The US exchange rate agreement with Argentina sparks domestic controversy

Just days prior to the scheduled midterm elections in Argentina, the Central Bank of the Argentine Republic (BRCA) signed “an agreement for exchange rate stabilization with the U.S. Department of the Treasury, for an amount of up to USD 20 billion.”

Despite the optimistic news for Buenos Aires, the agreement caused notable controversy in the United States as many criticized its purpose and repercussions.

Washington’s support for Argentina’s crippling economy

Argentina has long suffered from a severe economic and financial crisis, but Argentinian President Javier Milei’s government sought to resolve the matter through fiscal spending cuts and dramatically shrinking the size of government. These policies contradict previous ones that were adopted, which included “overspending, fiscal irresponsibility, and reckless borrowing,” according to US Treasury secretary Scott Bessent.

To this extent, and as Washington remains keen to support its key regional ally, it signed an agreement with the Argentine central bank for a $20bn swap line that the Treasury secretary had first announced last month. Moreover, the US has been working with its local banks to provide a further private sector-backed loan of $20bn in support of Buenos Aires, however no deal has been reached till now.

Rising American criticism with regards to the Agreement

The Trump administration claims that its economic and financial assistance to Argentina stem from strategic considerations. Firstly, as mentioned earlier, the Trump and Milei governments are close allies in the Americas. Particularly in Latin America, Buenos Aires’s importance has risen due to continuous tensions between Brazil and the US regarding various issues. Secondly, the latter cannot afford a failed state in what it believes as its “backyard.” Secretary Bessent thus asserted: “We do not want another failed state in Latin America, and a strong, stable Argentina as a good neighbor is explicitly in the strategic interest of the United States.”

Despite this alleged significance, the recent American-Argentinian agreement has raised concerns and controversy in the US, even with Trump’s Maga supporters. Many have doubted the purpose of such a massive bailout considering the current administration has reduced overseas spending considerably (including vital US and multilateral agencies). Georgia’s Republican Representative Marjorie Taylor Greene questioned, “Tell me how it’s America First to bailout a foreign country with $20 or even $40 BILLION taxpayer dollars.”

Critics also claim that while their country is aiding Argentina in addressing its problems, the latter has not adopted a reciprocal approach. China, which is in intensive competition and trade war with Washington, has recently pledged to replace soyabean orders from the US with large-scale purchases from Argentina. These plans, coupled with US intention to purchase Argentine beef, would have negative consequences on the American farming community, which has expressed its fury.

Argentina’s upcoming midterm elections

The midterm elections, which are set for October 26, represent an opportunity for the Argentinian President Javier Milei to expand his party’s minority seats in parliament.

Washington has tried to bolster support for Milei, which it considers a crucial ally in Latin America (unlike Brazil’s President Luiz Inácio Lula da Silva) as US President Donald Trump claimed that he would not “waste our time” with Argentina if Milei’s party loses in the midterm vote. Although Bessent aimed to downplay the president’s comments, he nevertheless stated that a positive result for Milei’s party would help block any policy repeal efforts.