentina like this?

[Tracy Alloway]

And then after we record this interview, you can write a little essay for Brad Setzer and send it to him.

[Joe Weisenthal]

And then I'll get the job? Yeah.

[Tracy Alloway]

Yes.

[Joe Weisenthal]

And then he'll hire me.

[Tracy Alloway]

All right, well, I am very happy to say that we do in fact have the perfect guest. We are going to be speaking with Gregory Makoff. He is the author of Default the Landmark Court battle over Argentina's 100 billion dol. Dollar debt restructuring. I read this book when it first came out. It was absolutely fantastic. And even though it's about, you know, a very complex court proceeding, it's. It's a page turner. And there are lots of really interesting anecdotes and lots of interesting personalities as well. So, Greg, thank you so much for coming on the podcast.

[Gregory Makoff]

Thank you for having me.

[Tracy Alloway]

So I guess I should start with that first question. What's up with Argentina?

[Gregory Makoff]

Well, for the history.

[Joe Weisenthal]

Start from the very beginning. Yeah, start from wherever you want.

[Gregory Makoff]

They spend too much.

[Joe Weisenthal]

Okay. But lots of countries spend too much.

[Gregory Makoff]

Well, they're particularly politically divided and do have a reform effort. Countries have a crisis, then they reform. Hopefully they embed the reforms and they graduate to a certain level of stability. But whereas the Mexicos and the Brazils and the Perus and the Colombias and the Panamas did succeed in the 90s in their Brady programs and have not defaulted since, Argentina and Venezuela have been distinct in not reforming and massively overspending. That's the big difference. There's no magic or no mystery here.

[Joe Weisenthal]

Well, can you explain maybe just. I think this might be helpful for me. What is it about the political environment of Argentina is not the poorest country in the world by any stretch. What is it about the political environment of Argentina such that it's never been able to, as you put it, embed reforms in the ways that other countries that struggled in the 90s were able to.

[Gregory Makoff]

Machine politics.

[Tracy Alloway]

So all I know about Argentina comes from basically your book. I covered the New York court case a little bit when I was at the ft, but also all my knowledge comes from Andrew Lloyd Webber's musical Evita, which is fantastic and I highly recommend. But can you explain what Peronism is?

[Gregory Makoff]

Yeah, Peronism is kind of a shapeshifter, but it goes back historically to Juan Peron, who was the president or dictator for a while in the 50s, and he, in the post war world, was aligned with labor forces and cut the country off from the outside world. Nationalistic. It became a political machine that controlled the apparatus of government and the unions and everything. So it embedded itself. Carlos Menem, the president in the 90s who reformed, was a Peronist. He had the political machine, but he was a reformer, an imperfect reformer, and that broke down in 2001. But then the Kirchners were also Peronists, and they have a particularly virulent version of Peronism, which is really what we're talking about here, is Kirchnerism. So Peronists come in many different flavors. And when we're talking about the Current situation, it's really the Kirchner version of Peronism versus the Millet version of let's finally balance our budget.

[Joe Weisenthal]

I want to get to Milei, obviously, but just go into this a little bit more machine politics. Again, not something that's alien to other countries in the world. That's fairly common. Talk about the sort of application or every country has some kind of machine politics. What makes that Kirchnerism, et cetera, so powerful and difficult to dislodge. How has it operationalized the machine?

[Gregory Makoff]

The way the cash moves, okay, in that if you get a bailout check during COVID you get it from the federal government in the mail. In the 2001 crisis, some of the emergency money that was allocated even from international institutions was given to Argentina, who was given to Peronis party operatives to hand out. In the barrios. You literally get checks from party operatives or in regions from the party governor under a picture of the governor in Peron. So in many cases, the cash flow looks like a gift from the leader and the party. And then when the leader says, oh, there's a Peronist rally in Buenos Aires, we'd like you to get on a bus, the people who depend on them for the check say, I guess I gotta go.

[Tracy Alloway]

Wow, I had no idea that happened. Okay, so Milei campaigned on a platform of massively reducing government spending in order to bring down inflation and all types of austerity. It wasn't necessarily IMF style reform, but it was supposed to be a reduction in spending. And yet here we are and Argentina is getting its $20 billion bailout. Do the politics of economic pain, I guess the idea of people no longer handing out check in the barrios and stuff like that, does that make serious spending reductions just untenable in Argentina?

[Gregory Makoff]

We should back up a bit and get a bit historical, please. Because the people voted in 2023 for Milei because they were in such economic chaos. They voted for a complete outsider with a very particular message that had a lot of truth for them. And his promise was pain now, success later. Let's finally have reform and sustain it to stop this 200 years of boom, bust, devaluation and default. Now, the context of this just from 2001, is the country, the program of the 90 of men falling apart and facing a devaluation, default, $100 billion debt default. As I talk about in my book, the people were in the street screaming, they all must go. They were banging pots and pans, clink, clink, clink, clink. And the president left in a helicopter from the top of Casa Rosada. And they had a reform program. They ran a very tight budget, tighter even than milei is running between 03 and 05. But then they didn't sustain the reform. And after 2010, they've been in the boom, then the bust and default from 2010-23. So again, they voted for Milei because they were saying they all must go. The rest of the political class who couldn't deliver must go. We want stability. Now, the brilliance of Milei is he said, we spent too much, we print too much money, we have inflation. And that was true. And he symbolized it with a chainsaw because it was the problem and the solution. I've seen pictures of him at a rally. He's not even talking. He just holds it up.

[Joe Weisenthal]

That's really powerful.

[Tracy Alloway]

And he lent that chainsaw to Elon Musk as well.

[Joe Weisenthal]

Oh, he did?

[Tracy Alloway]

Yeah. That was Milei's chainsaw.

[Joe Weisenthal]

Wait, what happened to that other guy? Wasn't there some guy around 2016 or 2017 that all the international community loved and thought he was going to be the great neoliberal reformer there?

[Gregory Makoff]

That was Macri.

[Joe Weisenthal]

Oh, yeah, Macri, right. What happened to that guy?

[Gregory Makoff]

Well, the people were tired of the chaos of Cristina Fernandez de Kochner, who was present for two terms after her husband Nestor was present for one term. He died after her first term. He was going to run again, so she had to. And things were bad, including on the bond default and all the litigation. And Macri's like, I'm going to bring a normal country. And he did some great things at first, but his program fell apart, which brought back an even worse Peronist administration. With Alberto Fernandez, who had been the chief of cabinet for Nesta Kirchner, with Cristina Fernandez de Kirchner as the vice president and Covid hit, they did default again and they handed over the reins to milei with 150% annualized inflation. So there was an urge to reform under Macri, but he had such a bad imbalance of too much monetary emission in the local market, he couldn't get out from it fast enough. He tried to slow walk it and be gradualistic, and he couldn't make it through.

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[Tracy Alloway]

So Milei took a chainsaw to government spending in Argentina. It seems inflation did come down. Why do they need a bailout now? Their umpteenth bailout? Actually, I should ask you, you might actually know how many times Argentina has been bailed out.

[Gregory Makoff]

I have the number on how many defaults. Okay, the bailouts we'd have to check the number. But first of all I would term the treasury support is not a surprise and was always in the cards from the IMF program in April. The IMF program for what it was doing in the negative reserve position they inherited from the prior government was always too thin. They were always vulnerable to a speculative attack. They were always vulnerable around the Midterm elections and a speculative attack occurred. And as treasury hinted they would, they stood behind the imf. This is nothing new. This is not a failure of the program. This is completely predictable. The way it unfolded in the speed leaves a bad impression. But as an observer for a long time, this was no surprise and Besson's word. We really need to have an orderly election here. This is true. The people have to choose. Are we going to sustain reform and stop defaulting or are we going to go back to the other way and go back to overspending, money printing, devaluation, inflation and default? There's a very stark difference between what the Kiseloff leadership of the party will lead the country to in what a continued leadership by Milei and his center right coalition will.

[Joe Weisenthal]

Can you actually explain a little bit further? Reform is a nebulous term. Sounds good, but I don't know what it means. What substantively have we seen from the current administration in terms of either spending cuts or so called reforms, what's been done so far?

[Gregory Makoff]

This single number to focus on is the primary surplus. Okay, it's kind of like the free cash flow for a company. But it's your net cash flow before your debt payments, your revenue in, minus your expenses. And your debt does not stabilize unless that's positive and positive enough to pay off your existing debt at a reasonable pace. Countries like us, the US we're running negative primary surplus, which means we're incurring more debt and we're refinancing maturing debt with more and more, which has debt going up. Argentina, to stabilize its situation, has to run a primary surplus of, let's say 3%. Under Minister of Economy Lavanya, who was a great reformer from 2002 to 2005, when Kirchner fired him for being too tough, they were running a 5% primary. Totally stabilize the economy. Milei's program is carefully calibrated to stop monetary emission and stabilize the economy. There is nothing arbitrary about it. It is the kind of macroeconomic stabilization that you have to do. It makes sense and moreover, it is done sensitively. They protected the basket of money available to the poorest households.

[Joe Weisenthal]

So where are they cutting?

[Gregory Makoff]

They adjust a lot of different things. Most importantly, they did things like you don't get free buses anymore, you don't get free trains. So they move the costs of those things up to a market rate. And utilities, because the Kirchners, they also defaulted on all the utility contracts in 2001, they never normalized utility rates. So one of their fiscal problems around 2000, after 2010, is they were subsidizing the power bills for everyone, which was costing 4% of GDP a year. That's why you have a primary deficit. They said, we can't do that. They corrected those popular household subsidies and they did some adjustments, including to the indexation of pension. That's a next level topic in terms of what the Kirchners did to re index the whole society.

[Tracy Alloway]

So we've been very focused on what Argentina itself is doing and why it seems to be in a perpetual financial predicament. But maybe we could talk about the role of external actors a little bit more. So in your book, again, fabulous story of the big court case over Argentina debt, But one of the criticisms of this whole process is, is that every time you successfully work out defaulted debt or every time you reach a settlement, the country can just return to market fairly quickly. Right? So it's never really punished that much or enough to make it seriously think about reducing its debt. Is there some truth to that? Are there things that external actors like the court system or the IMF should be doing to stop this from repeatedly happening?

[Gregory Makoff]

I really think the question you ask is the most important one, but it's really about the soul of the Argentine people. Have they had enough pain to insist their government follows robust financial policies? They either elect people who will be straight with them about what they can afford and set up policies they will follow, like Gordon Brown's Golden Rule and things like that, or they will elect politicians who say, oh, I'll make it easier on you. And so the people shocked me in 2023 on finishing my book. I was depressed. I saw no way out of perpetual chaos. And then Milei came and they voted for him because the people said, please, we want to be an orderly country. Now we're at the midterm. Put aside the last six weeks of chaos. You're asking the people, will you stick to the plan to get to the finish line? Or are you going to say, we're tired, we don't want to try so hard. And again, they may very well go for Milei and Macri and say, we do want to complete it, we didn't like this blow up that happened, we don't want to go there, or they're going to do something else. So no outside party can tell a sovereign nation what to do. No judge. The judge makes it worse. The imf, it has to come internally.

[Joe Weisenthal]

Is the problem democracy? I mean, we've talked about. No, for real, We've talked about this in the Context of Fritz Bartel wrote a book the Triumph of Broken Promises. Similar story with the post Soviet states and how they ultimately broke apart from the Soviet Union because of this sort of difficulty that they had in making difficult decisions and these attempts to impose austerity or live within their means, et cetera. And they finally, it didn't work anymore. And in the early 80s somehow the UK found a way to sort of do an internal adjustment. But these things are like really hard in a democracy. They're really hard in a system in which every two years there's a referendum on how it's going. And if it is painful, I understand why people don't want to continue with it even though maybe long term it's beneficial. Like I'm not really proposing this but like in your view, does someone like a mile a need like a nice like 10 year or 20 year Runway where he doesn't have to face the voters, you know what I'm saying? Like is this. The issue is that these difficult things keep coming up for a vote over time and in the middle it's like what are we getting here?

[Gregory Makoff]

Yeah. And somebody wrote a book a BlackRock manager gave me, he says, greg, this is the best book. It's called A Free Country Deep in Debt, about the histories of countries getting in debt. He said you don't need to know any more than that. But there's this challenge between democracy and running a balanced budget. But populations learn. And I heard, I think it was a Moody's analyst or a Fitch analyst last year talking about the debt trajectories in Europe. He said France is going up and this country's going up and the UK is going up. But you know what? Greece is going down and Spain is going down and Italy's is going down because the crisis country people don't want to go through the disaster again. So when you have people like Argentina who dealt with hyperinflation, they don't want to be lied to. They know the cost of no pain now and suffering later. Now Americans, we don't know we're willing to have the government massively overspend because we want low taxes now and more benefits now. And we don't know what an imbalanced budget mean. You can go forever, but when you've been in Argentina and you've suffered it, you want a government who says I'm not going to overspend because you've lived the cost countries, the people embed that knowledge in their voting behavior and they can sustain it year after year. That's called graduating. That's the point of this election, this midterm. Did the Argentine people get the message and they are now going to sustain the path because they understand the costs? Or are they going to just say, I'm tired of it. Let's go back. We don't know the answer. We will know on the 26th of October after they vote on the 27th, and it's an incredible historical moment that we're facing.

[Tim Stenbeck]

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[Tracy Alloway]

Okay, so the new bailout that's getting finalized today in D.C. between Trump and.

[Joe Weisenthal]

We'Re recording this the 14th. October 14th.

[Tracy Alloway]

I should have said October 14th. So the new bailout does have direct U.S. involvement. I know you said it was part of the earlier IMF agreement, but still people are, you know, talking about the US doing a $20 billion bailout of Argentina. Do you think that involvement changes maybe creditor debtor dynamics in the future?

[Gregory Makoff]

I think in the short term right now it's a big bazooka to stop a run on the bank. There is a speculative attack on the Argentine peso at the worst possible time and the Perona start amping it up. Cristina Fernandez de Kirchner, I think it was October 1st is on X saying, oh, he's going to devalue right after the election and okay, pour more speculative attacks on. That's kind of odd behavior towards your own country. And so treasury is responding by putting a huge bazooka. It's very expensive to be short and so this should put all those shorts out of business. They have an orderly election and you don't even know the extent that these sort of external things nobody understand really affects behavior. They're living their life. They're worrying about their bills. They know their local stories about what's happened, what Millie has done and hasn't done and what people are saying. This is just another piece of noise in a complicated picture. External creditors, that's a different question. This is perceptually very important. Bonds started rallying because you have people like was it Bob Citron said he immediately bought a lot of bonds and they went up and he's saying, oh, treasury is backing Argentina. You buy long term bonds because of short term bailout. That's a risky thing to do. But it's pro Argentina. It helps stabilize the situation. But the market is so afraid of Kiseloff in particular. So not just Peronism, which I explained it had reformer minimum and early Nestor Kirchner was quite reformist, but it has this Kiselov, Christina Fernandez de Kirchner version of Peronism which involved notorious defaulting. And Kiselov was directly involved with the nationalization of YPF in 2012, which you know, led to the $16 billion judgment in the court because the way minority shareholders were treated the non payment of some GDP warrants that were due I think in 2013 which led to a 1.5 billion judgment in the UK court and was deeply involved with Christina Fernandez de Kirchner in the Redefault under the Peri Passu threat. In 2014, Kiselov went to New York and failed to negotiate in a deal which was basically on the table slightly better than what Macri took two years, a year and a half later, but wouldn't take it or couldn't figure out how to take it. And so foreigners see this ghost of default or past as coming back into power. So if they see any big chance of Kiselov coming back, they're going to run. So that's how the bondholders buying dollar bonds in New York think they're very happy when treasury comes. But we should talk for a minute about the election and what success means.

[Tracy Alloway]

Can I ask one more question before we talk about that?

[Gregory Makoff]

Yeah.

[Tracy Alloway]

Why do investors keep buying Argentina bonds?

[Gregory Makoff]

I should play you this tape. The second Circuit in one of their two hour and a half hearings, Judge Pooler, Rosemary Pooler, who is the nice judge in very kindly voice at the end of a hearing, looked to Argentina's counsel Jonathan Blackmun and said can I ask you a question, sort of off the record? He said, sure. She says, why would anybody who can read ever buy a bond from Argentina?

[Tracy Alloway]

That's right.

[Gregory Makoff]

Jonathan Blackmun had the best answer. He's like, they didn't default arbitrarily. They were suffering a crisis worse than the Great Depression. It was like Weimar Germany with middle class people selling their furniture on the street. Like he was brilliant in that spontaneous answer to the question. But I keep thinking of that question and we're back there. But Milei and the Proparty with Macri and reformists, they don't need a lot at this election in this sense with 33% of the lower house, they continue to veto legislation they don't like and rule by decree and things. So the chance that the Peronos completely take over the legislative branch is really low. We're just facing a more bigger picture perceptional question. Which direction is the mind of the voter going in leading to the next presidential election? Are they really tired of Milei and they're going to go back to Kislov as their leader or are they gonna Stick in the reformist direction with some complaints and demands for readjustment of direction.

[Joe Weisenthal]

So what should we watch? So, okay, tell us a little bit about what date is the election again?

[Gregory Makoff]

October 26th.

[Joe Weisenthal]

Okay, so what should we be watching for on that day? So that we can be smart and I can post a tweet that's insightful or something like that.

[Gregory Makoff]

So it's first the percentage that Milei's party gets.

[Joe Weisenthal]

Okay.

[Gregory Makoff]

Plus the percentage that Macri's party gets, plus then the percentage that other center reformists, center right parties get. And you want to know they have blocking minority, a veto proof minority in each house. That's the minimum. But you would hope that they get a majority as a coalition in let's say the lower chamber. So there's between the best case and lower case. What the markets the bondholders in New York would fear is a sort of blowout for the Peronist and the strong message from every corner of the country.

[Joe Weisenthal]

What's the name of the Peronist party?

[Gregory Makoff]

It keeps changing its name. So right now they often set up a newly vehicle for every single election. So the name changes so much. So I kind of. Yeah, avoid the names.

[Joe Weisenthal]

Okay. But it's the Peronis Party.

[Gregory Makoff]

Yeah. Now what they're calling themselves is Forcipatria, like Homeland Party.

[Joe Weisenthal]

Got it. I see. So the reason these anxieties kicked off is because there were some small regional elections in which they did well, which got people in the minds of thinking, oh, they might have a really good midterms.

[Gregory Makoff]

Oh no, it's far more fun than that.

[Joe Weisenthal]

Okay, good.

[Gregory Makoff]

And there's a lot of history.

[Joe Weisenthal]

Okay, good.

[Gregory Makoff]

So it was not a small regional election. It was the biggest region of Buenos Aires, who had an off cycle early election for provincial offices. And it was a deliberate political ploy to bring down Milei. Here's the history. 2019, in the presidential election, they had the primary in, let's say, July, August, the presidential elections in October. The weirdest system ever called the PASO is the primary where you don't vote by party for your candidate within the party. Everybody votes for all the candidates. And those who run for a party are those who ran better. But it's kind of like an early vote on who's going to win. And Alberto Fernandez, with the former President Kirchner running as his vice president, did sue so well that the markets tanked. It was a self fulfilling prophecy that Macri's people can barely make it to the finish line because the currency and local interest rates and bonds were exploding. And so that lesson meant Milei in February said, we do not want to have a Paso. We don't want to have a primary. We just want to have the election in October. So they got the Senate to agree to take the Paso off the table. But then Kiseloff, where the strength of Peronism is in the Buenos Aires province, where a lot of poor people are, he said, oh, let's have our provincial election six weeks or whatever before, because we know we'll do well. And they anticipated Milei would pound his chest. I'm going to get the majority. And he might fail. And he did fail. And even though he got, let's say, 35%, which nationally would be his veto proof minority that he minimally needs to continue to rule, it was less than he said he'd get. So he did not manage the perceptions well. And his political team got stung by that. And he admitted it wasn't handled well. So there was a lot of history in this early vote being engineered. And as far as the Peronist are concerned, it was a perfectly executed attack on the stability of his program. So this speculative attack is not a failure of the program. It was really a deliberate political process ahead of an important vote.

[Joe Weisenthal]

I have a question actually about Milei. He has this whole vibe. He's sort of a colorful character. I think he quotes Austrian economists and stuff like that. Calls himself a libertarian and so iconoclastic and all that. But setting all that side, like, would you characterize his economic program is like fairly normie, IMF style, regular economics?

[Gregory Makoff]

Yes. And you have to separate the political character from the policy. And you have behind him. Remember, he got elected, he did well in the Paso, the primary in 2023. I don't know if it was 35% and he beat out Macri's candidate. So Macri said, I'm going to support you. So he got to 55%, trouncing the pronus opposition with Macri's support. But part of the deal was that Melaye then took the superstars, the financial superstars of Macri's administration, Caputo and Bacilli, to be as Minister of Economy and as head of his central bank. Already Milei had chosen Federico Sturzenegger, Harvard professor, had worked in the Macri government too, to be as head of reform. Has been churning out pages and pages of reforms to make the country more efficient. He has the tightest, best technical team behind him. Great economists negotiating with the imf, making sure the execution of the plan is perfect, which is not something Argentina has ever seen. Having looked at 30 years of history, this is an amazing, tight team. They work together as a team. Milei completely supports them. But on top of them, he says all kinds of wild things. He's kind of a Trumpy character like that. So you have to separate the sort of wild things he says from the policy.

[Tracy Alloway]

So if I could ask you to put your betting cap on, if you have one, how do you think this plays out? Does Milei retain the majority and Argentina is now on a path to non defaults after many, many, many years? Or are things going to go sideways again?

[Gregory Makoff]

I think they'll be fine. I think the events of the last few weeks will be noted in the history book. But the people want normalcy. Argentina can always surprise you. But having looked at what they've lived through, they understand what's happening. And I'm hopeful that this shocking instability has reminded them of what's going to happen if they don't stick with the plan.

[Joe Weisenthal]

You mentioned that the Milei character is sort of Trumpian. Trump himself. Is he Malayan? Whatever. If you thought like, okay, it was Trump, who does he remind you of in Argentina?

[Gregory Makoff]

Peron.

[Joe Weisenthal]

Okay.

[Gregory Makoff]

It's totally ironic. They're total opposites. I've written pieces about this. You have two characters who bind at an emotional, political character level, one of whom is massively overspending in the United States. Another one is running the most disciplined reform ever, and they're best friends. And then we have this bailout. You can't make this up. So nonfiction. Who needs fiction when you have Argentina?

[Tracy Alloway]

No, indeed. All right, Greg, thank you so much for coming on odd lots. The book is Default, the landmark court battle over Argentina's $100 billion debt restructuring. And if you're interested in this topic, definitely go pick it up. That was fantastic. Fantastic. Thank you so much.

[Joe Weisenthal]

Thanks, Greg. That was great.

[Gregory Makoff]

Thank you.

[Tracy Alloway]

Joe. That was very interesting. Very timely. Do you feel like you could write a little answer essay for Brad Setzer now?

[Joe Weisenthal]

I mean, like for a job interview, and I'm 25 or 26. I could probably maybe come up with. I literally had no. It was so embarrassing. It's like you open your mouth and no words come out. That's what happens.

[Tracy Alloway]

Yeah, that's painful.

[Joe Weisenthal]

What I'm really interested in still is why the political environment is as messed up as it is or messed up as it seems to be. And what is it about Argentina specifically that somehow other countries, like the Mexicos, et cetera, didn't fall into that trap.

[Gregory Makoff]

But Also.

[Joe Weisenthal]

If it gets going, say, I don't know, I worry about all kinds of things, but corruption, debt, et cetera. It seems like you could fall into some very bad, very bad cycles that are hard to escape from.

[Tracy Alloway]

Well, it also feels like there's a tension between what Greg was saying about the Argentinian people need to decide if they've had enough of being serial defaulters and high inflation and if they're willing to trade that for austerity. But on the other hand, having someone come out to the barrio and hand you a check for a bunch of cash sounds really good. So it does seem to be a decision for sure.

[Joe Weisenthal]

Yeah, it seems really difficult. And there's just the reality that, okay, you can get by without help from abroad, but then you might have to deal with sort of a massively reduced standard of living, devalued peso, et cetera. No easy options.

[Tracy Alloway]

Yeah, I'm also still kind of wondering who is buying Argentina bonds all the time?

[Joe Weisenthal]

I mean, haven't they, haven't they done well? Don't they always, like, you know, they end up with a bond and a yacht or something like that? Don't they end up. They get a ship.

[Tracy Alloway]

It was bigger than a yacht.

[Joe Weisenthal]

Okay.

[Gregory Makoff]

Yeah.

[Tracy Alloway]

All right. Shall we leave it there?

[Joe Weisenthal]

Let's leave it there.

[Tracy Alloway]

This has been another episode of the Odd Lots podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.

[Joe Weisenthal]

And I'm Joe Weisenthal. You can follow me @thestalwart. Follow our guest, Gregory Makoff, He'smakoff. Follow our producers, Carmen Rodriguez, Ermenarmon, Dashiell Bennett at dashbot and Cale Brooks at Kalebrooks. For more Odd Lots content, go to bloomberg.com oddlots with the Daily newsletter and all of our episodes and you can chat about all of these topics 24. 7 in our Discord Discord GG oddlots.

[Tracy Alloway]

And if you enjoy Odd Lots, if you like it when we talk about Argentina's latest bailout, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad free. All you need to do is find the Bloomberg Channel on Apple Podcast and follow the instructions there. Thanks for listening.

[Tim Stenbeck]

There are two kinds of people in the world.

[Gregory Makoff]

People who think about climate change and.

[Tracy Alloway]

People who are doing something about it. On the Zero podcast, we talk to.

[Tim Stenbeck]

Both kinds of people. People you've heard of, like Bill Gates.

[Joe Weisenthal]

I'm looking at what the world has to do to get to Zero not using climate as a moral crusade and.

[Tracy Alloway]

The creative minds you haven't heard of yet. It is serious stuff, but never doom and gloom. I am Akshat Ratty. Listen to Zero every Thursday from Bloomberg.

[Tim Stenbeck]

Podcasts on Apple, Spotify or anywhere else.

[Tracy Alloway]

You get your podcasts.