U.S. President Donald Trump’s vision of making America great again has taken an intriguing turn, expanding geographically with a proposed multibillion-dollar bailout for an ideological ally located 5,000 miles away. The Trump administration, led by Treasury Secretary Scott Bessent, is backing Argentina’s beleaguered president, libertarian Javier Milei, whose aggressive economic reforms have had mixed results. As Milei approaches a crucial congressional election later this month, discussions are underway for the U.S. to potentially provide up to $20 billion in emergency support to stabilize the Argentine peso, purchase Argentine bonds, and maintain Milei’s hold on power.
The rationale behind this significant financial commitment raises eyebrows. Initially, Bessent claimed that Argentina’s fiscal and financial difficulties were of “systemic interest” to the United States. However, considering the minimal trade and financial ties between the two countries, this assertion seems questionable. Experts suggest that unless the U.S. actually lends Argentina $20 billion, the notion of systemic interest is hard to justify. Brad Setser, a senior fellow for international economics at the Council on Foreign Relations and a former U.S. Treasury official, expressed skepticism, stating, “I don’t think it is of systemic interest. Presumably, he meant Argentina is a model they believe in.”
Argentina’s current economic troubles are a familiar tale, though not entirely the fault of Milei. When he took office two years ago, he pledged to rectify the damage inflicted by years of Peronist policies. In some respects, he succeeded, managing to reduce inflation from nearly hyperinflationary levels to a mere 20 percent—an accomplishment that, while still high, is perceived as a victory in Argentine terms. However, Milei’s aggressive economic reform strategy, often referred to as “shock therapy,” has also led to significant pain. Unemployment is rising as the stronger peso, which was intended to combat inflation, has diminished the competitiveness of Argentina’s economy. Recently, the Argentine central bank has been forced to spend scarce resources to bolster the peso amidst growing investor anxiety about the country’s political future and economic decisions. This culminated in a significant electoral defeat for Milei’s party in Buenos Aires, suggesting that disillusioned voters may be leaning towards a return to more traditional economic policies.
Nobel laureate economist Paul Krugman has pointed out that Argentina is facing a classic currency crisis, characterized by capital flight as investors fear a collapse of the peso. He noted, “Argentina is experiencing a classic currency crisis, with capital fleeing the country because investors fear a peso collapse, and this capital flight is pushing the peso ever closer to collapse.”
While the U.S. bailout for Argentina draws parallels to the United States’ intervention during Mexico’s 1995 “tequilazo” crisis, the rationale for supporting Argentina is less clear. Mexico was a neighboring country and a recent signatory of the North American Free Trade Agreement, making its economic stability a matter of more immediate concern for the United States. In contrast, making a case for Argentina’s systemic importance is more challenging unless it is viewed as a purely political maneuver. Milei has been a favorite of Trump even before his election, and his libertarian approach to economic recovery resonates with the Trump administration’s ideology.
Bessent himself highlighted this connection when he presented Milei with an Atlantic Council Global Citizen Award while unveiling the U.S. government-backed bailout: “One man recognized government wasn’t the solution—it was the problem. One man had the courage to stand up for Argentina by standing against the establishment. … Tonight, we recognize President Javier Milei for his tireless efforts to Make Argentina Great Again.”
The contrast in U.S. engagement with Argentina compared to Brazil, which has a left-leaning president and a judiciary that prosecutes coup plotters, is telling. The Trump administration has responded to Brazil’s political stance with punitive tariffs and sanctions, showcasing a clear preference for right-wing leadership in the region.
Yet, there is a paradox in Milei’s administration seeking U.S. assistance. Argentina is the largest borrower from the International Monetary Fund (IMF) and recently received another $20 billion from the organization. This raises critical questions about the feasibility of repaying any U.S. funds. Setser remarked, “If Milei wants to be a libertarian, he needs to rely on his own resources, and yet the peso is only sustainable on borrowed money.”
Further complicating matters is the irony of U.S. support coming at a time when Milei’s government has suspended export taxes on agricultural goods to boost hard currency revenues. While this decision is intended to stabilize the economy, it has allowed China to capitalize on Argentina’s agricultural exports, leaving U.S. farmers at a disadvantage after suffering losses from previous trade wars initiated by Trump.
Despite the U.S. promise of financial support calming markets temporarily, analysts are cautioning that even robust assistance may not be enough to stabilize the peso. Oxford Economics has warned that “stabilization could prove elusive if markets anticipate a government defeat in the 2027 presidential election.” Unlike previous U.S. financial interventions that acted as a bridge loan, this situation might be more akin to a bridge leading nowhere.
As Setser concluded, “I doubt that this will work even to get Milei to the election without a forced devaluation. If they use the money, how do you get the money back?” The future of both Argentina and the implications of U.S. intervention remain uncertain, leaving many to ponder the true motivations behind this multibillion-dollar bailout.
