U.S. Stakes $40 Billion on Argentina's Austerity as Peso Surges, Poverty Grows

Trump Praises Milei's Landslide Victory in Argentina as Dollar Exchange Rate Plunges

President Javier Milei's party, La Libertad Avanza, secured a decisive victory in Argentina's midterm elections, prompting praise from U.S. President Donald Trump, who linked the outcome to a potential financial windfall for the U.S. The peso, which had hit record lows amid economic turmoil, surged over 6% against the dollar on Monday following the election results, while Argentine stocks and bonds rallied, according to a Bitcoin.com report. Trump celebrated the win, calling it a "big win" and claiming it had made the U.S. "a lot of money."

The U.S. Treasury had intervened earlier this month to stabilize Argentina's currency, selling dollars through Banco Santander to keep the peso within its trading band, Bloomberg reported. The peso had weakened by 30% against the dollar in 2025 before the election, fueled by political uncertainty and dwindling foreign exchange reserves, CNN reported. Treasury Secretary Scott Bessent defended the $20 billion swap line with Argentina's central bank as a "bridge to a better economic future," though critics questioned whether the U.S. would recoup its investment, according to Yahoo Finance.

Milei's victory, with 41% of the popular vote, strengthened his position to push forward with austerity-driven reforms, including dismantling state ministries and slashing public spending, Geopolitical Economy reported. However, his policies have deepened poverty, with 53% of Argentines living in poverty as of 2024. The U.S. has pledged an additional $20 billion in private-sector support, contingent on Milei's political success.

The election outcome triggered a market rebound. Argentine dollar bonds climbed to near historic highs, while the Merval stock index surged 22%. Investors viewed the win as a green light for continued U.S. support, with JPMorgan economists noting it "halts a recent slide in the peso." Yet challenges remain: Milei will need to forge alliances in Congress to pass reforms, and the peso's rebound may be short-lived if inflation and debt crises persist, as The Wall Street Journal noted.

Trump's endorsement of Milei aligns with his broader "America First" agenda, prioritizing U.S. economic interests over humanitarian concerns in Argentina. Critics, including economist Joseph Brusuelas, warned that past U.S. bailouts have failed when political support waned, and a 15%-30% peso plunge remains likely if Milei's reforms stall. Meanwhile, Milei faces scrutiny over corruption scandals, including his sister's alleged embezzlement and a controversial executive order granting U.S. military access to Argentine bases.

The U.S. Treasury's intervention has drawn mixed reactions. While it temporarily stabilized the peso, the currency remains overvalued, and structural issues like high inflation and unemployment persist. Analysts at Goldman Sachs noted that Milei's "strong and conclusive performance" in the election could bolster investor confidence, but long-term success hinges on fiscal discipline and political stability.

As Argentina's economy teeters between crisis and cautious optimism, the U.S. remains a key player. Trump's conditional support underscores the high stakes: a successful Milei could attract foreign investment, while a relapse into economic chaos risks further U.S. losses.

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