Editors at National Review Online ponder President Donald Trump’s recent agreement with Argentina.
For a president who prides himself on putting America first to throw a massive lifeline to Argentina, a country led by Javier Milei, a fierce opponent of bailouts, is doubly jarring, but that is just what has happened.
The Treasury has finalized a $20 billion swap line with Argentina’s central bank. In practice this means lending Argentina up to 20 billion badly needed greenbacks (without, conveniently, any requirement for congressional approval: The same maneuver was adopted by the Clinton administration as part of the Mexican bailout in 1995). Any such loans are collateralized with Buenos Aires’s unloved pesos. The Treasury has also been buying them in the markets to help prop up the price. All this is intended to head off a broader panic — as it was, the sell-off was not confined to the currency — that might lead to default of Argentina’s dollar-denominated debt and, possibly, set off a panic beyond its borders. To reinforce these efforts, the Treasury wants to round up $20 billion in additional finance from the private sector, sovereign wealth funds, and the like.
Whether Milei could or should have headed all this off by replacing the peso with the dollar after his election is a separate debate, as is the question whether he should dollarize now. It is, however, undeniable that the underlying cause of this crisis is that, as part of his effort to crush inflation, Milei’s managed depreciation of the peso has been below the rate at which prices were increasing. This meant that Argentina’s currency has become increasingly and artificially overvalued, anathema surely to a president caricatured as one of those elusive market fundamentalists we hear so much about. …
… Extending money to Argentina is, as generations of infuriated creditors have discovered, extremely risky. But if Treasury Secretary Scott Bessent’s lifeline gives Milei enough breathing space, it should attract other cash, starting with that second $20 billion, giving a fresh tailwind to reforms that could transform Argentina into a prosperous, powerful American ally and a beacon in the region.
