Most Americans probably don’t wake up wondering about Argentina. But this week, the U.S. Treasury announced it’s negotiating a $20 billion swap line with Argentina’s central bank, backed by bond purchases and standby credit. In other words, the U.S. is bailing out Argentina’s currency crisis.
The question is: why?
The Story: Milei’s Gamble
Argentina’s President Javier Milei took office in December 2023, promising an economic revolution. As a self-described “anarcho-capitalist”, he has pursued a “shock therapy” approach with drastic deregulation and spending cuts.”
His policies:
Eliminating the budget deficit
Firing nearly 50,000 public workers
Deregulating large parts of the economy
The results so far? Inflation, which had once reached nearly 300%, has slowed, but reserves are depleted, and investor confidence remains shaky. After Milei’s party stumbled in recent provincial elections, markets worried he wouldn’t have the mandate to keep reforms alive.
That’s when Washington chose to step in, or had to, depending on who you ask.
The Rescue Package
Treasury Secretary Scott Bessent outlined three tools to stabilize Argentina:
Swap line – $20B in U.S. dollars for Argentine pesos, giving Milei hard currency to defend his reforms.
Bond purchases – buying Argentina’s dollar-denominated debt to steady markets.
Standby credit – using the U.S. Exchange Stabilization Fund, normally deployed in emergencies.
The U.S. intervention puts markets at ease and skirts concerns of default. Think of it as America lending Argentina a financial umbrella while the storm passes.
Why does the U.S. Care?
On paper, Argentina isn’t “systemically important” (its economy is the size of Michigan’s). But politically, the story changes:
Trump and Milei: Trump views Milei as a kindred spirit, sharing anti-spending, anti-bureaucracy, and pro-market views. Supporting him validates Trump’s vision abroad.
Election calendar: Treasury admits this bailout is a “bridge to the election,” aimed at helping Milei survive the October midterms.
U.S. business interest: American firms are eyeing Argentina if Milei can hold power.
Why It’s Controversial
Not everyone is cheering.
Farmers’ anger: As the U.S. steps in, Argentina cuts its export tax on soybeans, undercutting American farmers in the Chinese market. “Our government gives them money while they steal our market,” one Kentucky farmer complained. Farmers are struggling to offload this year’s soybean production as China avoids U.S markets due to Trump’s tariff policy.
America First contradiction: Trump slashed foreign aid and lectured allies on paying more. Raising the question, why is Argentina different?
Historical note: Argentina has defaulted on its debt multiple times. Skeptics ask: What makes this time different?
The Bottom Line
This bailout isn’t really about Argentina’s peso. It’s about the politics of economic ideology. Trump wants a Milei victory to prove that slashing government can spark growth, and to showcase his model abroad. The American taxpayer is stepping in and is now invested in the Argentinian experiment.
But there’s a trade-off: helping a friend overseas may mean alienating loyal supporters at home.
Reader Question: What do you think: Is this bailout a smart geopolitical strategy or an “America First” contradiction?
Hard to view this as a bailout of a fellow strongman
There are similarities between Milei and Trump, but it seems to me that the differences are important and to a significant extent beneficial to Argentina in the long run, just as Mr Trump's policies are harmful to the USA in the long run. Milei is overturning a century of actual government overreach in the form of Peronism, which, famously among economists, turned Argentina from a first world country into a developing country over half a century; Mr Trump is disrupting a fundamentally sound system. I do not support Trump or most of his policies, but bailing out Milei is, IMHO, kind of an accidental win ;-). Here is an article that compares and contrasts them: https://www.palabranahj.org/archive/milei-and-trump-romance-or-self-interest#:~:text=%E2%80%9CLike%20it%20or%20not%2C%20he,emergence%20and%20election%20in%202023.%E2%80%9D