US Treasury's High-Stakes Gamble on Argentina: What's at Stake?

Sat Nov 01 2025 01:11:46 GMT+0200 (Eastern European Standard Time)

The US intervenes in Argentina's economy amidst soaring instability, backing President Javier Milei's administration ahead of midterm elections. With a bailout and a $20 billion currency swap, the question remains: Is this a wise investment or a risky endeavor?

US Treasury Secretary Scott Bessent is leading a controversial intervention in Argentina's economy to stabilize the peso amidst fears of a political collapse. With the US establishing a $20 billion currency swap line and purchasing pesos, reactions are mixed on the potential for success. While President Milei's party has gained ground in elections, the long-term financial viability of this support is in question as the peso continues to face pressure. Analysts caution that the underlying economic realities may necessitate policy changes, potentially leading to further currency depreciation.

US Treasury Secretary Scott Bessent has been the point-person entrusted with selling financial markets on some of President Donald Trump's riskiest economic gambles: sweeping global tariffs, trade talks with China and preparations to install a new leader at the US central bank.

But Bessent's trickiest task may just be the White House bet on Argentina.

The US stepped onto the scene in mid-September, responding to a plunge in the peso - the Argentine currency - which officials feared could imperil Trump ally President Javier Milei and his party in looming midterm elections.

Bessent said the US would do whatever was needed to stabilise the situation, calling the country a key ally in the region.

In political terms, the US intervention - which included purchases of pesos and the establishment of a $20bn (£15bn) currency swap line that gives the Argentine central bank access to dollars - was a success for Milei. His party not only fended off losses in the midterm elections but made inroads, strengthening his position.

However, whether the US intervention will be a success financially is another question. The peso has fallen roughly 30% this year, including roughly 4% over the last month. This trend suggests ongoing risk; one possible scenario could leave the US holding pesos worth significantly less than their initial value.

The intervention in Argentina was a highly unusual move - especially from a White House known for its 'America First' approach. Milei has endeared himself to conservatives in the US with his embrace of free-market reforms and radical spending cuts. He has met frequently with Trump, who has called him his 'favourite president'.

However, critics argue that direct purchases of a struggling emerging market currency are unprecedented and may not align with historical US financial practices. The added risk lies in Argentina's troubled history of currency devaluation and debt defaults, the most recent occurring in 2020.

Despite being optimistic regarding the intervention's potential outcomes, Bessent faces significant challenges in ensuring that US support does not escalate into a bailout scenario. Analysts have estimated the US has purchased as much as $2bn worth of pesos so far, leading to scrutiny over the ambitious nature of this undertaking amidst ongoing economic challenges.

The peso plummeted ahead of the midterms as businesses and households sought to protect themselves from prior economic missteps. While current trends indicate a slight recovery in confidence following the elections, long-term predictions remain uncertain, as the peso's value may still fall further without policy changes to address its challenges.