Sometimes even the Trump administration acts like a normal American government. The bailout of Argentina is one of those times.
The Trump administration is proposing to lend Argentina up to $20 billion to support its currency on financial markets. The plan is unpopular with Republicans and Democrats alike. Yet at a time when much of U.S. policy seems driven by a perverse hostility to the outside world, assistance to Argentina is a welcome exception that deserves support across the political spectrum.
Yes, the administration’s proposal completely contradicts Donald Trump’s rhetoric of “America First,” but this rhetoric is wrong and self-harming. Yes, the bailout is motivated by Trump’s capricious favoritism. But in this case, Trump has at least chosen an appropriate beneficiary.
Yes, at least one hedge-fund friend of Treasury Secretary Scott Bessent’s stands to benefit. But there are hedge funds on every side of every financial bet, and saying no to the deal will also enrich somebody.
The United States has a big interest in advancing free-market and democratic institutions in the Western hemisphere. We are now in a phase, however, where authoritarian nationalism is gaining ground, from Mexico on southward. At a time when much of Latin America is heading the wrong way, Argentina is progressing toward a more open economy.
Javier Milei came to power in December 2023 promising radical change. Decades of corrupt and authoritarian government interventions had twisted the Argentine economy into a dysfunctional mess. In the year that Milei was elected president, inflation surpassed 211 percent. Impoverished people lived in the streets outside empty dwellings that few could afford to rent. A libertarian economist with little political experience, Milei pledged to let loose a free-market transformation that would put Argentina on the path to monetary stability and sustainable growth.
Milei mostly kept his promise. But along the way, he took a gamble with his management of the exchange rate of Argentina’s troubled currency—not an absurd gamble, but a gamble all the same. That gamble has gone wrong, and this failure now jeopardizes the rest of Milei’s economic agenda. If Milei fails, his failure will discredit market-oriented reformers in every economically troubled country in the Americas and beyond. If Milei succeeds, he will revive economic and political liberalism in a hemisphere where those systems are now in retreat.
Let’s start with Milei’s accomplishments. They are enormous. Just before he entered office, the country’s inflation rate was rising in the double digits every month. Milei has lowered the inflation rate to 2 percent a month—still high, but an astonishing change in the right direction.
Before Milei’s presidency, Argentine real-estate markets were strangled by controls. Landlords would not rent because rents rapidly fell below market values; home-seekers could not buy because the mortgage market had ceased to exist. Now the housing market is reviving, and it’s even possible to get a mortgage in a country where inflation once eliminated all long-term lending.
How did Milei do it? Although he gained renown for being an outlandish showman, his economic ideas are free-market common sense. End rent controls to boost the housing supply. Cut government spending to shrink the budget deficits that drive inflation. Lower tariffs, export taxes, and other barriers to trade. Privatize state assets to make them more efficient and pay down government debt. Milei, a former television pundit with a big mouth and attention-getting hair, is often likened to Trump. Yet their philosophies of government could not be further apart. If anything, Trump’s statism, authoritarianism, and corruption are reminiscent of Juan Perón, Milei’s ideological nemesis.
Milei’s problem—and Argentina’s—is a risk he took along the way. Milei had campaigned on a promise to replace the Argentine peso with the U.S. dollar—a promise that appealed to Argentines desperate for monetary stability. The pre-Milei peso was hopelessly distorted by multiple exchange rates that perversely rewarded cronyism and corruption, as black marketeers and politically connected businesses could buy more American currency with their pesos than the average person could. But dollarization was not a realistic solution. Argentina had experimented with something like it, with catastrophic results.
Instead, Milei simplified the exchange-rate structure and started devaluing the peso toward market levels. He probably should have just abolished in one stroke Argentina’s retrograde system of capital controls and let the peso float free on global currency markets. But this had hazards, too. Fearful of an outright currency collapse, he tried to manage the devaluation by implementing it in fixed, preannounced stages: a onetime downward adjustment of 54 percent against the U.S. dollar followed by further devaluations of 2 percent a month. But Milei’s chosen plan failed to keep pace with market trends, which left the peso about 20 percent overvalued against the dollar by September 2025.
Every peso holder—not only speculators, but everyday Argentines—responded to this mismatch by trying to sell overvalued pesos and buy dollars at the artificially cheap price to which the government had unwittingly committed itself. These trades threatened to draw down all the dollar reserves held by the Argentine central bank.
Bessent’s proposed bailout is an agreement to lend Argentina enough U.S. dollars to give time for the peso to devalue to market levels. To make the bailout a success, Milei will have to do now what he arguably should have done at the start: eliminate the remainder of Argentina’s daunting mess of capital controls. A peso that can be freely traded at market prices will allow Argentina to return to world markets as a normal trading nation.
The Trump administration needs to do its part by dropping its demand that Argentina reinstate export taxes on farm products. Bessent added this crude giveaway to U.S. agricultural interests to mollify MAGA protectionists. But it’s not Argentina’s fault that Trump started trade wars against American farmers’ best customers. Letting Argentina export freely is the surest path to Argentine recovery—and repayment of its debts. The alternative is an Argentina with a state-managed economy that subsists by providing agricultural products to China via government-directed barter.
No American will lose a dollar of health-care coverage or any other federal benefit because of the bailout. The $20 billion is not being taken from any domestic U.S. constituency. The funds will come from a revolving line of credit that exists at the Federal Reserve specifically for the purposes of exchange-rate stabilization. This line of credit was created in 1934 and has often helped allies through difficulties. In the 1990s, this same emergency-support fund committed $12 billion to assist Mexico during a crisis. That money was repaid in full, with interest.
Still, this bailout does depend upon the full faith and credit of the United States. The taxpayer is on the hook if all goes wrong in Argentina. Given Milei’s record of courage and persistence to date, it seems plausible that he will execute the rest of his reform program and stabilize the Argentine peso. Already the announcement of help has largely calmed Argentine currency markets.
It’s only prudent to greet all Trump-administration transactions with mistrust. It’s only human to mock the glaring hypocrisy of people who suspend “America First” for their pals. But it’s the slogan that was wrong. The policy of helping friends through difficulties is right. Maybe Milei will fail in the end. But for now, he’s the best hope Argentina has had in a long time. He should also be the hope of everyone who believes in markets and democracy.
The bailout is a wise and generous risk. May it proceed and may it succeed.