The Trump administration has agreed to loan $20 billion to Argentina amid economic turmoil following provincial election losses for President Javier Milei's party. The aid aims to address a dollar shortage and stabilize markets ahead of upcoming congressional elections. Economist Monica de Bolle discussed the plan's potential benefits and risks on NPR.
Argentina's economy has been in crisis, with its currency plunging and stock prices plummeting after President Javier Milei's party suffered defeats in crucial provincial elections last month. These setbacks have threatened Milei's reforms, which seek to balance the budget and curb triple-digit inflation. Milei, an ideological ally of President Trump, has made progress in downsizing the government bureaucracy and reducing inflation substantially, while turning around a high fiscal deficit.
Eight months ago, Milei symbolized his austerity measures by waving a chainsaw at a U.S. conservative conference. However, a corruption scandal involving his sister—a key government figure—combined with the election losses in Buenos Aires, triggered dollar outflows and market instability. Argentina's unique dual-currency system, using both the peso and U.S. dollars, exacerbates these issues, leading to chronic dollar shortages.
This week, U.S. Treasury Secretary Scott Bessent formalized the $20 billion loan agreement. In a statement, he affirmed that the United States is "prepared, immediately, to take whatever exceptional measures are warranted to provide stability." Economist Monica de Bolle of the Peterson Institute for International Economics explained that the aid would temporarily ease dollar shortages, steady the exchange rate, and prevent inflation spikes. Yet, she cautioned it offers no long-term fix for the dual-currency regime, predicting future shortages.
The lifeline is timed to calm markets before Argentina's congressional elections on October 26, potentially boosting Milei's chances for greater legislative support to advance reforms. De Bolle noted the U.S. faces significant risks given Argentina's history of defaults, with no clear economic rationale for the aid. Instead, she suggested a geopolitical motive: countering China's growing influence in Argentina and the region, drawing the country into the U.S. sphere.