Recently, the U.S. Department of the Treasury announced on Thursday (October 9) that it has reached a currency swap agreement with Argentina, amounting to approximately $20 billion. The agreement involves the purchase of Argentine pesos in the market to support the country’s financial stability. This move is seen as concrete support from U.S. President Trump for the reforms of the Milei government in Argentina.
The U.S. Secretary of the Treasury, Scott Bessent, expressed on the social platform X, “The U.S. Department of the Treasury stands ready to take all necessary extraordinary measures to maintain market stability.”
Following the news, financial assets in Argentina saw a comprehensive rise. The 2035 government bond prices increased by 4.5 cents to 60.5 cents per U.S. dollar, while the peso to dollar exchange rate closed at 1 USD to 1418 pesos, appreciating by 0.8%. The Buenos Aires stock market surged by over 5%, with Argentine stocks listed in the U.S. also rising by 13%.
The agreement was reached after four days of discussions between Bessent and the Argentine Minister of Finance, Luis Caputo, in Washington, with the participation of the International Monetary Fund (IMF).
IMF Managing Director Kristalina Georgieva praised the U.S. decision on X and stated that the IMF “fully supports Argentina’s economic plan with fiscal discipline and a sound exchange rate system at its core.”
The U.S. Treasury did not disclose the scale of peso purchases and swap details. Bessent emphasized in an interview on Fox News program “The Ingraham Angle” that this action is “not a bailout” and that “no funds are directly transferred to Buenos Aires.” He pointed out that the Exchange Stabilization Fund (ESF) used “has never incurred losses in history, and will not this time as well.”
Bessent also mentioned that this measure holds strategic significance. The Milei government has pledged to “remove Chinese (Communist) influence from Argentina” and open up the country for U.S. companies to invest in rare earth and uranium resource development.
He stressed that the success of reforms in Argentina is “systemically important,” and a stable and strong Argentina not only contributes to the prosperity of South America but also aligns with U.S. strategic interests. Bessent urged both parties to consider Argentine stability as a “common priority.”
This swap arrangement is also seen as substantial support from Trump to political ally Milei. Argentina is set to hold midterm congressional elections on October 26, with the Milei camp aiming to strengthen parliamentary seats and advance the reform agenda of reducing public spending and attracting private investments.
Shamaila Khan, the Head of Emerging Market Bonds at UBS, believes that the U.S. action will boost confidence in the Milei camp. Kathryn Exum, Sovereign Research Head at Gramercy, pointed out that the key is whether fiscal and exchange rate reforms can be sustained post-election.
Milei later expressed gratitude on X to Bessent and Trump for their “trust and support,” stating that the two countries will “work as the closest allies to build a free and prosperous Americas.” He is scheduled to attend the IMF and World Bank Annual Meetings in Washington next week and meet with Trump.
Investors have responded positively. Eduardo Ordonez Bueso, the Emerging Markets Investment Manager at BankInvest, highlighted, “If the U.S. does not fulfill its commitments, what we are talking about today would likely be a complete collapse of Argentina.”
(This article references reporting from Reuters)