Why is Trump Giving Billions of Dollars to Argentina?
Just days after the Trump administration approved a multibillion-dollar financial lifeline for Argentina as it faces a major economic crisis, Trump hosted Argentine President Javier Milei at the White House, on October 14.
Milei, also known as “El Loco” (the madman) to his critics, holds ideologies that have drawn many comparisons to Trump. The two leaders' closeness became apparent when Milei was one of the very few world leaders to attend Trump’s inauguration. Furthermore, Trump has even come out to name Milei as his “favorite president.”
Most notably, Milei’s political agenda includes severe deregulation and free-market reform support. These two factors have been major components in growing Argentina’s current economic crisis that risks full financial collapse. While the details of the crisis are more complex, the main issue relates to the Argentine peso rapidly becoming a volatile currency.
The financial bailout from Trump comes in the form of a $20 billion currency swap deal with Argentina’s central bank, along with an additional $20 billion loan through private banks and sovereign wealth funds. Though like most deals with Trump, the money is not without a stipulation. In order to keep Trump’s support and receive the money, Milei needed to be elected as president in the recent election.
“If he does win, we’re going to be very helpful. If he doesn’t win, we’re not going to waste our time,” Trump said at a White House lunch where both Milei and Cabinet members were present.
The election on October 26 brought victory for Milei which means the bailout will be set in motion.
The Trump administration has argued their reasoning for getting involved was purely economical, stating that Argentina’s economic crisis could spill over into surrounding countries in the region.
During a conversation about the entire situation on PBS, Monic de Bolle from Peterson Institute for International Economics debunked this explanation.
When asked if there is a possibility of Argentina’s failing economy affecting the countries around it, Bello said, “Argentina is not a country that poses any risks to either its neighbors, its surrounding - the surrounding countries, or to the United States, or to the global economy. Argentina is not a systematic country in that sense.”
Since the bailout isn’t as urgent as it appears, the aid offer comes at a seemingly awkward time that departs from traditional financial assistance the U.S. has been known to give in the past. Many critics have called it out as being more politically motivated rather than in the interest of economics or Americans.
Milei is seen as a political ally to the Trump administration and by offering financial help to Argentina if Milei wins, they can keep that ally in office. Keeping him in office also helps with the geopolitical reasoning behind the Trump administration’s offer.
The aid is a strategic move in order to keep Argentina open to allowing U.S. development of rare earths and uranium resources. China is currently very involved in Argentina because of these resources and Milei made the promise to get “China out of Argentina” if the deal with the U.S. were to follow through. This would allow the U.S. to have access to those resources instead of China. The assistance could additionally be a way of protecting investors in the midst of the U.S. government shutdown.
The U.S. involvement with Argentina has also caught negative attention of U.S. farmers. China has been one of the U.S.’ largest buyers when it comes to soybeans, but in response to Trump’s recent trade war they stopped purchasing from the U.S. and switched suppliers to Brazil and Argentina.
What Does Loaning Argentina Money Mean for the US?
Looking at the history of those who have loaned money to Argentina during an economic crisis, it doesn’t look good for the U.S. Argentina has a concerning track record of not being able to pay back those who give them loans.
It is likely that one of two things will end up happening, either the U.S. will have to commit to loaning Argentina more and more money as they face further crisis down the line so that the U.S. is able to repay themselves and they are able to keep Argentina afloat, or the U.S. will at some point have to back out of loaning them money, which will result in Argentina being sent into crisis once again, though this time the blame for the crisis will fall onto the U.S.
