On September 23, 2025, President Donald Trump expressed his commitment to supporting Javier Milei, Argentina’s president, just one day after the U.S. government announced it was considering a bailout for the struggling Latin American nation.
This dialogue unfolded on the sidelines of the United Nations General Assembly in New York, following a concerning sell-off of the Argentine peso and a significant decline in the country’s stock and bond markets.
The U.S. Treasury Secretary, Scott Bessent, indicated that he was prepared to extend financial assistance to Argentina, potentially up to $20 billion through currency swaps and bond purchases.
Milei’s decision to seek help from Washington emerged from a dire economic situation. Recently, the Argentine central bank expended over $1 billion from its reserves within three days to stabilize the peso’s value, attempting to stave off further depreciation.
Instead of reaching out to Trump, Milei had other options, such as letting the currency adjust to its market-determined value or continuing to utilize the funds borrowed from the International Monetary Fund (IMF) to support the peso.
However, Milei decided to ask for U.S. assistance, built on the rapport he has established with Trump since his election.
The Argentine government is acutely aware that a sharp depreciation could reignite inflationary expectations. Additionally, authorities want to conserve IMF resources to manage nearly $20 billion in debt obligations due over the next 15 months.
Further complicating matters, raising interest rates or cutting government expenditures could exacerbate the stagnation or recession already seen in the economy.
Argentina’s economic troubles can be traced back to the loose monetary and fiscal policies of Milei’s predecessor, who maintained low-interest rates and high spending levels that resulted in rampant inflation and eroded confidence among both domestic and foreign investors.
While Milei has taken steps to reverse these damaging policies, achieving a balanced budget and reducing inflation significantly throughout 2024, his popularity and perceived management capabilities have dwindled in recent months.
Recent events, including job losses, rising unemployment, and accusations of corruption involving Milei’s family, have contributed to this decline. In addition, Milei’s party performed unexpectedly poorly in recent provincial elections.
With important midterm congressional elections forthcoming on October 26, Milei is in urgent need of financial and political backing from the Trump administration to stabilize local financial conditions and convey a sense of order.
The U.S. has previously shown strong support for Argentina through its significant positions in international financial institutions like the IMF, World Bank, and Inter-American Development Bank. Earlier in the year, the U.S. assisted Argentina in securing commitments for new loans worth tens of billions.
What distinguishes the current situation is the potential for direct lending from the U.S. Treasury to Argentina, a significant shift from past practices.
Treasury Secretary Scott Bessent’s comments suggest that negotiations are underway for a $20 billion currency swap line, which would involve the Treasury temporarily purchasing Argentine pesos in exchange for U.S. dollars. Additionally, it is anticipated that this agreement could include the purchase of Argentine government bonds, likely denominated in dollars.
The positive immediate market response from local and foreign investors following Bessent’s announcement indicates a tentative recovery, as previously beleaguered stocks and bonds experienced a resurgence, and the Argentine peso began to appreciate.
If this market confidence is sustained, the Treasury might not need to allocate excessive funds to bolster support for Milei and Argentina, at least until the impending midterm elections.
Should Milei’s party perform well in the elections, gaining crucial seats in the House and Senate, it could lead to increased political backing in the national legislature, making what would be a relatively minor investment from the U.S. potentially worthwhile for both the Trump and Milei administrations.
Typically, the U.S. government refrains from directly involving itself in foreign bailouts unless the country in question has systemic significance — that is, when its economic difficulties could have repercussions for its neighbors or the United States itself.
For example, during crises in the 1990s involving Mexico, East Asia, and Russia, the U.S. Treasury provided direct support, and Argentina benefited during its own crisis in 1995.
In 2008, amid the global financial crisis, the Federal Reserve facilitated currency swaps with a number of countries, predominantly in Europe but also with other nations like Brazil, Canada, and Mexico.
Most U.S. support historically acts as “bridge lending,” with the Treasury and Fed able to deploy funds quickly, while other financial entities take longer to secure and disburse funding.
In the case of Argentina, Bessent implied its systemic importance, even though its economic struggles have not yet affected other nations.
However, the mechanisms by which Argentina would repay the U.S. Treasury remain unclear, particularly as the pipeline for disbursements from international organizations is limited at this stage.
Previous instances have seen the U.S. Treasury require repayment guarantees from borrowing countries during similar crises. Given Trump’s transactional approach, certain conditions could be expected from Argentina in exchange for the bailout, especially considering the nation’s wealth in lithium, rare earths, and shale oil resources.
The Exchange Stabilization Fund (ESF) plays a pivotal role in this equation as the Treasury’s designated crisis fund.
Established in the 1930s, the ESF initially functioned to fund Treasury operations that influenced the price of the dollar, with its secondary purpose being the provision of short-term government-to-government loans, primarily to Latin American nations.
However, since the mid-1990s, its primary function has shifted predominantly to providing emergency loans, reflecting the changing dynamics of international finance and crisis response.
As Milei navigates Argentina’s challenging economic landscape with the specter of U.S. assistance looming, the coming weeks are critical not just for his administration but for the broader implications of international support in times of economic distress.
image source from：theconversation
