Scott Bessent’s $20 Billion Bet: How Washington Is Wagering on Argentina’s Comeback

The libertarian administration of Javier Milei, backed by an unprecedented $20 billion U.S. Treasury swap line and a complementary private facility in the works, has engineered a dramatic stabilization of the peso, rebuilt reserves, and re-anchored expectations. Markets have responded with cautious optimism; Washington has responded with cash. The question is whether Buenos Aires can hold the line through politics as volatile as its currency once was.

The Return of Orthodoxy

For the first time in over a century, Argentina has posted a fiscal surplus. Economy Minister Luis Caputo, a veteran of Wall Street, and Central Bank chief Santiago Bausili have delivered what few Latin American reformers ever manage: a credible fiscal anchor. Spending has been slashed by 15 percent, the primary balance has remained positive for twenty consecutive months, and inflation — though still elevated — is falling steadily.

This newfound orthodoxy is not cosmetic. Argentina’s fiscal and monetary program is coordinated with rare precision. The Central Bank’s balance sheet has been repaired, the crawling-peg exchange-rate regime has given way to floating bands that allow the peso to fluctuate within limits, and the government has moved to neutralize the monetary overhang inherited from years of deficit monetization.

The data speak for themselves. Since Milei took office in December 2023, Argentina’s multilateral real exchange rate has normalized after a decade of distortion. The new regime has broken the vicious cycle of devaluation, inflation, and fiscal collapse that has long haunted Buenos Aires.

The Swap That Changed Everything

At the heart of the turnaround lies an audacious policy innovation: a $20 billion currency-swap line between the U.S. Treasury and Argentina’s Central Bank. The swap effectively exchanges volatile pesos for U.S. dollars, providing a liquidity buffer at a moment of acute market stress. Treasury Secretary Scott Bessent called it “an exceptional measure warranted to provide stability to markets.”

For Washington, the move is both financial and geopolitical. It is the first U.S. intervention of this kind since the 1995 Mexican rescue. For Buenos Aires, it is nothing short of a lifeline. With elections looming and reserves dwindling, the deal arrested what could have been another peso spiral.

The swap’s structure is unconventional. Rather than a simple loan, it is a two-way exchange of currencies that allows Argentina to access dollars without adding to its formal external debt. In practice, it has the same effect as a bailout, but without the stigma — or the conditionality — of an IMF program.

Since its implementation, reserves have surged 60 percent to nearly $40 billion. The liquidity cushion has restored confidence and stabilized the peso’s trajectory. The central bank has been able to manage the new floating-band system — introduced in April 2025 — with limited intervention.

Economists at JPMorgan Chase describe the deal as a “circuit breaker.” It halted the negative feedback loop between currency depreciation and inflation that had threatened to unravel the reform program.

Political Calculus in Washington

The U.S. stake in Argentina’s success is not purely economic. With Washington’s influence in Latin America increasingly challenged by China, the decision to support a libertarian ally who explicitly aligns with American free-market ideals carries strategic weight.

President Donald Trump’s public endorsement of Milei was unusually direct. At a White House meeting, he lauded Argentina as “our strongest partner in the Southern Hemisphere” — but warned that if Milei’s coalition loses the midterms, “we are not going to be generous with Argentina.”

Such bluntness unsettled markets. The peso briefly weakened 0.7 percent the next day, and Argentine equities fell sharply. Yet, the message was clear: Washington’s support is conditional on the survival of Milei’s reform agenda.

Critics in both countries have decried the swap as politically motivated. In Congress, Democratic senators introduced the “No Argentina Bailout Act,” arguing that U.S. taxpayers should not subsidize a foreign experiment in libertarian economics. But Bessent countered that Argentina’s program is “sound,” emphasizing that fiscal discipline, rising reserves, and a credible monetary regime make the country a safer bet than in decades.

A Second Tranche: Private Capital Joins In

Behind the scenes, U.S. officials are working to double the financial backstop. A second $20 billion facility is being structured through private banks and sovereign funds, designed to complement the Treasury swap. Bessent calls it “a private-sector solution,” and interest from global investors has been strong.

If completed, the combined $40 billion package would represent the largest foreign financial commitment to Argentina since the early 1990s. More importantly, it would anchor the peso and reduce Argentina’s reliance on the IMF, to which it still owes $41.8 billion — the Fund’s largest outstanding exposure.

Such magnitude is not without precedent: the 1995 Tequila Crisis saw a $20 billion U.S. loan to Mexico; today’s Argentina operation is its modern echo. The difference is that Milei’s program is already delivering the macro fundamentals that Mexico only achieved after devaluation.

From Crawling Peg to Floating Bands

The Argentine peso’s path under Milei has been remarkably linear — until it wasn’t. From early 2024, the government maintained a crawling peg to guide gradual depreciation. That regime ended abruptly in mid-2025, when authorities introduced a system of floating bands to absorb market shocks.

The shift coincided with the U.S. Treasury’s swap line and an additional $20 billion IMF Extended Fund Facility. With ample reserves, the Central Bank could allow wider fluctuations without losing control. The peso briefly appreciated before stabilizing around ARS 1,300 per USD — a level consistent with external competitiveness and export growth.

Caputo insists the band system is “consistent and well-calibrated,” noting that volatility reflects political uncertainty, not macro weakness. “We have an economy built on iron fundamentals,” he said in Washington.

Indeed, Argentina’s real exchange rate is now close to equilibrium. Inflation expectations have moderated, and the trade balance has turned positive.

The Swap Mechanics: Profit and Politics

The U.S. swap also includes a novel incentive structure. Under the agreement, investors — notably the Treasury’s lead negotiator, Scott Bessent — have exposure to the peso’s performance.

The mechanism sets “profit” and “loss” zones: if the peso appreciates within the defined range, the U.S. can repurchase more pesos than it sold, generating a profit; if it depreciates beyond the threshold, losses are capped. It is a quasi-option structure that aligns Washington’s interests with Argentina’s currency stability — a financial and political hedge rolled into one.

Critics argue that such arrangements blur the line between policy and speculation. Yet, they may also represent a pragmatic innovation: a market-based bailout that reduces taxpayer exposure while rewarding success.

Rebuilding Credibility: Reserves and Wages

The impact has been immediate. As reserves climbed from $25 billion to nearly $40 billion, the wage index measured in U.S. dollars rebounded for the first time in years. Real incomes, which had been decimated by inflation, are recovering — particularly when adjusted for the parallel exchange rate.

Wage stability, long elusive in Argentina, has underpinned a modest recovery in consumption. Although real wages remain below 2017 levels, the trajectory has turned positive, supporting Milei’s narrative that fiscal discipline ultimately delivers prosperity. This stabilization, coupled with declining inflation, has revived domestic demand without reigniting imports — a crucial balance for a nation historically prone to boom-bust cycles.

A Magnet for Capital

Beyond the macro stabilization, Milei’s Argentina has become a magnet for investment. According to Caputo, the country has secured nearly $100 billion in project commitments, including OpenAI’s $25 billion data-center initiative — poised to make Buenos Aires a regional hub for artificial intelligence — and ENI’s $20 billion joint venture with YPF in oil and gas.

The newly approved Régimen de Incentivo para Grandes Inversiones (RIGI) offers special tax and regulatory treatment for projects exceeding $200 million. Around $80 billion in projects have already qualified.

The implications are profound: within four years, energy and mining surpluses are expected to double those of agriculture, long Argentina’s traditional foreign-exchange backbone. For the first time, the nation’s export matrix will be diversified — and technology, not soybeans, could become the new growth driver.

Political Risk: The Last Hurdle

Yet, the biggest risk to Argentina’s renaissance is not economic but political. The October 26 midterms will determine whether Milei can consolidate his reforms or be trapped by a hostile Congress.

Peronism still controls half of the legislature, obstructing key structural measures such as labor reform, privatizations, and deregulation. Without congressional backing, Milei’s program could stall, reversing market gains and eroding confidence.

Trump’s warning — that “if he loses, we are not going to be generous with Argentina” — underscored the stakes. The U.S. support, both financial and diplomatic, hinges on Milei’s ability to sustain momentum and political legitimacy.

Markets have already priced in a measure of uncertainty. The peso’s implied volatility has risen ahead of the vote, and Argentine bonds trade with risk premiums reminiscent of 2019. Yet, investors remain largely constructive, betting that the opposition will not dare to dismantle a program that has finally stabilized the economy.

The Regional Context: A New Model Emerges

Argentina’s transformation could ripple across Latin America. If successful, Milei’s experiment will provide a counter-model to the state-centric policies that have dominated the region for decades.

By coupling fiscal orthodoxy with liberalized capital markets and strategic alliances with the U.S., Argentina is positioning itself as the new regional hub for artificial intelligence and energy.

Such a pivot could redefine the Southern Cone’s economic geography: Buenos Aires as a data-center and LNG exporter, linked more to Silicon Valley than to São Paulo’s industrial complex. For Washington, this represents an ideological and strategic victory; for Argentina, it is the long-awaited emancipation from its cyclical dependence on the IMF and commodity booms.

Risks and Rewards

The near-term risks are clear. Inflation, while moderating, remains above 40 percent. The peso, though stable, could come under renewed pressure if political uncertainty intensifies. The swap arrangement itself, though innovative, creates contingent liabilities that could test both partners if global liquidity tightens.

Domestically, austerity has exacted a heavy social cost. Poverty remains above 35 percent, unemployment is rising in the public sector, and the political backlash could harden if growth does not materialize quickly.

Yet, the rewards are equally tangible. Argentina’s external accounts are improving, the current account is heading into surplus, and for the first time in decades, the Central Bank is accumulating reserves rather than burning them.

Conclusion: The Test of Continuity

Argentina stands at a crossroads between redemption and relapse. The coordination between fiscal and monetary authorities, unprecedented foreign backing, and surging investment flows suggest a foundation for durable recovery.

But history counsels humility. The country’s crises have never stemmed from poor economics alone — they have been political in origin. If Milei secures congressional control and maintains policy continuity, Argentina may finally escape its boom-bust fate.

If not, the reforms that dazzled Wall Street and drew Washington’s dollars could fade into another chapter of lost potential.

For now, fundamentals are strong, reserves are swelling, and the currency is holding. Argentina has been given a rare second chance. Whether it seizes it will depend not on the markets, but on the ballots.

Sources & References

AP News. (2025). US buys Argentine pesos, finalizes $20 billion currency swap. https://apnews.com/article/trump-bessent-argentina-milei-currency-swap-7432a188e57264f0e5f6c753ddc40879 

AP News. (2025). US is working on doubling aid to Argentina to $40 billion by tapping private funding sources. https://apnews.com/article/trump-argentina-financing-economy-milei-billion-peso-fd38553ae03f4c33ce1288999469f7fb 

Buenos Aires Times. (2025). Argentine officials say US$20bn currency swap could be agreed before midterms. https://www.batimes.com.ar/news/economy/argentine-officials-say-us20bn-currency-swap-could-be-agreed-before-midterms.phtml 

CNBC. (2025). The U.S. has stepped in with an extraordinary bailout of Argentina. Here’s what it means. https://www.cnbc.com/2025/10/13/the-us-has-stepped-in-with-an-extraordinary-bailout-of-argentina-heres-what-it-means.html