Dollar Lifelines and Domestic Faultlines: Argentina’s Crisis at a Crossroads - A Case Study on Inflation Dynamics, Exchange-Rate Pressures, and Strategic Stabilization Choices

Abstract

In October 2025, Argentina secured a USD 20 billion bilateral currency-swap arrangement with the United States at a moment of escalating macroeconomic stress. The country faced one of the highest inflation rates in the world, declining foreign exchange reserves, and deteriorating investor confidence. The swap facility was designed to provide temporary access to dollar liquidity, potentially stabilizing the Argentine peso and easing pressure on the country’s balance of payments. This case examines the economic context that led to the agreement, the mechanics of the swap arrangement, and the policy dilemmas confronting Argentina’s economic leadership. Although the swap line offered short-term financial relief, it did not address deeper structural weaknesses in fiscal policy, institutional credibility, and monetary governance. The case places readers in the position of Argentine policymakers who must determine whether to rely on external liquidity support, seek multilateral assistance, or pursue politically difficult domestic reforms. Through this decision framework, the case highlights broader issues in international macroeconomics, including financial crisis management in emerging markets, the role of central bank cooperation in the global financial system, and the political economy constraints shaping stabilization policy.