US Secures $20 Billion Swap Line with Argentina, Buys Pesos
The United States has established a significant monetary agreement with Argentina, marked by a $20 billion currency swap line. This initiative aims to bolster stability in Argentina’s economy, particularly the peso’s value.
Details of the Currency Swap and Financial Impact
On Thursday, U.S. Treasury Secretary Scott Bessent announced the completion of a currency swap framework with Argentina’s central bank. The U.S. government has actively purchased Argentine pesos as part of this deal. This move has positively influenced the Argentine peso and dollar bonds.
Market Reactions
The announcement led to a notable increase in Argentine financial market activity. Following the news:
- The Argentine 2035 bond value rose by 4.6 cents, trading at 60.58 cents on the dollar.
- The peso strengthened, closing at 1,425 per dollar, marking a 0.8% increase for the day.
This surge contrasts with previous sessions marked by a managed decline of the peso, due to interventions from the Argentine treasury.
Background and Rationale
Bessent’s announcement came after four days of meetings with Argentine Finance Minister Luis Caputo, alongside officials from the International Monetary Fund (IMF). These discussions followed the IMF’s provision of a new $20 billion loan program to Argentina in April.
According to Bessent, Caputo emphasized ongoing coordination with the IMF regarding Argentina’s economic reform commitments. He stated, “Argentina’s policies, when anchored on fiscal discipline, are sound.” The Secretary underlined that Argentina’s current exchange rate framework is effective.
Significance of U.S. Actions
Bessent highlighted the urgent need for liquidity in Argentina, stating, “Argentina faces a moment of acute illiquidity.” He expressed confidence in the international community, including the IMF, supporting Argentina’s fiscal strategy. However, he noted that the U.S. is positioned to act quickly to address the crisis.
A U.S. Treasury spokesperson has not disclosed specifics regarding the quantity of pesos purchased or the detailed structure of the $20 billion currency swap line.
