Swap Finalized

The US finalized an agreement to provide $20B in financial support to Argentina.

Context

Currency swaps allow two countries to exchange their currencies, with the receiving country able to use the funds while committing to repay them with interest. Argentina’s economy has been in crisis for months, with the peso weakening and inflation rising despite initial improvements under President Javier Milei, who took office in December 2023. Milei had initially controlled inflation but spent nearly all of Argentina's Central Bank dollar reserves trying to prop up the peso. The country faces midterm elections on October 26, with the currency’s wild fluctuations disrupting Argentinians’ savings and spending plans.

Economic Agreement

Argentina’s central bank announced the agreement on Monday, with US Treasury Secretary Scott Bessent confirming it on Tuesday. The deal allows Argentina to access up to $20B through currency swap operations between the two countries’ central banks.

Bessent stated the agreement would help Argentina “embrace economic freedom” and serve as “a bridge to a better economic future for Argentina, not a bailout.” He added that “a strong, stable Argentina as a good neighbor is explicitly in the strategic interest of the United States.”

Political implications 

This week, Milei, once celebrated as a global advocate for budget-cutting libertarian politics, entered the midterm elections weakened by his failure to stabilize the peso despite aggressive intervention. 

The currency swap arrived just six days before the October 26 vote that will determine whether his party can grow its minority presence in Argentina’s legislature. A positive result would help Milei block efforts to repeal his policies, while a loss could undermine both his domestic agenda and the continued US support that Trump has explicitly tied to his political success.

Support and Criticism 

Supporters argued the agreement advances US strategic interests in Latin America and helps prevent another failed state in the region. The Trump Administration emphasized that the swap differs from traditional foreign aid because Argentina must repay the funds with interest, making it more similar to a loan than a bailout.

However, critics from both parties described the arrangement as a bailout for a Trump political ally that could benefit wealthy hedge funds while risking US taxpayer money. The Wall Street Journal reported that major US banks struggled to finalize a separate $20B private lending facility over concerns about collateral and whether the US would provide guarantees. The terms of the currency swap agreement were not immediately made public, leaving uncertainty about interest rates, repayment timelines, and other conditions.