Bessent’s bailout: $20 billion to keep Trump’s buddy afloat

Trump friendly Argentine President gets a bailout while the peso sinks and voters head to the polls.

Today Reuters dropped a bombshell that nobody is paying attention to: U.S. Treasury Secretary Scott Bessent is in talks with Argentina to arrange a $20 billion swap line — basically exchanging U.S. dollars for Argentine pesos — ostensibly to stabilize their nosediving finances. But wait — that’s not the whole story. According to the same reporting, Bessent also floated purchasing Argentina’s U.S. dollar-denominated bonds and using the U.S. Treasury’s Exchange Stabilization Fund (ESF) to provide standby credit. Meanwhile, he’s pressed Argentina to eliminate a tax exemption favoring commodity exporters converting foreign currency.

Full disclosure, I have no idea what the purpose of the elimination of the tax exemption is for.

Irrespective, let’s call this what it is: a backdoor bailout wrapped in diplomatic platitudes. And yes, there seems to be much more to it than stabilizing a struggling South American economy. Neither Donald nor Bessent has bothered to offer anything resembling a geopolitical, domestic, or even vaguely strategic reason for doing this.

The “Friends in High Places” Theory

Argentina’s president, Javier Milei, is a good buddy of our village idiot — or at least, that’s the story being sold. Bessent went out of his way to signal that investors shouldn’t panic, and explicitly called out that Argentina’s market destabilization might be politically motivated, suggesting that Milei’s politcal enemies are at fault for near economic collapse. They are not. The Economist suggests that it was Milei’s obsessive efforts to contain inflation while ignoring consequences to the peso.

Milei publicly thanked both Trump and Bessent, for their “firm support and confidence in the Argentine people.” (Reuters). He added, “Together we will build a path to stability, prosperity, and freedom. MAGA.”

The inevitable questions begs itself: is the United States about to throw $20 billion at a country whose government is politically aligned with Trump — right before Argentina’s midterm elections on October 26? Milei himself is not on the ballot, but his minority party’s survival in Congress is potentially on the line.

Earlier this year, Milei’s party suffered a major beatdown in Buenos Aires’ local elections — a litmus test that his libertarian revolution may be losing steam. That loss apparently rattled markets and shook public confidence. So the timing of this U.S. offer is, to put it mildly, extremely convenient.

Can Argentina Even Pay Back What It Owes?

Possibly, probably not. Argentina’s debt load is already overwhelming. They owe $41.8 billion to the International Monetary Fund alone (AP). In fact, Argentina is among the IMF’s largest Latin American debtors.

Their peso is collapsing — markets have punished it severely over the past weeks. Investors have already started treating this swap talk as a kind of circuit breaker (Reuters). But a currency swap only works if the counterparty has a credible path to repay. Argentina, under Milei, has absolutely no margin for error, yet the current meltdown is attributed a litany of missteps, some of them hidden until recently.

Let me emphasize: swapping $20 billion into pesos doesn’t magically generate real revenue or export dollars. If Argentina’s economy can’t produce enough foreign exchange, that swap becomes a ticking time bomb. And if they default again — which is quite plausible — the U.S. may be stuck holding worthless paper.

Remember, the US economy is also tanking thanks to Donald’s tariff debacle. Thirty-seven trillion dollars in debt, we are literally borrowing money to lend money to Argentina.