Trump Administration Approves $20 Billion Lifeline to Support Argentina’s Economy
The U.S. Treasury finalized a $20 billion currency swap deal with Argentina, marking a major show of support for President Javier Milei’s government. The agreement includes purchasing Argentine pesos on the open market, fulfilling President Donald Trump’s pledge to stabilize Argentina’s struggling economy.
“The U.S. Treasury is prepared to take whatever exceptional measures are necessary to restore market stability,” Treasury Secretary Scott Bessent said on X, following the announcement.
Argentina’s 2035 sovereign bond surged 4.5 cents to trade at 60.5 cents on the dollar, while the peso strengthened 0.8% to 1,418 per dollar, recovering from earlier losses. Local equities rallied 5.3%, and Argentine stocks listed in the U.S. climbed more than 13%.
The announcement followed four days of meetings between Bessent and Argentine Finance Minister Luis Caputo, alongside officials from the International Monetary Fund (IMF), which already has a $20 billion loan program with Argentina.
IMF Managing Director Kristalina Georgieva praised the U.S. move, saying the Fund was “fully aligned” with Argentina’s reform program, centered on fiscal discipline and a strong foreign exchange regime to rebuild reserves.
U.S. Support Not a Bailout, Says Treasury Secretary
While declining to release specific details about the peso purchases or swap structure, Bessent emphasized that the move does not constitute a bailout. He noted that no funds were directly transferred to Buenos Aires and that the Exchange Stabilization Fund (ESF) “has never lost money, and it’s not going to lose money here.”
Bessent added that the agreement also serves strategic U.S. interests, citing Milei’s commitments to reduce Chinese influence in Argentina and to open access for American firms to develop the country’s rare earth and uranium resources.
However, the decision drew criticism from Democratic senators, who accused Trump of using U.S. funds to support a foreign government while Washington remains in a partial government shutdown. Senator Elizabeth Warren called the move “inexplicable,” arguing that the administration was “propping up a foreign state while neglecting its own.”
Political Impact in Argentina Ahead of Midterm Elections
Analysts believe the $20 billion backstop aims to strengthen Milei’s position ahead of Argentina’s October 26 midterm elections. His party seeks to expand its minority representation in Congress to advance economic reforms focused on austerity and private investment.
Despite a positive market reaction, it remains uncertain whether the financial boost will improve Milei’s political prospects amid growing public discontent over spending cuts.
UBS strategist Shamaila Khan said the support package could bolster Milei’s credibility, while Gramercy’s Kathryn Exum noted that the elections and subsequent foreign exchange adjustments remain key turning points for Argentina’s economy.
Bessent described Milei’s reform agenda as being of “systemic importance” to U.S. interests, calling it essential to fostering “a prosperous and free Western Hemisphere.”
Milei and Trump Deepen Diplomatic Ties
President Javier Milei thanked both Donald Trump and Scott Bessent, writing on X:
“Together, as the closest of allies, we will build a hemisphere of economic freedom and prosperity.”
The Argentine leader is scheduled to meet Trump next week during the IMF and World Bank annual meetings in Washington.
Investors welcomed the move, with Eduardo Ordonez Bueso of BankInvest saying markets had been waiting for clarity. “If the U.S. hadn’t followed through, we would be talking about a complete collapse of Argentina,” he noted.
Meanwhile, U.S. Senate Democrats introduced a symbolic bill to block the Treasury’s use of the Exchange Stabilization Fund for foreign bailouts, but the legislation is unlikely to advance given the Republican majority.
