Question: Why is the $20 billion to Argentina not mentioned in the government budget debacle? Is this not more reckless spending?
Answer: It’s unclear how much of the $20 billion will actually be used, or whether all of it will go to the swap line vs. debt purchases vs. standby credit. There is a risk that Argentina may default, restructure, or be unable to repay. That raises questions about how the U.S. would recover or manage losses.
The U.S. is coordinating with the International Monetary Fund (IMF), which already has a large exposure to Argentina. Yet, Argentina is currently the IMF’s largest debtor with an alarming $41.8 billion owed.
The $20 billion swap line to Argentina’s central bank is a currency swap—it is not a bailout, although there are political motives. China could be the one stepping in and bailing out Argentina, ruining America’s alliance, and propping up the yuan over the dollar, and Washington does not want to see Argentina look toward non-dollar solutions. Beijing has strategically used debt diplomacy in recent years to expand its influence. In fact, China provides more in loans to emerging economies than the World Bank.
Argentina and China agreed to a bilateral currency swap worth RMB 70 billion (approx. $11 billion) in 2009. By 2022-2024, Argentina expanded access to the swap facility, reaching $18 billion in total, with $5 billion actively activated and renewed for direct use in 2025-2026. Argentina was deeply dependent on those swap lines and used Chinese debt to repay IMF debt, restructuring along the way, and falling deeper into the hole. Up to 95% of Argentina’s liquid reserves depended on Chinese swap funds during certain periods of time. The nation repaid China $7.5 billion through an IMF loan in 2023, but still owes around $18 to $24 billion. The U.S. addition of $20 billion is merely a way for Argentina to pivot from China to U.S. reliance.
In addition, the U.S. is indicating willingness to purchase U.S. dollar-denominated Argentine bonds (i.e. sovereign debt) in either the primary or secondary markets. The support would also include “standby credit” via the U.S. Treasury’s Exchange Stabilization Fund (ESF) as needed. The ESF largely operates outside of congressional oversight.
The US is now simply standing in line beside the IMF when the time comes to restructure Argentina. The default risk remains valid. Confidence in the dollar must remain high. This is not charity but an option for the US to maintain dollar dominance in Latin America.
