Bailing on Farmers to Bail Out Argentina.

A hundred years ago, Argentina was considered one of the strongest economies in the world as measured by income per capita, putting it on par with developed nations such as Germany. Today, it is one of the most economically volatile countries in the world. It’s taken 23 IMF loans including a $20 billion loan earlier this year to backstop its currency. A loan that it drew down at an alarming rate.

The news of the moment that we’ll address is the announcement by the Trump administration that it is willing to backstop the Argentine currency and economy by injecting up to another $20 billion dollars into the economy. Only this time, it’s not the IMF. It’s the American taxpayer.

While the United States cuts crucial funding to countries around the world, sometimes making a literal difference between life and death, why is the Trump administration seemingly hellbent on propping up a country that represents a half of one percent of all U.S. exports?

The simple answer is ideology. The longer explanation gets into the weeds of foreign policy, defending the world’s reserve currency and dollarization. But there is truth in the Occam’s Razor answer of ideology as well, so that’s what we’ll unpack first.

The Trump administration has modeled itself after Javier Milei’s administration in terms of attacking the administrative state. It’s a mutual admiration society between the two men, with Milei styling his campaign after Trump’s, Trump and Elon adopting the whole chainsaw spectacle on the stage at CPAC and on and on. But while their approach is similar, the circumstances between our two nations couldn’t be more different.

Under normal circumstances a bailout of a neighboring ally in the form of loan or bond purchases wouldn’t be such a big deal. But this move roiled the political world on both sides of the aisle for one big reason: Soybeans. The whole thing came to a head in recent days when an AP photographer snapped a picture of Scott Bessent’s phone which displayed a group text that included Agriculture Secretary Brooke Collins. Collins shared a snippet that read: “We bailed out Argentina yesterday (Bessent) and in return, the Argentine’s removed 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 dropping further because of it. This gives China more leverage on us.”

So here’s what’s going on. First off, Boomers shouldn’t text in public like Pete Hegseth shouldn’t use Signal.

Anyhoo, here’s the crux of the problem with soybeans. It’s harvest season. Actually, it’s near the end of it for our farmers. And China, typically our top purchaser of this important commodity, hasn’t bought a single bean from us since Donald Trump’s tariff war began. So they looked to our biggest competitor in this market, who just so happens to be Argentina. And on the promise of a $20 billion infusion to stop the slide of the peso, it actually made Argentina’s agricultural exports more attractive. Keen currency observers might note that a devalued currency makes a good more attractive, but in the case of Argentina the fluctuations in their currency actually spooks buyers and sellers alike. In the import/export game, price predictability is everything. So in a roundabout way Bessent screwed U.S. farmers who are struggling to find a market for soybeans, specifically while watching their own government make their top competitor more competitive.

Adding insult to injury, several farmers have had to resort to short-term financing as a hedge against declining exports and rising input costs due to persistent inflation. But these kinds of loans are typically managed and coordinated by the Farm Service Agency, a division of the Department of Agriculture. And guess who is not showing up to work right now because of the government shutdown? It’s a mess.

So why do it? Why risk the ire of your deeply red constituent base over a trading partner that is, quite frankly a rounding error to the United States economy? This is where it gets a little more complicated.

The Canary in the Coal Mine

Look, the surface answer about ideology isn’t wrong. It’s just incomplete. Yes, Donald Trump has a tight relationship with Javier Milei because he fits the profile of a brash authoritarian tear-it-all-down persona that Trump admires. And yes, Milei is absolutely a darling among conservatives in the United States because of his desire to dismantle the administrative state in Argentina.

But the co-dependence between these leaders goes deeper than theatrical props and matching ideological talking points. In many ways, Milei is the canary in the coal mine for Trump’s entire agenda.

Think about what Milei has been doing in Argentina since December 2023. Stripping agencies of authority. Eliminating what they consider wasteful bureaucracy. Consolidating power in the executive branch. Sidelining the legislature when it gets in his way. Crushing entitlement programs and safety nets. Firing tens of thousands of government workers. Sound familiar? This is the exact playbook that Trump and his DOGE bros want to run here in the United States.

Paul Krugman recently wrote a piece for his new Substack on how Milei quickly became a poster child for right-wing economics based on flawed monetary principles that have failed in the past. Trump has called him his “favorite president” and praised him for pursuing his own MAGA vision to “Make Argentina Great Again.” Milei has returned the favor by praising Trump’s tariffs and deportations at the UN while attacking what he calls “left-wing infiltration” of American institutions. It’s a feedback loop of mutual validation.

But here’s the thing. If Milei fails in Argentina, with a two-year head start on implementing this exact agenda, it gives enormous fuel to Trump’s adversaries that this approach simply doesn’t work. That it can’t work. That it’s fundamentally flawed economics dressed up in tough-guy rhetoric.

And right now? Milei is failing. Spectacularly.

So this isn’t just about ideology or personal friendship. It’s not because Argentina is systemically important to the United States. Argentina represents half of one percent of all U.S. exports.

No, we’re doing this because the early success, or apparent success, of Milei’s policies was widely celebrated as a great victory for this particular brand of right-wing economics. And now that it’s all falling apart, the Trump administration is desperately trying to prop it up before the whole world watches their ideological project collapse in real time. That’s the primary rationale. But there’s more at play that goes beyond defending MAGA conservatism in this hemisphere. There are bigger issues at hand that haven’t been fully addressed in corporate media that speaks to the declining relevance of the U.S. in global affairs.

Before we get there, however, we should talk about the plight of the Argentine economy and how poorly it has been managed. Because for as much as Milei is a hero to the right and villain to the left, he’s battled institutional rot inside Argentina in a profound way.

When It All Looked So Good

To understand why Milei’s apparent success was so intoxicating to conservatives, you need to understand just how dire things were when he took office. And I mean genuinely, catastrophically dire.

Argentina was experiencing its seventh recession in the last ten years. Inflation was running at nearly 118% year-over-year. Monthly inflation stood at almost 13% before Milei took office. The government had been running chronic fiscal deficits for years. The country was locked out of international capital markets. Poverty was rising. Unemployment was climbing. Political corruption was rampant. Argentina was facing a legitimate, full-blown economic crisis.

This is why Milei was able to ride a populist wave to power and roll over existing structures of authority. People were desperate. They wanted someone to come in and break things, because the current system clearly wasn’t working.

And when Milei imposed his regime of economic shock therapy in December 2023, something remarkable happened. For a while, it actually looked like it was working.

He slashed government spending with unprecedented brutality. By firing tens of thousands of government workers and cutting spending on welfare, research, public works, transfers to provinces, and subsidies for utilities and transportation, he found savings equivalent to an impressive 6% of GDP. This allowed him to balance the budget for the first time in more than a decade. Argentina reported its 14th consecutive monthly fiscal surplus by March 2025.

He stopped the central bank from issuing the costly short-term securities that had been fueling monetary expansion. He halted all lending to the government. And he implemented exchange rate policies designed to stabilize the peso and bring down inflation.

For about a year and a half, the results looked miraculous on the surface. Monthly inflation fell from nearly 13% to below 2%. Real GDP in the first quarter of 2025 was up almost 6% from a year earlier. The fiscal deficit was eliminated. Foreign exchange reserves were being rebuilt. Country risk decreased from 1,900 basis points in December 2023 to 720 basis points.

This is why Milei became such a phenomenon. Why he was hailed as an economic visionary who had finally cracked the code that had eluded Argentina for generations.

But there were warning signs that everyone chose to ignore. Because while those headline numbers looked great, the human cost was mounting. Nearly a third of Argentines fell into poverty as cuts to subsidies for transportation, soup kitchens, and medications made it harder to make ends meet. Unemployment was rising. Consumer spending was cooling. Inequality was widening dramatically.

One Argentine quoted in the New York Times put it bluntly: “My grandmother can’t afford her medicine. All they do is support the wealthiest.”

But because the macroeconomic indicators were moving in the right direction so quickly and so demonstrably, conservatives around the world latched onto Milei as proof that their economic theories worked. That you could slash spending, shrink government, eliminate the deficit, and boom—economic prosperity would follow.

The Trump of Argentina was on a winning streak. Until he wasn’t.

The Dollarization Delusion

Here’s where Milei’s grand experiment started to unravel, and it all comes back to a promise he made during his campaign that he was never able to fulfill: full dollarization of the Argentine economy.

During his presidential run, Milei campaigned aggressively on getting rid of the peso altogether. His plan was to shut down the Argentine central bank entirely and fully commit to using U.S. dollars as the nation’s currency. The logic was straightforward enough: the peso had been such a volatile instrument for so long, spooking foreign investors and causing wealthy Argentines to park their money offshore in dollar-denominated accounts, that dollarization would incentivize everyone to repatriate these dollars. Confidence would be restored, investment would flow back in, and Argentina’s chronic currency crises would be solved once and for all.

Milei described this plan as “very easy.” It’s not.

Full dollarization requires a complete transformation of every single aspect of an economy. Everything from retail transactions to commercial contracts. Wages and pensions would need to be converted. Investment portfolios would need to be converted. The entire banking system would need to be recapitalized. And yes, the central bank itself would need to be eliminated—which means eliminating the lender of last resort function that provides stability during financial crises.

This isn’t just technically complex. It’s economically perilous. This is the maneuver of a banana republic, not one of the most storied economies in the whole of Latin America (and at one time, the world). It’s also well-worn territory as several nations have submitted to this agenda. Only Poland and Israel went through the long and painful process to successfully break from dollarization, something no other nation has been able to replicate.

So why didn’t Milei go through with it? Because Argentina simply didn’t have enough dollars. The country’s central bank and government lacked the reserves necessary to swap out all pesos in circulation without triggering a new financial crisis.

Instead, Milei pivoted to an exchange-rate-based stabilization plan. He devalued the peso massively at first, then committed to much slower monthly devaluations of just 2%, later reduced to 1%. The idea was that this predictable crawling peg would anchor inflation expectations and give the currency stability.

But here’s the problem, and it’s a problem that Argentina has experienced before. In fact, both Argentina and Chile tried this exact approach in the late 1970s, and it ended in disaster both times.

What happens is this: even though you’re devaluing the currency slowly and predictably, if domestic inflation doesn’t fall fast enough, your real exchange rate—the exchange rate adjusted for differences in price levels—starts rising. Your currency becomes overvalued. Your exports become less competitive. Your imports become cheaper. And you start running into serious economic imbalances.

By early 2025, this is exactly what was happening in Argentina. A Big Mac cost nearly 60% more in Buenos Aires than in the United States, whereas a year earlier it had been 13% cheaper. Argentines were flocking to Brazil and Chile for shopping and holidays because everything had become a bargain compared to expensive Argentina. Imports were surging. Tourists from neighboring countries stopped coming. The country’s competitiveness was eroding rapidly. Eventually, everyone began rushing for the exits at once. Capital flight took hold. The currency started to nosedive. In other words, a classic currency crisis.

As a result, earlier this year unemployment jumped to a four-year high. Investors began losing confidence and capital started fleeing the country. Argentina’s central bank tried to defend the peso but burned through its scarce foreign exchange reserves at an alarming rate. Political problems compounded the economic ones—Milei’s sister was caught up in corruption scandals, his party suffered a stunning loss in a provincial election, and Congress started pushing back on his budget plans.

The Structural Sickness

Here’s what makes Argentina’s situation so frustrating: even if Milei’s policies had worked perfectly, even if dollarization had been implemented flawlessly, Argentina would still be struggling with fundamental structural problems that no monetary policy can fix. It would also leave it naked during shocks because it strips a country of the ability to print money during a crisis.

Periodic crisis is something that occurs in stable capitalist economies, and it’s even more severe in a nation that is a textbook case of what economists call the “resource curse.”

Argentina is blessed with incredible natural resources—some of the best agricultural land in the world, massive energy reserves and mineral wealth. But like many resource-rich nations, it never fully diversified its economy the way other successful Latin American countries did. Brazil, whose economy is more than three times the size of Argentina’s, managed to build a much more diversified industrial base. Argentina, on the other hand, remained heavily dependent on agricultural exports and commodity revenues, which makes it perpetually vulnerable to global price swings.

This is why Argentina has needed 23 separate IMF bailouts over the years. It’s not just about bad policy or political instability, though both of those factors play a role. It’s that the country’s fiscal health rises and falls with commodity prices. When soybean and wheat prices are high, government revenues surge and everything looks fine. When prices fall, the whole fiscal house of cards collapses.

And here’s where things get more complicated and reveals a lack of planning and insight on the part of the United States. This is where China enters the picture. The United States has been largely ignoring Latin America for decades, while China has been systematically building relationships and economic dependence across the region.

In 2015, the People’s Bank of China opened a yuan clearinghouse through the Industrial and Commercial Bank of China in Buenos Aires. This was part of China’s broader effort to internationalize its currency after the yuan was designated as a reserve currency by the IMF in 2016. China also acquired major stakes in Argentine oil companies. It became one of Argentina’s top trading partners. And it’s been offering loans and development financing that the United States has been unwilling or unable to match.

As Carol Wise wrote in her book Dragonomics, “Argentine policy makers in the post-global financial crisis period embraced some measures, such as nationalization, capital controls, and multiple exchange rates, that were simply not appealing to any rational investor.”

But China didn’t care about those things the way Western investors did. China was playing a longer game—building relationships, gaining access to resources, and establishing economic dependencies that would pay dividends for decades.

This is the backdrop that makes the Trump administration’s Argentina bailout so frustrating from a strategic perspective. We’re not just propping up a failed economic experiment. We’re trying to do it while China systematically outmaneuvers us in our own hemisphere.

The Bigger Game

Let’s zoom out for a moment and look at what’s really happening here, because Argentina is actually small potatoes in the grand scheme of global economic affairs. The real story is about the fundamental architecture of the global financial system, and how it’s being quietly restructured while the United States flails.

China achieved reserve currency status for the yuan in 2016. That might not sound like a big deal, but it’s huge. It means that central banks around the world can now hold yuan as part of their foreign exchange reserves, just like they hold dollars, euros, yen, and pounds. While it’s not happening to a monumental degree yet, it’s an opening move on the chess board on the part of the Chinese government.

This matters because according to a recent JP Morgan report, the dollar’s share in global foreign exchange reserves has declined to just under 60%, a two-decade low. It’s not all going to the yuan, but a little is.

Meanwhile, emerging market central banks, led by China, Russia, Poland and Turkey, have been massively increasing their gold holdings as an alternative to dollar-denominated reserves. The share of gold in emerging market reserves has more than doubled in the past decade, from 4% to 9%, driving gold prices to record highs.

What Carol Wise calls “Dragonomics” is China’s international development strategy—positioning itself through loans, foreign direct investment, infrastructure projects, and trade agreements to become the biggest lender and partner to developed and developing nations throughout the world. Because someday, China wants to be the center of the reserve currency and settlement equation. Not just a player, but the player.

Now put this in the context of how BRICS+ alliance nations are developing alternative trading pathways and potentially creating a global stablecoin that utilizes a basket of currencies—including the yuan—along with hard commodities like gold, to facilitate international settlements. The goal is to reduce dependence on the dollar for global trade and financial transactions.

This is the real threat to American economic hegemony. Not whether Javier Milei can balance Argentina’s budget or whether inflation comes down in Buenos Aires. The real question is whether the United States can maintain its privileged position as the issuer of the world’s dominant reserve currency, which allows us to run persistent trade deficits and finance our government spending at favorable interest rates.

During the Obama administration, there was at least an attempt at a strategic response to China’s growing influence: the Trans-Pacific Partnership (TPP). Yes, it was flawed. Yes, it had serious problems with labor and environmental protections. But it was a calculated, comprehensive strategy for economic containment—creating a trade bloc that included key Asian and Latin American countries while excluding China, thereby setting rules for trade and investment that would favor American interests and values.

Trump pulled out of TPP in his first term. And now, instead of that kind of Cold War Kennan-style economic containment strategy, we have an autocrat with a trigger-happy autopen blasting out tariffs and sanctions on the whole world with no apparent strategy beyond personal grievances and ideological posturing.

So here we are. Argentina is playing a pivotal, albeit outsized and largely symbolic role in the battle over ideology and worldview. On one side, you have Trump and Milei—the seat-of-the-pants wannabe authoritarians centralizing power and playing fast and loose with monetary policy. On the other side, you have the slow-moving, calculated Asian giant methodically building economic relationships and infrastructure that will define the next century of global commerce.

And while Trump and Scott Bessent think they’re outsmarting everyone and making friends with wildcards like Milei, China is picking our pocket with one hand and filling the other with Argentine soybeans.

We’re offering $20 billion dollars to prop up Argentina’s currency so that Javier Milei’s ideological project doesn’t collapse before the midterm elections and embarrass Donald Trump.

Meanwhile, American soybean farmers—some of Trump’s most loyal constituencies—are getting crushed. They’re watching their government make their biggest competitor more competitive while China, which normally buys American soybeans, loads up on twenty shiploads of Argentine beans instead. Senator Chuck Grassley from Iowa, not exactly a flaming liberal, asked the obvious question: “Why would USA help bail out Argentina while they take American soybean producers’ biggest market?”

The Trump administration doesn’t have a good answer to that question. Because there isn’t one.

Image Source

• The White House, Public domain, via Wikimedia Commons. Changes were made.