Argentina's economy and 20 billion Currency swap

In mid-October 2025, Washington and Buenos Aires announced a financial decision in which President Donald Trump and Treasury Secretary Scott Bessent approved a $20 billion currency swap with Argentina’s central bank, along with an additional $20 billion expected to come from private lenders. The official goal is to “stabilize Argentina’s volatile peso” and “help the country embrace economic freedom.”

The deal comes at a very opportune moment — just days before Argentina’s October 26 midterm elections — in which Javier Milei, Trump’s closest ally in Latin America, faces serious currency problems and a decline in approval rates. This economic assistance can be seen as an act of solidarity. Yet, knowing Trump’s business-minded approach to diplomacy, it is worth asking: what will he get in return?

Let’s explore together what the deal means, how the country got to this point, the strategic interests at play, and of course, why this should matter to you.

So let’s start with the basics, 

Why are dollars so important for Argentina?

On one hand, the country has relied on international loans to keep its economy afloat, and those debts must be repaid in dollars, not in pesos. Low dollar reserves, becomes therefore a pressing issue. On the other hand, the country’s monetary system itself runs on a dual currency: the peso and the dollar. Since trust in the Argentinian economy and therefore the peso has declined, people increasingly started to use dollars to protect their savings and make more secure payments.

What’s more, today, Argentina operates with two exchange rates for the dollar: an official rate, set by the government and used mainly for imports and exports, and a parallel “blue dollar” rate, used on the street and by day to day businesses. This separate rate exists because the government imposes strict controls on access to foreign currency, in order to try to avoid a dollar fugue from their reserves, so a separate “black” inevitably emerged which reflects the actual market value of the dollar 1. 

Currency Swap or Bailout?

Delving now into the deal, the public has been debating whether this deal constitutes a currency swap or, in more practical terms, a bailout. Although officials insist it is not a bailout, the distinction rests on technicalities. A bailout usually involves direct loans or monetary aid meant to rescue a country from insolvency, often coordinated by institutions such as the IMF or the World Bank. A clear example would be the loan packages received by Greece beginning in 2010 during the financial crisis 2.

A currency swap, instead, allows two central banks to exchange currencies temporarily so one can use the other’s money to stabilize its own exchange rate — much like the swaps between South Korea and the U.S. in 2008 and 2020 3. Theoretically, Argentina is only “borrowing” dollars against pesos, not receiving free cash. Also, and most importantly, payments aren’t actually made until the swap is activated, it becomes active when one of the countries decides to use the money. It could even be partially activated, it doesn’t have to be for the full amount at once. — that is, once they actually use each other’s currency. Technically, the swap line could be in place, but not used, as happened with the U.S.–ECB swap lines that were extended but never used 4.

Conditions of the Swap

Unfortunately, the precise terms of the deal have not been made public. It may be because they have not yet been finalized and will only be drafted once one of the two parties decides to activate the swap. What is clear is that the swap will be tied to Argentina’s election outcome. Trump’s message to voters in Buenos Aires was ambiguous: “If Milei loses, we won’t be generous with Argentina.” The public interpreted that as a form of financial conditionality tied to domestic politics 5.

After the announcement, market reactions have not been as spectacular as one would expect. The dollar has continued to rise, though at a slower pace — suggesting that investors remain skeptical about the swap’s ability to improve Argentina’s fragile situation.

A Familiar Pattern

Argentina’s crisis didn’t begin with Milei; it is the product of decades of structural fragility 6. The country’s economy has gone through populist expansion and painful austerity, cycles that have been marked by fiscal deficits, inflation, external borrowing, and a loss of investor trust. Governments have relied on the central bank to print money to cover spending, eroding the peso’s value and reduced reserves. A situation that time and time again have lead to this type of measures. In 2018, the IMF granted a record $57 billion loan to President Mauricio Macri. The conditions of that program backfired, deepening the recession and further undermining confidence.

Strategic Interests at Play

For the United States, this exchange is less about profit and more about risk control and regional leverage. The pesos they would receive, hold little value themselves, they can’t easily be spent or converted to be used abroad, but they serve as a political promise that Buenos Aires will stabilize and eventually repay in dollars. It is actually a high-risk bet, considering Argentina’s poor credit reputation and its $300 billion external debt  7, of which $57 billion comes from the IMF alone. That represents more than one-third of the Fund’s total global lending, making Argentina its largest debtor, followed by Ukraine.

This is why interests relate more to a geopolitical standpoint, Washington’s motivations could be mainly two: to maintain regional stability and to counter Chinese influence. As Bessent stated, “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.”8

A “failed Argentina” far beyond the domestic costs, could fuel instability, migration pressures, organized crime, and potentially increase Chinese or Russian presence in South America.

Meanwhile, Chinese impact in the country is undeniable: it is already Argentina’s second-largest trading partner after Brazil, the top supplier of Argentine imports, and the main buyer of its beef and soy — 80 percent of Argentina’s meat exports go to China 9. Beijing also maintains an $18 billion currency swap with Argentina’s central bank, covering roughly 43 percent of the country’s reserves 10, and is financing infrastructure projects worth another $14 billion, including a nuclear plant, hydroelectric dams, and railway rehabilitation.11

Argentina’s participation in the Belt and Road Initiative deepens these ties. An additional reason for uneasiness for the US is a Chinese deep-space observation base in Neuquén province that has been said to be run in secrecy. While there are no Chinese military bases in Argentina, the symbolism is clear. These concerns were reportedly expressed quite clearly at Milei and Trump’s meeting at the White House on October 14. “You can do some trade,” Trump said, “but you certainly shouldn’t be doing beyond that. Certainly, [you] shouldn’t be doing anything having to do with the military with China. And if that’s what’s happening, I’d be very upset about that.”12

Why Does This Matter?

For the average Argentinian, this swap will influence daily life, the price of bread, the value of savings, and the survival of Milei’s government and his libertarian experiment. For the United States, it is a test of whether financial diplomacy can still guarantee influence in a region increasingly tied to China. Success would show that Washington can still outcompete Beijing using the dollar regardless of their efforts to weaken the dollar economic framework; failure would expose the limits of Trump’s transactional diplomacy.

For Latin America as a whole, the deal signals that the region’s economic struggles are now part of a new great-power contest, where financial decisions carry heavy political weight with the intention of shaping diplomatic loyalties. And for the world, it’s a reminder that in the 21st century, battles also take place at the financial/economic level.