Why Trump’s $20B Argentina Bailout May Be Doomed to Fail | WSJ

Argentina's Economic Situation - Argentina faced economic turmoil with monthly inflation peaking at over 25% and almost half the country in poverty [3] - Argentinians voted for radical change due to decades of economic hardship [2][3] - President Milei implemented drastic public spending cuts, reduced public workers, closed ministries, and halted public works projects [3] - Argentina's economy is characterized by the widespread use of both the official currency, the peso, and the US dollar [4] - Milei initially devalued the peso and then attempted to maintain a stronger peso to curb inflation, using a crawling peg and currency band [4][5] US Involvement and Implications - The Trump administration offered a $20 billion economic aid package to Argentina, which calmed markets but sparked controversy in the US [9][10] - The US Treasury directly bought pesos and provided Argentina's central bank with a $20 billion currency swap [12] - Some accused the administration of intervening to benefit wealthy American investors holding Argentinian debt [11] - The US support may not be enough to give Milei the boost he needs in the elections, and US taxpayers are already exposed [15] - Argentina owes the International Monetary Fund $41 billion and has a history of defaulting, making the US investment risky [15] Risks and Sustainability - Milei faced protests and bribery accusations against his aids, leading to losses in local elections and concerns about the sustainability of his program [6][7] - Investors panicked about midterm elections, triggering a peso sell-off [7] - The central bank's intervention to contain devaluation led to a loss of reserves, further fueling investor concerns [8] - Unless Argentina addresses its dual currency regime, market turmoil is likely to recur [16]