Argentina Gets a Bailout, Brazil Gets the Stick. What Unites Them.

Argentinian President Javier Milei’s party recently lost a key provincial legislative election by 13 percentage points, worrying some that his party may lose in the country’s general legislative election next month. (Kayla Bartkowski/Getty Images)

About the author: Karthik Sankaran is senior research fellow of geoeconomics in the Global South Program at the Quincy Institute for Responsible Statecraft. He has more than two decades of global macro experience as an analyst, strategist, and portfolio manager in foreign exchange and emerging markets.

The U.S. jumped last week to the rescue of Argentina’s President Javier Milei ahead of a legislative election on Oct. 26. Treasury Secretary Scott Bessent announced Argentina could access a $20 billion swap line (amounting to roughly 16% of the country’s public external debt) from the department’s Exchange Stabilization Fund, and that the U.S. might even purchase Argentine debt. While the U.S. has participated in many multilateral rescue operations, purely bilateral ones are rare, with the last one coming right after the Dec. 1994 devaluation of the Mexican peso.

Is Argentina as important now as Mexico was back then? No. Mexico was already America’s third largest trading partner in 1994 with bilateral trade of roughly $100 billion. Mexico is now America’s largest trading partner, at $800 billion. The 31 years since Nafta came into effect have deeply integrated Mexico in American supply chains, transformed the country’s export mix, and made its balance of payments more resilient. Mexico was one of the first emerging markets to make a successful transition from fixed to floating exchange rates—a feat Argentina has yet to accomplish.

In comparison, U.S.-Argentina bilateral trade in 2023 was about $15 billion, and the country essentially has the same export mix in 2025 as it did in 1885. (That may be one of the causes of its history of economic crises and alternations of left and right-wing populism). Argentina isn’t of systemic importance to global finance either. The country has spent 40 years lurching in and out of crisis without triggering a global one even when it was the largest component of the JP Morgan hard currency bond index in 2001.

Argentina is also a trade competitor with the U.S., specifically for agricultural exports like soybeans. In conjunction with the bailout announcement, Milei briefly suspended soybean export taxes to encourage crop sales. The central bank desperately needs dollars, and exports bring them in. Argentina quickly sold $7 billion of soybeans to China, to the utter fury of American soy farmers, who are locked out of the Chinese market.

The bailout might not even have cured the interactions between political and financial uncertainty. There is substantial agreement among experts that the peso is too strong, leading to speculation that the government could allow depreciation after the election, even if it weren’t being pressed by markets. If belief becomes widespread that a depreciation is coming, people may try to buy dollars now, turning the package into a subsidy for capital flight rather than a mechanism that restores confidence.

So what explains an unpopular and possibly risky bailout to a non-systemic country? One theory is that Argentina has lots of critical minerals, and it is close to Antarctica, which supposedly has even more of them. But beyond this, the bailout seems motivated by a desire to rescue a government that gained international cachet for pushing through difficult austerity measures to reduce public deficits and bring down inflation. Mileimania ran amok for two years among tech industry fans of anarcho-capitalism and political figures on the right in the developed world, sometimes in countries whose problems with inflation or debt were minimal compared with those of Argentina.

As for the argument that the bailout is to “keep China out of America’s backyard,” the soybean sales ruckus suggests that the basic complementarity between a resource-rich Argentina and a resource-hungry China might make that a hard economic act to pull off—especially for a more naturally self-sufficient America.

Unlike Mexico 1994, where the bailout came after a new government with a six-year term had taken office, support for Argentina was explicitly acknowledged as a strategy to prevent market turbulence from weakening Milei’s political position further. Or, in Bessent’s words, “We aren’t going to let a disequilibrium in the market cause a backup in his substantial economic reforms.” A closer analogy than Mexico 1994 might be the European Central Bank’s behavior in the euro zone in the 2010s. The ECB’s action (or inaction) in the face of market pressures on a country’s bonds was seen to signal approval or disapproval of voter choices.

So the bailout may be a carrot to the Argentine electorate to help a candidate ideologically congenial to the U.S. administration. That in itself is somewhat unusual for an administration that has been much more prone to using sticks—most obviously tariffs—to achieve various goals. Despite the often inconsistent stated aims of tariffs, their rationales have been largely grounded in economics or foreign policy—to force market opening or onshoring, to gain revenue, or to signal pique at some aspect of diplomacy.

Argentina’s neighbor Brazil was also subject to economic pressure grounded entirely in its domestic politics. The administration imposed 50% tariffs in opposition to the trial of former President Jair Bolsonaro, another figure it sees favorably. Luckily for Brazil, it has relatively little exposure to American demand. Spillovers from U.S. financial conditions are more important, but as long as the dollar doesn’t strengthen too much and the Federal Reserve is cutting rates, Brazil will probably be fine.

Confusingly, the White House’s judgments about Milei, Lula, and Bolsonaro appear grounded more in their political style than their actual beliefs, particularly about the economy. As a libertarian, Milei wants to cut both taxes and spending, but he is also ideologically opposed to tariffs, which are a panacea in D.C. now. Conversely, Brazil has a long history of import-substitution developmentalism led by an interventionist state, something that might be anathema to Milei, but is certainly not to President Donald Trump.

Argentina and Brazil are united in being subject to the use of America’s formidable economic tools to intervene in their politics. Even this has precedents. But the use of these tools alongside a growing two-way mirroring of political styles in the U.S. and South America adds a new element.

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