It has been a busy week for U.S. policy towards Argentina.
Treasury Secretary Scott Bessent announced Wednesday that the U.S. would be doubling the assistance it is marshaling for Argentina from $20 billion to $40 billion. The increase comes ahead of legislative elections on October 26 that will elect half the lower house and one-third of the upper house, and represents an increasingly strenuous effort in Washington to bolster Argentine President Javier Milei financially and politically.
Ironically, one reason for an even bigger bailout package might have been a comment by the White House itself. Heading into a meeting with President Donald Trump on Tuesday, an optimistic Milei is reported to have said “we will have dollars pouring out of our ears.” During the meeting, Trump burst that bubble, remarking that “if he loses, we’re not going to be generous with Argentina,” a remark that immediately hit markets.
A day later, Treasury Secretary Scott Bessent tried to remedy the situation, saying that beyond the original amount the U.S. had committed to lend Argentina, the Trump administration was coordinating the delivery of another $20 billion for the country from banks and sovereign wealth funds. Bessent invoked an “economic Monroe Doctrine” and said the outcome of upcoming elections in Chile and Colombia depended on the fate of Milei’s presidency. He thus grounded the need for assistance in the possibility that electorates in those countries might follow the cue from Argentine voters despite their very different circumstances (as detailed below).
Milei’s first term ends formally in 2027, but he is under severe pressure from domestic politicians and international investors. Argentina was a darling of the markets following Milei’s election in 2023 as he pushed through radical reductions in the size of government by decree, arguing that it was the only way to deliver the country from a long history of high inflation and serial defaults.
However, in early September, his party received a drubbing from voters tired of austerity in the province of Buenos Aires, home to roughly 40% of the population. This hit Argentine bonds and led to a sharp depreciation of the Argentine peso. Local and foreign investors fled, worried that the results in the provincial election were a harbinger of worse to come in the congressional polls.
By the end of September, the U.S. had stepped in, offering Milei’s government a level of support practically unprecedented in recent history (and yet apparently still not enough). The Treasury offered an arrangement where Argentina could borrow dollars against pesos, hinted that it might buy the country’s debt, and later even purchased the country’s currency in foreign exchange markets.
While Mexico did receive ample support from the U.S. in 1995, when that country suffered its own devaluation shock, the U.S. Treasury did not actually buy Mexican pesos on that occasion, unlike its actions during the current intervention in Argentine markets. And the U.S. rescue efforts for Mexico were for a country that was a member of the North American Free Trade Agreement, already the U.S.’s third-largest trading partner (it is now the biggest), and supported a new president about to enter a six-year term after an election.
Hellbound and Down 
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