[L]et me ask two questions about this deployment of $20 billion, or maybe $40 billion in U.S. funds. (Scott Bessent, the Treasury secretary, has talked about a second facility financed by the private sector, but I don’t see why anyone would put money into this facility without some kind of official U.S. backing that puts taxpayers further on the hook.) First, what if anything does this have to do with U.S. national interest? Second, will this bailout succeed and, if so, for whom?
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In 1994, just before the financial crisis that prompted Clinton to intervene, Mexico accounted for 10 percent of U.S. exports, a number that would rise over time as the North American Free Trade Agreement led to close integration of our national economies. Furthermore, Mexico is right next door, giving the U.S. an obvious interest in Mexico’s political stability.
Argentina is, to say the least, not next door, and accounts for less than 0.5 percent of U.S. exports. Why, exactly, should U.S. taxpayers bail out Javier Milei?
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Now, even though the US is currently buying pesos, Argentina is supposed to repay the “swap line” borrowing with dollars at the current exchange rate, so US taxpayers won’t lose from a devaluation. But where will the dollars come from? Realistically, taxpayer money is definitely at risk.
From Krugman’s blog post:
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