Outside the Beltway

The Argentine Bailout

Brought to you by the "America First" crowd.

Steven L. Taylor · Friday, October 3, 2025 · 7 comments

I will confess that I pay less attention to Latin America than I should, given my background, but I do try to keep an eye on it. Back when Javier Milei was elected President of Argentina and promised a libertarian economic miracle to solve the country’s woes, my thought was something along the lines of “here we go again with a novel, but doomed to fail, ideological gimmick to address serious economic problems.”

If anything, readers will remember Milei from the photo above, where he brought his trademark budget-cutting chainsaw for Musk to play with. It is a reminder that when politicians try to be prop comics, it almost certainly foretells bad policy outcomes.

At any rate, the initial results were mixed, as the BBC reported: Have Milei’s first six months improved the Argentine economy?

In his initial package of measures, he devalued Argentina’s currency, the peso, by 50%, slashed state subsidies for fuel, and cut the number of government ministries by half.

The quick reduction in public spending has helped Argentina swing from a fiscal deficit – the difference between the government’s spending and income – of 2tn pesos ($120bn; £93bn) in December of last year to a surplus of 264.9bn pesos in April.

Argentina also reported a surplus in January, February and March, marking the first time it had achieved this monthly target since 2012.

[…]

Inflation has slowed – in April the month-on-month rate fell to 8.8%, the first time since October that it was not in double figures. This inflation measure is closely followed in countries like Argentina that have long had high inflation.

Yet when it comes to the more globally recognised annual inflation rate, this hit 289.4% in April. To put that into perspective, in the UK the annual rate is currently just 2.3%.

And although official growth figures are not yet available for the period since Mr Milei took office on 10 December, there is evidence that Argentina’s economy has contracted sharply, with consumer spending dropping off in the first three months of this year.

So, while inflation improved and the budget was balanced, the NYT noted, about a week ago, Milei Vowed to Fix Argentina’s Economy. Then Came a New Crisis.

Using tough financial remedies, Mr. Milei, a self-proclaimed radical libertarian, tamed out-of-control inflation and slashed a bloated budget. And even as his painful fixes made life harder for millions of people, his popularity was built on hopes that he may finally succeed where his predecessors had stumbled: pulling Argentina out of chronic crisis.

Then, in recent weeks, Mr. Milei found himself facing an economic meltdown so severe — investors had began panic-selling Argentina’s currency, the peso, and ditching Argentine assets — that it fueled panic over a possible default on the nation’s enormous international loans and prompted President Trump to throw his South American ally a lifeline by offering a $20 billion bailout.

Stepping in, the U.S. Treasury said it was ready to do “what is needed” to stop markets from derailing Mr. Milei’s agenda. “President Milei is restoring economic stability after decades of Argentine mismanagement,” said Treasury Secretary Scott Bessent.

The bailout is what drew my attention. Setting aside anything else for a moment, it is yet another example of the Trump administration being more than willing to spend when it wants to, however it wants to, all the while talking about controlling spending and avoiding waste.

All of which made me think of this from earlier in the week when Trump spoke at Quantico to the assembled fatties generals and admirals,

I mean, when you look at — we’ve taken in trillions of dollars. We’re rich — rich again and they’ll never be — when we finish this out, they’ll never be any wealth like what we have. Other countries were taking advantage of us for years and years.

[…]

The other day, they had $31 billion that they found, $31 billion. Sir, we found $31 billion and we’re not sure from where it came. A gentleman came in, a financial guy. I said, well, what does that mean?

He said, we don’t know where it came. I said, check the tariff shelf. No, sir, the tariffs haven’t started in that sector yet. I said, yes, they have, they started seven weeks ago, check it. Comes back 20 minutes later, sir, you’re right, it came from tariffs. $31 billion, that’s enough to buy a lot of battleships, Admiral, to use an old term.

Ok, taking Trump at his word for a split second (note: in reality, I take none of the “Sir” stories as anything other than pure fabrication), we found $31 billion on the “tariff shelf,” which would buy oh-so-many battleships, so we are spending $21 billion on Argentina?*

Side note: if we are raking in the dough to the degree that we are “rich again,” then I guess we can afford those healthcare subsidies?

And words fail me on the notion of a “tariff shelf” where one might just happen to find $31 billion.

Back to Argentina and the NYT write-up:

By firing tens of thousands of government workers and slashing spending in different areas, including welfare and research, he has shrunk the bureaucracy and balanced the budget for the first time in more than a decade.

[…]

Yet, Mr. Milei’s bold bet that his policies would put Argentina on a path to growth has yet to pay off, while the pain of his spending cuts has already set in for millions of people.

As job losses have piled up and consumer spending has cooled, Argentina’s economy has slowed in recent months, stoking fears of a recession. Nearly a third of Argentines live in poverty, as cuts to subsidies for transportation, soup kitchens and medications have made it harder to make ends meet.

This has some unpleasant echoes to contemporary American policy moves, although at least the Argentines got a balanced budget out of it.

Meanwhile, Fortune reports: Leaked texts on Scott Bessent’s phone suggest the White House got played bailing out Argentina—and U.S. soybean farmers are the casualties.

According to a photo of a private text on the phone of Treasury Secretary Scott Bessent, Argentina responded to the treasury secretary’s $20 billion bailout by turning around and removing its export taxes on soybeans and striking a huge new deal with China. That diminished the price of U.S. soybeans and weakened U.S. trade leverage with China, which immediately pulled out of its existing arrangements with soybean farmers in America’s heartland.

The photo taken by Angelina Katsanis for the Associated Press last week shows Bessent reading a text that appears to be from Agriculture Secretary Brooke Rollins. 

“Finally—just a heads up, I’m getting more intel, but this is highly unfortunate,” the text said. “We bailed out Argentina yesterday and in return, the Argentine’s [sic] are removing their export tariffs on grains, reducing their price, and sold a bunch of soybeans to China, at a time when we would normally be selling to China. Soy prices are dropping further because of it. This gives China more leverage on us.”

More evidence of the overwhelming genius of the deal-making Trump administration and its commitment to hard-working Americans.

But, of course, as Paul Krugman notes:

But remember that, in Trump’s world, America’s interests don’t count. Only his interests count. And Javier Milei, Argentina’s president, has been an important poster child for right-wing economics. The early success — or apparent success — of his policies was widely celebrated as a great victory. In February, Milei and Elon Musk shared the stage, wielding a chainshaw, during the Conservative Political Action Conference (CPAC.) And Milei has deftly played the part of the Trump acolyte, praising Trump’s tariffs and deportations at the UN, while attacking “left-wing infiltration” of American institutions.

And then there’s this from Popular Information: Trump’s Argentina bailout enriches one well-connected billionaire.

Bessent’s announcement had massive economic benefits for one American: billionaire hedge fund manager Rob Citrone, who has placed large bets on the future of the Argentine economy. Citrone, the co-founder of Discovery Capital Management, is also a friend and former colleague of Bessent—a fact that has not been previously reported in American media outlets. Citrone, by his own account, helped make Bessent very wealthy.

I wonder why people keep saying that, despite all the populist rhetoric that this administration seems primarily dedicated to the billionaire class? There is also a side plot in the PI piece about CPAC and Matt Schlapp.

In November 2024, shortly after Trump’s election, key CPAC officials, including Matt Schlapp and Mercedes Schlapp, founded a new lobbying firm called Tactic Global. This is the same group that organized CPAC Argentina in December 2024, an event that featured Milei, Lara Trump, and other right-wing luminaries. CPAC has long played a key role in Trump’s political operation.

[…]

Although CPAC promotes itself as an “America First” organization, Tactic Global represents not only the government of Argentina but also Kyrgyzstan and Vietnam. After Bessent announced his rescue package for Argentina last week, CPAC promoted the deal on its social media accounts.

It continues to be grifts all the way down.

In short: Trump and Bessent are risking a substantial number of US taxpayer dollars to help both an ideological ally and a hedge fund manager who happens to be a close associate of Bessent’s (and CPAC’s Matt Schlapp gets a taste, too).

You know, Good Governance 101.

*I understand that we are not simply giving $21 billion to Argentina, so yes, I exaggerate a bit. We are essentially loaning them money, and it is not a low-risk loan. As Krugman notes in the post linked above, “I can say is that I can see no legitimate reason for the U.S. government to risk billions in American taxpayer dollars in an almost surely doomed effort to bail Milei out.”