The U.S. Treasury has announced that it is providing Argentina with a $20 billion currency swap, essentially an emergency credit line that constitutes the first large-scale rescue financed directly by the United States since the Bill Clinton administration provided Mexico with a $20 billion loan in 1995. Lending through the International Monetary Fund (IMF) has been much more common, as it poses far fewer risks to the United States. This unusual credit line—and even more unusual decision to use U.S. foreign exchange reserves to buy the Argentine peso last week—seeks to support the battered currency of South America’s third-largest economy, officials with President Donald Trump’s administration said. There is concern, however, that Argentina lacks a clear path to repaying both the United States and the already over-exposed IMF. Critics argue U.S. taxpayer dollars are being put at risk to provide Javier Milei, Argentina’s unorthodox and fiscally conservative president, a political lifeline weeks ahead of legislative elections on October 26. Brad Setser, a senior fellow at CFR with expertise in global trade and capital flows, explains the rationale behind the Treasury’s actions—and the risks it poses—just ahead of Milei’s visit on October 14.
Will Trump’s $20 Billion Backing Help Milei Change Argentina’s Fortunes? (Brad W. Setser – Council on Foreign Relations)
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