Bailouts: Why Trump is rescuing Argentina

Donald Trump and Javier Milei — Trading good dollars for bad pesos makes as much sense as “swapping Mar-a-Lago for a shack in the middle of the Pampas.”

(Image credit: Alex Wong / Getty Images)

“The Trump administration really hates giving foreign aid that serves any kind of humanitarian purpose,” said Paul Krugman in his Substack newsletter. But giving aid to MAGA’s foreign friends is a different matter entirely. The White House last week signed off on a $20 billion lifeline for Argentina, claiming the deal—in which stable U.S. dollars will be exchanged for volatile pesos—was needed to shore up a cash-strapped U.S. ally. A “more cynical” read is that this is about ideology, with Trump wanting to bail out Argentina’s like-minded president, Javier Milei, whose failing “libertarian econo-derp policies” could doom his party in this month’s mid-term elections. President Trump explicitly tied the deal to his pal’s electoral fortunes in a White House meeting with Milei, saying, “If he doesn’t win, we’re gone.” An even more cynical read is that this is a rescue of the administration’s “hedge fund buddies,” who placed big investment bets on the success of Milei and his DOGE-like spending cuts. The swap will give them time to “sell their Argentine assets at inflated prices” and rush for the exits.

Milei deserves U.S. help, said The Wall Street Journal in an editorial. Since taking over from big-spending Peronists in late 2023, his free market reforms have cut inflation from about 210% to 33%. If he can make the project a permanent success, it will serve as a “rebuke to the tide of left-wing populism that has caused trouble from Brazil through Colombia, Venezuela, and Central America.” But that won’t happen unless Argentina abandons its perpetually tumbling currency and adopts the dollar; Ecuador did just that in 2000 and has since kept inflation in check. Without dollarization, this deal is nothing more than a “loan to one of the world’s most notorious serial defaulters,” said Steve H. Hanke in Fortune. Trading good dollars for bad pesos makes as much sense as “swapping Mar-a-Lago for a shack in the middle of the Pampas.”

There are domestic risks for Trump as well, said Farrah Tomazin in The Daily Beast. It’s not a good look to be sending dollars abroad “as thousands of federal workers face layoffs” and many more go without paychecks during the government shutdown. And the deal isn’t playing well with America’s struggling soybean farmers, who have seen exports to China drop from $12.6 billion a year to zero amid Trump’s tariff war. As they wait for their own bailout, those farmers have watched Argentine competitors sell record amounts of soybeans to China. “MAGA,” said Illinois farmer John Bartam, “now means Make Argentina Great Again.”