Treasury Secretary Scott Bessent confirmed the U.S. signed a $20 billion currency swap to prop up the Argentine peso on Tuesday. The goal? To raise the peso’s value on foreign exchange markets.

The Argentine peso is in trouble because, well, people don’t want it.

“The currency is woefully over-valued,” said Mark Sobel, U.S. chair of the Official Monetary and Financial Institutions Forum. “And the market has lost confidence that the value of the currency is sustainable or tenable.”

A bedraggled peso is a problem for Argentina’s government, which is about to face an election.

“If the peso falls, there’ll be an uptick in inflation in Argentina,” said Brad Setser, a senior fellow at the Council on Foreign Relations. “The price of imports will go up. The price of all things will go up.”

Not good if you’re trying to win an election. 

The way you prop up a currency is by going and buying a bunch of it. “When you buy something, or when you bid on something, the price tends to go up,” Setser said.

That’s what the U.S. has been doing — in a very unusual move, by the way. Just buying pesos.

“The U.S. has had to spend a decent amount of money, estimates are close to a half billion, maybe more, and it hasn’t actually had that much of an impact on the currency,” Setser said.

So the U.S. Treasury is throwing more dollars at the peso, up to $20 billion more, using something called a currency swap, “where you exchange one currency for another,” said Arturo Porzecanski, a research fellow at American University's Center for Latin American and Latino Studies. 

The basic idea is Argentina gets dollars that it can then use to buy pesos, propping up the value. The U.S. gets to hang on to a bunch of pesos which it doesn’t actually need. At some point Argentina pays back the dollars, and that is where the risks start to come in.

“There’s repayment risk (that) we’re not going to get repaid everything that we’re owed,” said Steve Kamin, a senior fellow at the American Enterprise Institute. “Argentina is a serial defaulter. It’s defaulted many times, and it owes far more money now to other agencies — especially the IMF — than it can repay.”

If Argentina’s currency continues to fall, the U.S. is left with a bunch of pesos that aren’t worth what it paid for them.