US purchases Argentine pesos and establishes a $20 billion swap agreement, Bessent states.

US Treasury Supports Argentina Amid Economic Turmoil

On October 9, the U.S. Treasury announced a $20 billion currency swap framework with Argentina and proceeded to buy pesos in the open market. This move aims to bolster the struggling country’s economy, honoring a commitment made by President Trump. Following this, the peso and Argentine dollar bonds experienced a significant surge.

Treasury Secretary Scott Bessent mentioned, “The U.S. Treasury is prepared to take prompt and justifiable actions to stabilize the markets.” This initiative came after four days of negotiations with Argentina’s Finance Minister Luis Caputo and representatives from the International Monetary Fund (IMF). The IMF had previously approved a new loan program for Argentina amounting to $20 billion back in April.

Following the announcement, Argentina’s bond due in 2035 saw a rise of 4.5 cents, trading at 60.5 cents to the dollar. Additionally, the peso appreciated by 0.8%, closing at 1,418 to the dollar, rebounding after a 3% drop the preceding day.

Local stocks also climbed 5.3%, recovering from a recent low earlier last month. Argentine stocks listed on U.S. exchanges surged by 13% as well. Bessent conveyed his concerns over Argentina’s liquidity crisis, stating, “Argentina is experiencing a critical shortage of liquidity. The global community, including the IMF, is united in its support for Argentina’s prudent fiscal approach. However, only the U.S. can act swiftly, and we are doing just that by purchasing Argentine pesos directly.”

As for further details of the peso purchases or specifics regarding the currency swap, the Treasury Department opted not to comment. Meanwhile, U.S. Senate Democrats have voiced concerns that President Trump is prioritizing bailouts for foreign governments while the U.S. government itself faces a shutdown.

This Support for Milley

Bessent has pointed out that the Treasury’s support could potentially aid Argentina’s President Javier Milley ahead of the midterm parliamentary elections set for October 26. Milley’s administration hopes to solidify its influence to drive spending cuts and promote private investment, although lawmakers are currently working to limit his ability to enact measures by decree.

While the market reaction was promptly positive, it remains uncertain if this U.S. backing will help improve Milley’s electoral prospects, especially given the rising discontent over austerity measures among the public.

Some experts believe that Bessent’s announcement might enhance the outlook for Milley’s party. They also highlighted that the midterm elections are pivotal, as well as any subsequent policy and currency adaptations following the vote. Bessent emphasized that the success of Milley’s reforms is crucial for U.S. interests by fostering stability in the region.

Expressing Solidarity

Milley expressed gratitude towards Bessent and President Trump on social media, emphasizing their partnership in promoting economic freedom and prosperity in the region. Investors reflected relief over the U.S. intervention in the markets.

Another market analyst voiced concerns about the peso’s value and emphasized the critical need for fulfilling promises—otherwise, the prospect of Argentina facing a total economic collapse could have been a real concern. Meanwhile, some Senate Democrats have put forward a bill to prohibit the use of the Exchange Stabilization Fund for foreign government bailouts, although these measures are unlikely to pass given the current political minority they face.

Senator Elizabeth Warren criticized President Trump for prioritizing foreign interests during the government shutdown, highlighting a disparity in his supposed commitment to “put America first.”