While it remains premature to determine if President Javier Milei will be remembered as having aligned with the prevailing moral narrative by fervently and steadfastly supporting the inaugural US bombing of a South American capital, he ought to be acknowledged for his alignment with the dynamics of power. History and power do not consistently align over time. At a certain point in history, aligning with a figure such as Adolf Hitler might have appeared to be a logical choice, perhaps even the sole viable alternative. Conditions can shift rapidly. Milei’s alignment with Trump reflects not only a clear ideological preference but also a rational strategy in the short term. The US president intervened to prevent Argentina from descending into financial chaos in October, as a surge in demand for the peso jeopardized his prospects in the midterm elections and potentially his broader economic agenda.
The notion that the US Treasury could serve as the lender of last resort for Argentina, particularly in light of the recent US$4.2 billion payment to private bondholders, is decidedly unconventional. Economy Minister Luis Caputo required a repo loan from banks to secure the necessary funds, yet the market was aware – with a significant level of confidence – that, should circumstances demand, Trump would inject capital into Buenos Aires. The reality is that the region harbors apprehensions regarding Trump, following his unparalleled assault on Caracas. Milei, however, is reaping the benefits of a significant political triumph. Trump continues to exhibit a high degree of unpredictability, a characteristic that extends to his political relationships. The case of Venezuelan opposition leader María Corina Machado, who appeared poised to assume leadership following the January 3 strikes, serves as a pertinent example of this volatility.
Even if the short term proves advantageous for Milei and he secures Trump’s backing throughout his term, enhancing his prospects for re-election in 2027, the president appears to have underestimated the structural implications of the Venezuela situation on Argentina, particularly concerning the nation’s pivotal economic sector: energy. The Vaca Muerta shale formation is achieving unprecedented production levels; however, a significant advancement is necessary within the next two to five years with the finalization of the Vaca Muerta Oil Sur–Sur oil pipeline. This development has the potential to elevate production to approximately 1.5 million bpd and exports to exceed one million, alongside the Southern Energy LNG project anticipated later in the decade. YPF Chairman Horacio Marín asserts that oil exports will generate US$20 billion annually for the country by the end of the decade, which is noteworthy as it exceeds all scheduled debt payments for the country in 2026. A resurgence in Venezuela, particularly one that involves significant investments in infrastructure reconstruction, would pose a direct challenge to Vaca Muerta. This development has enhanced production efficiency but still requires cost optimization, even if Milei successfully addresses the nation’s macroeconomic issues. This would render Argentina a comparatively less appealing option for investment. One of the significant vulnerabilities of the Milei model to date has been foreign direct investment, notwithstanding the advantages provided by his renowned RIGI investor incentive scheme. In 2025, foreign direct investment recorded its first negative annual outcome in more than two decades.
This phenomenon can be attributed to domestic firms spearheading initiatives while multinational corporations opt for more appealing locales, such as Guyana, which is adjacent to Venezuela. The actions taken by the US have further exacerbated divisions in a region that was already fragmented. Milei and Brazil’s Luiz Inácio Lula da Silva are, as expected, positioned at opposing ends of the spectrum regarding support for and condemnation of the attack. The unpredictability lies in the fact that the two leaders have consistently chosen to emphasize their ideological and worldview differences rather than focusing on their countries’ significant common agendas. One of them also impacts Vaca Muerta: Brazil represents a significant market for Argentine gas; however, insufficient cooperation hinders or postpones advancement. The forthcoming indicator will be the presidential election in Brazil scheduled for October 2026. Milei is expected to campaign against Lula, mirroring the leftist’s approach towards the libertarian in 2023. The re-election of the Brazilian leader would likely impede further dialogue and action. Milei’s current considerations do not encompass these factors, as they are driven by his ideological preferences and an ambition to position himself as Trump’s foremost ally in the region, prioritizing immediate gains. Currently, he is performing adequately: positioned favorably within the power dynamics, as the region seems to be shifting back towards conservative ideologies. The passage of time will ultimately reveal the narrative.