Boquete no pau grande e grosso de macho safado | Why Is the U.S. Bailing Out Argentina?
Boquete no pau grande e grosso de macho safado - News •
In October 2025 the administration of U.S. Pres. Donald Trump announced the extension of a $40 billion bailout package to Argentina. The U.S. Treasury would provide a $20 billion currency swap to prop up Argentina’s ailing peso (a deal that was finalized on October 20), while an additional $20 billion would be financed by a mix of sovereign wealth funds and private banks. Trump made it clear, however, that continued financial support for Argentina was tied directly to the success of Pres. Javier Milei’s La Libertad Avanza (LLA) party in Argentina’s October 26 legislative elections. Trump stated plainly that “If [Milei] loses, we are not going to be generous with Argentina,” and that “we’re not going to waste our time” with Argentina if LLA isn’t victorious. This provided ample fuel for opposition Peronist politicians who characterized such comments as an extortionate expression of colonialist attitudes.
This wasn’t the first time that the United States has directly intervened in a Latin American economy. In 1995 Pres. Bill Clinton responded to the sharp devaluation of the Mexican peso (an event informally known as the “Tequila Crisis”) with a loan that helped stabilize the currency and halt capital flight. Clinton’s intervention, which was backed with additional funds pledged by the International Monetary Fund (IMF), the Bank for International Settlements, and the Bank of Canada, was an immediate success. Mexico’s economy quickly turned around and went on to experience sustained growth. The government of Ernesto Zedillo repaid the $12.5 billion borrowed from the United States—with interest—three years early, and the United States ultimately made $580 million on the deal.
Here are a few factors driving the current bailout talks:
Boquete no pau grande e grosso de macho safado - The roots of Argentina’s financial woes
In the early 20th century Argentina was one of the most prosperous countries in Latin America. Meat and grain were exported to expanding markets in Europe in exchange for fuel and manufactured products. The Great Depression considerably damaged the Argentine economy by reducing foreign trade. In response, successive governments from the 1930s to the ’70s pursued a strategy of import substitution designed to transform Argentina into a country self-sufficient in industry as well as agriculture. This was accomplished mainly by imposing high tariffs on imports and thereby sheltering Argentine textile, leather, and home-appliance manufacturers from foreign competition. The government’s encouragement of industrial growth diverted investment from agriculture, and agricultural production fell dramatically. Between 1930 and 1980 Argentina fell from being one of the wealthiest countries in the world to ranking among the less-developed nations.
Argentina under Milei: Inflation, austerity, and currency devaluation
Argentina has lived with ultra-high inflation—frequently bordering on hyperinflation—for decades. In 1989, for example, prices doubled every few days and the Argentine currency lost nearly all of its value. In the process, the country lost credibility with its lenders.
A similar pattern emerged again in the early 2020s, though at a slower pace. Between 2022 and late 2023, the peso weakened steadily against the U.S. dollar as inflation reached the triple digits, and foreign currency reserves shrank. By the time Javier Milei took office in December 2023, the pressure on the peso had already built to a breaking point. The currency traded at roughly 356 pesos to the dollar at the official rate—but more than double that in the parallel market, where Argentines paid a premium for dollars to protect their savings or buy imported goods.
Milei’s new administration responded with a sharp, one-time devaluation of about 50 percent—a move designed to narrow the gap between the official and parallel exchange rates and to reset the country’s economic course under a program of deep fiscal cuts and deregulation.
But Milei’s austerity plan turned out to be a classic case of what John Maynard Keynes called the Paradox of Thrift: On an individual basis, saving money and cutting costs can balance someone’s income and expenses, but it can be disastrous if it’s done on a macroeconomic basis. When government spending suddenly drops, there’s less money circulating through the economy—businesses see fewer customers, workers lose income, and the slowdown feeds on itself. In Argentina’s case the cuts helped reduce the deficit but also deepened a recession, leaving many Argentines worse off in the short term.
The U.S. swap line and lending facility, explained
In October 2025 Argentina struck a deal to unlock up to $20 billion in a currency swap with the U.S. Treasury Department. Under the arrangement, known as a swap line, Argentina’s central bank exchanged pesos for U.S. dollars—giving it a buffer—and agreed to return the dollars later (with interest). The country has also been working with the Trump administration on a separate lending facility—loans from banks and sovereign wealth funds—worth another $20 billion.
Together, the swap line and lending facility are intended to give Argentina some breathing room: dollars to shore up its capital reserves and plug budget holes, and time to stabilize its currency and rebuild trust among international investors and trading partners. But the assistance will not be a clean slate; markets will want to see the terms, who ultimately bears the risk of default, and whether reforms set in motion by the Milei administration actually hold.
China: The economic elephant in the room
The bailout came at a time when the United States was engaged in a trade war with China, a fact that complicated matters internationally for U.S. trading partners and domestically for Trump. China had deep ties with Venezuela, and Beijing was looking to expand its influence in Latin America. While Trump’s foreign policy outlook could be seen as broadly isolationist, it was coupled with a hegemonic vision of the United States rooted in the Monroe Doctrine. By providing an economic lifeline to Argentina, the United States sought to close one potential avenue for an increased Chinese presence in the region.
Beijing was not without its own resources, however. China has historically been the world’s largest purchaser of soybeans, as well as the top U.S. export destination for that crop. In May 2025 China responded to a new round of Trump tariffs by zeroing out imports of American soybeans and turning to new suppliers in Latin America: Brazil and, notably, Argentina. This triggered a vocal backlash from an American agriculture industry that had already seen its share of turmoil in the wake of Trump’s unpredictable trade policies. Critics observed that the Trump administration chose to spend tens of billions of dollars to boost the election chances of Milei, a personal friend of Trump, while American farmers continued to wait for a long-promised relief package from their own government.
What comes next for Argentina?
Loans to Argentina are likely to demand tighter terms and stronger collateral, given the country’s track record. Since joining the IMF in 1956, Argentina has entered into 23 IMF programs to stabilize its economy. Despite that level of intervention, the country has defaulted on its external debt nine times in its modern history—three times since 2001 alone. Its history of loan defaults and coordinated international bailouts may explain why lenders remain wary and why any new arrangement—swap, loan, or otherwise—is unlikely to succeed without lasting economic reform. However, Milei’s sinking approval ratings and his party’s poor showing in local elections seemed to hint that the Argentine public had lost its appetite for yet more austerity. Thus, it came as a surprise to even Milei’s most ardent supporters when La Libertad Avanza won a landslide victory in October 26, 2025, midterm legislative elections. Although the election was marked by low turnout, Milei’s party captured nearly 41 percent of the vote and dramatically expanded its presence in both houses of the Argentine legislature.