The Central Bank of the Republic of Argentina (BCRA) revealed, just six days ahead of the vital midterm elections, that it has entered into a $20 billion agreement for exchange stability with the U.S. Treasury. This deal outlines the framework for currency swap operations between Argentina and the United States, although specific technical details were not provided.
The central bank highlighted that these transactions would enhance its monetary and exchange rate policy tools, effectively boosting foreign exchange reserves’ liquidity. On that day, the Argentine peso dipped by 1.7%, hitting an unprecedented low of 1,475 pesos per dollar.
BCRA described this agreement as part of a broader strategy aimed at improving its resilience against fluctuations in foreign exchange and capital markets. However, the U.S. Treasury Department had not responded to inquiries about the specifics of this new swap line nor released an official statement confirming the arrangement.
U.S. Treasury Secretary Scott Bessent indicated that the deal would be backed by International Monetary Fund Special Drawing Rights, which would be converted into dollars held in the Treasury’s Exchange Stabilization Fund. He also pointed out that the U.S. would not impose further conditions on Argentina beyond the necessity for President Javier Milei’s administration to persist with austerity measures and economic reforms to promote private sector growth.
Caputo, Argentina’s Economy Minister, expressed hope last week that the terms of the swap agreement would be finalized before the midterm parliamentary elections on October 26, as Milei’s party seeks to boost its representation in parliament. Milei’s approach to tackling Argentina’s economic challenges includes significant spending cuts and a reduction in government size, although he has recently faced political setbacks.
Last week, U.S. President Donald Trump remarked that the U.S. would not engage with Argentina if Milei’s party were to lose in the midterm elections. This statement briefly unsettled local markets, yet Bessent clarified that continued U.S. support would depend more on sound policies than the election’s outcome. A favorable result for Milei’s party, he noted, would help resist any attempts to reverse current policies.
