“America First,” President Donald Trump proclaimed in two inaugural addresses: 2016 and, again, in 2025—unless you’re Argentina.
What Happened?
The U.S. Treasury, under Secretary Scott Bessent, finalized a $20 billion financial lifeline for Argentina in the form of a currency swap, allowing Argentina's central bank to exchange pesos for U.S. dollars.
The loan earned Argentina’s President Javier Milei a visit to the White House on Oct. 14, where he met with Trump, Bessent and top U.S. officials.
The move also came amid a government shutdown, drawing questions from lawmakers, especially Sen. Elizabeth Warren, about the prioritization of foreign aid during fiscal constraints. After all, it was Trump who ordered the formation of Elon Musk's Department of Government Efficiency (DOGE) to crack down on federal spending, both in the U.S. and abroad.
So much for that (spending has actually increased).
And given the lack of a strong financial relationship between the U.S. and Argentina, observers scratched their heads. Why does Milei need such a large loan when the U.S.’s own growing debt load recently topped $38 trillion?
Why Does It Matter?
This $20 billion infusion is seen as an emergency lifeline to stabilize Argentina’s financial markets amidst a major economic crisis, including a sinking peso and escalating capital flight.
At the time of reporting, the Treasury Department had not released details about the terms of the swap, and the dollars involved are U.S. taxpayer funds: just tweets.
Yet, the gesture raises eyebrows given the Trump administration’s prior stance on reducing foreign spending, even bypassing the legislative branch to cut pre-approved funds.
Who's Involved?
Key figures in this story include:
- Milei, Argentina’s president, a libertarian and Trump ally, whose economic reforms have seen mixed results.
- Bessent, U.S. Treasury Secretary, is responsible for the deal and its implications on global financial stability.
- Robert Citrone, a billionaire hedge fund manager and close friend of Bessent, is heavily invested in Argentina's financial recovery and stands to benefit from the bailout, according to the WSJ.
- Billionaire Stanley Druckenmiller, also pals with Bessent, invested in Argentina after Milei’s election victory. Bessent denies that cronyism played a role in the decision to prop up Argentina.
- Fidelity, BlackRock, PIMCO, major U.S. investment firms with significant exposure to Argentina, adding further American interest in stabilizing the country's economy.
- Trump, who OK’d the Argentina rescue that aided wealthy investors at a time when federal workers aren't getting paid due to the longest government shutdown in history.
What's The Backstory?
The U.S. has historically used tools like currency swaps to stabilize global markets.
During the 2008 financial crisis, the U.S. Federal Reserve set up swap lines with major central banks to provide liquidity in dollars, preventing a global liquidity squeeze.
In 2011, amid the European debt crisis, the Fed reestablished swaps to ease pressure on European banks. Similarly, in 2020, during the COVID-19 pandemic, the Fed expanded swap lines with several countries, ensuring dollar access to stabilize markets and support economic recovery.
These measures helped safeguard global financial stability.
This situation is different due to the political dynamics, complicated by Milei, who implemented controversial economic policies that have destabilized Argentina's economy.
Wealthy investors like Citrone and Druckenmiller like Argentina’s high-risk, high-reward opportunities. The current economic instability can lead to undervalued assets, which investors look to buy up in anticipation of a rebound. The country also issues high-yield debt to attract investors, despite the risk of default. For these investors, Argentina offers an opportunity to diversify portfolios, capitalize on distressed assets, and profit from Milei’s reforms.
What's The Reaction?
U.S. soybean farmers feel slighted. China used to be America’s leading soybean customer. Not anymore. Argentina now ships its soybeans to China ever since the trade war with Trump escalated.
Also, legislation introduced to solve the shutdown and payments for federal workers has stalled.
Still, both the S&P 500, as tracked by the Vanguard S&P 500 ETF (NYSE:VOO), and the Nasdaq 100, tracked by the Invesco QQQ Trust (NASDAQ:QQQ), are just shy of reaching fresh highs.
What Happens Next?
Whether this financial intervention will be viewed as a one-off or a sign of ongoing U.S. commitment to Argentina's economic recovery remains to be seen.
It’s also unclear whether Argentina’s financial struggles could affect other economies.
Officials also worry that Argentina, a key South American economy, may deepen its ties with China. If the deal leads to long-term stabilization, it could become a model for future financial interventions.
However, if Argentina’s situation worsens, the political ramifications could be significant both domestically and internationally.
Argentina’s next legislative elections are scheduled for October 26.
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