Argentina’s central bank announced on Monday (October 20) that it has signed a currency swap agreement with the U.S. Treasury worth a total of $20 billion. This agreement aims to stabilize the exchange rate and strengthen the liquidity of foreign exchange reserves. The agreement was reached a week before Argentina’s midterm elections and is seen as an important move by President Javier Milei’s government under political and economic pressure.
The Central Bank of Argentina (BCRA) stated that the agreement establishes a framework for bilateral currency exchange mechanisms, allowing the central bank to expand its policy tools for market intervention and enhance the defense capabilities of the foreign exchange and capital markets. The Central Bank emphasized that the agreement is part of a broader financial stability strategy aimed at enhancing the country’s ability to cope with fluctuations in the foreign exchange and capital markets.
The statement did not disclose specific technical details, and the U.S. Treasury has not yet issued an official statement. After the news was announced, the Argentine peso closed at 1475 to 1 against the U.S. dollar, hitting a record low and depreciating by 1.7% in a single day, indicating that market reaction remains cautious.
U.S. Treasury Secretary Scott Bessent stated last week that the agreement would convert Special Drawing Rights (SDRs) held in the Exchange Stabilization Fund of the Treasury into U.S. dollars to support the initiative, executed through operations with U.S. banks and investment funds.
Bessent emphasized that the U.S. will not impose additional conditions on Argentina but requested Milei’s government to continue advancing fiscal austerity and market liberalization reforms to promote private sector growth. He revealed that over the past few weeks, the U.S. has purchased Argentine pesos multiple times, although the transaction volume has not been disclosed. According to currency traders, since the U.S. entered the market on October 9, the U.S. dollar funds injected into the peso market have reached billions of dollars.
On the same day, The Wall Street Journal reported that several U.S. banks, including JPMorgan Chase, Bank of America, and Goldman Sachs, are still cautious about providing loans to Argentina without collateral or guarantees.
Argentinian Minister of Economy Luis Caputo stated last week that he hopes to finalize the agreement framework before the congressional midterm elections on October 26. Milei’s Free Forward Party remains a minority in Congress, and this election is considered a crucial test of whether its reforms can continue.
Since coming to power, Milei has pushed for significant cuts in government spending and relaxation of market regulations, but reforms have been hindered by political resistance in Congress and from local governments. U.S. President Trump warned last week that if Milei’s party fails in the elections, the U.S. “will not waste time dealing with Argentina,” causing market turbulence.
Bessent later clarified that U.S. support will depend on whether Argentina maintains “good policies,” not the election results. He stated that if Milei’s camp performs well in the elections, it will help maintain the reform process and deepen U.S.-Argentina cooperation.
(Reference: Reuters)