Trump Supports Argentina’s Milei with $20 Billion as US Purchases Pesos
The U.S. Treasury has established a new framework for a $20 billion currency swap with Argentina, marking a significant move to support the country’s troubled economy. This agreement includes the direct purchase of Argentine pesos. Following this announcement, both the peso and Argentine bonds experienced notable gains in the market.
Market Reaction to U.S. Support
The U.S. Treasury Secretary, Scott Bessent, emphasized the government’s readiness to implement exceptional measures for market stability. The Argentine 2035 bond increased by 4.5 cents, reaching 60.5 cents on the dollar. Meanwhile, the peso appreciated by 0.8%, closing at 1,418 pesos per dollar after an earlier decline of 3% during the day. Argentine stocks surged 5.3% on the same day, recovering from a recent low.
Involvement of the IMF
Bessent’s announcement followed several days of discussions with Argentine Finance Minister Luis Caputo and International Monetary Fund (IMF) officials. The IMF is currently managing a $20 billion loan program for Argentina, although a spokesperson did not provide comments regarding these recent initiatives.
Clarification on U.S. Financial Aid
During a Fox News broadcast, Bessent clarified that this assistance should not be labeled as a bailout. He highlighted that no funds would be sent directly to Buenos Aires and that historically, the U.S. Exchange Stabilization Fund (ESF) has never incurred losses. Bessent stated that the support provides strategic benefits for the U.S., including assurances from Argentina’s President Javier Milei regarding U.S. business opportunities in the country.
Implications for Milei and the Upcoming Elections
This financial backing serves as a crucial support for President Milei’s party in the upcoming legislative elections on October 26. His administration is focused on cutting government expenses and attracting private sector investment. Nonetheless, challenges remain, as some Argentine lawmakers aim to restrict the president’s decision-making powers.
- Bond Increase: Argentine 2035 bond rose by 4.5 cents.
- Peso Value: Peso closed at 1,418 per dollar, gaining 0.8%.
- Stock Market Boost: Argentine stocks increased by 5.3%.
Political Tensions in the U.S.
The U.S. Senate Democrats expressed opposition to President Trump’s financial support for Argentina. They criticized the administration for providing aid to a foreign government while the U.S. was facing a partial government shutdown. Some proposed legislation aims to prevent the use of the ESF for such foreign bailouts, though it faces challenges in Congress.
As the situation evolves, the outcome of the upcoming elections and the effectiveness of Milei’s policies remain critical to securing stable relations and economic cooperation between Argentina and the U.S.
