When you default on your car loan, creditors seize your car. Argentina’s credit is so bad that it once had a military vessel seized by a foreign hedge fund.
Since 2000, the South American country has defaulted three times, developing a financial reputation so abysmal that few were surprised when a subsidiary of a U.S. hedge fund impounded the ARA Libertad during a stop in a Ghanian port in 2012 in an effort to compel back payments.
With Argentina staring down another full-blown financial crisis, President Donald Trump swooped in with $40 billion in U.S. assistance, helping flamboyant libertarian President Javier Milei’s party win midterm elections and continue his DOGE-style agenda of radical spending cuts to the Argentine government. It’s a short-term win for Trump, who previously threatened to pull the plug on the entire bailout if Milei lost. Trump was quick to claim credit for his ally’s unexpectedly strong showing a day later.
“He had a lot of help from us,” the president said on Monday. “We’re getting a real strong handle on South America.”
The quick fix doesn’t begin to address the serious, long-term problems of an underdeveloped economy.
But the quick financial fix doesn’t begin to address the serious, long-term problems of an underdeveloped economy stuck in an endless cycle of default. And the bailout means Trump has waded into a financial quagmire with little sign of an exit strategy beyond personal whim, ushering in a new era of freewheeling U.S. intervention in Latin America.
Argentina is famously in a category of its own among emerging countries. Once a wealthy nation on par with Britain or France in the early 20th century, it eventually fell victim to soaring inflation, currency crashes and bungled reforms. Buenos Aires most recently defaulted in May 2020 when it failed to make an interest payment on foreign debt during the pandemic.
Monica de Bolle, a former economist for the International Monetary Fund I spoke with, compared Argentina’s economy to a sphinx that routinely devours policymakers. No one has succeeded in cracking the riddle so far. Not Argentinian leaders, and certainly not the IMF.
The IMF has assembled 23 loan packages since the late 1950s. Those back-to-back loans haven’t put the country on a path to regain its privileged status as an advanced economy. Its latest $20 billion loan was issued in April, and Argentina still owes the IMF about $42 billion. Talk about a huge sum. The amount is quadruple of what war-torn Ukraine is on the hook for with the IMF.
During annual meetings of the IMF and World Bank earlier this month, I noticed IMF officials were careful not to step on Trump’s toes about a bailout that’s only grown since then. “We think the support from the U.S. Treasury is helping to stabilize markets and will complement the fund’s support program,” IMF West Hemisphere Director Nigel Chalk said at a press conference. He didn’t answer a flurry of questions from reporters pressing for specifics about Argentina’s future.
Milei succeeded in restoring budget surpluses and curbing inflation through his almost two-year austerity crusade. But the reforms came at sizable cost, with stalling growth and a cascade of job losses.
There is still a mighty challenge ahead: Taming an unruly currency that most analysts consider overvalued. The Argentinian peso is traded within a currency band helmed by its central bank, meaning the peso-dollar exchange rate is kept within a specific range. By comparison, the U.S. dollar floats freely in a sign of its strength among investors. Panicked traders went on a spree selling off the peso leading up to the election, fearing Milei was about to lose the ability to carry out his libertarian reforms. Argentina’s central bank then stepped in to defend a weakening peso by spending scarce dollar reserves, and the financial cavalry arrived from the north. Treasury Secretary Scott Bessent declared that the U.S. will “do what is necessary” to shore up Argentina. It’s nothing short of an open-ended promise. The pesos’s post-election surge faded fast. The pesos’s post-election surge, though, faded fast. Most observers believe the peso must be allowed to float since it will be unsustainable to keep in a band that requires constant intervention. However, taking that step will probably mean a drop in its value, at least at the outset. For example, the 9,000 pesos I have left over in cash — a modest amount now totaling $6.30 — shed 16% of their value since January. Now scale that amount to the billions of dollars at stake through the U.S. Treasury’s limited purchases so far. It doesn’t take years of trading expertise to spot a risky bet. Trump will have decisions to make if his Argentinian gamble goes south. He could deepen the U.S. footprint in the country’s markets, which already surpasses the 1995 Mexican bailout because the U.S. directly bought Argentinian pesos this time instead of providing a loan with strings attached. That could stir rare criticism from Republicans and further upset cattle producers already angry about Trump’s plan to import more beef from Argentina. Or he could pull strings behind the scenes, similar to when former President Bill Clinton helped fast-track an IMF bailout of Russia ahead of a 1996 election. There are signs that Trump is already pursuing this route by reportedly working in tandem with major banks like JPMorgan Chase and Bank of America to assemble a parallel aid measure. JPMorgan Chase CEO Jamie Dimon met with Milei during a visit to Buenos Aires just before the election. For the time being, Argentina sails on. The ARA Libertad recently pulled into Baltimore’s harbor, following stops in Costa Rica and Portugal. I could hardly tell it was the same Argentine naval ship caught up in an African port standoff over a decade ago. Sailors invited the public aboard to survey its towering old-school masts and vintage cannons. Now rough seas are ahead for Argentina with no way of knowing how the country may get through them. With or without U.S. help, this chapter won’t end well unless Argentina can chart its own path ahead.
Joseph Zeballos-Roig
Joseph Zeballos-Roig is a reporter who has covered economic policy and politics for Semafor, Business Insider and Quartz, among other publications. 
