The U. S. Treasury has finalized a $20 billion currency swap framework with Argentina, buying pesos to support the struggling country, fulfilling President Donald Trump’s commitment. This move has led to a significant increase in the value of the Argentine peso and its bonds. In Thursday’s trading, the Argentine 2035 bond rose by 4.5 cents, and the peso ended at 1,418 per dollar, reflecting a 0.8% increase after a decline earlier in the day. Local stocks also rose by 5.3%, bouncing back from a low last month.
U. S. Treasury Secretary Scott Bessent announced these actions after four days of meetings with Argentine Finance Minister Luis Caputo, which included discussions with the International Monetary Fund (IMF), that currently has a $20 billion loan program in place for Argentina. IMF Managing Director Kristalina Georgieva expressed support for the U. S. measures, emphasizing the importance of fiscal discipline in Argentina’s economic program. A Treasury spokesperson did not provide additional specifics about the purchased pesos or the details of the currency swap line.
Bessent clarified that the actions were not a bailout, insisting no money was given to Argentina and highlighting the strategic advantages for the U. S., including Argentina’s commitment to reducing Chinese influence and welcoming U. S. companies in resource development. However, some Democratic lawmakers criticized Trump for using U. S. resources to assist a foreign government while the U. S. government faces a shutdown.
This support is partly aimed at strengthening the position of Argentina’s president, Javier Milei, ahead of the upcoming midterm elections, where his party is seeking to solidify its agenda of cutting spending and boosting private investment. Despite the immediate positive financial market response, public discontent over austerity measures poses a risk to Milei’s electoral success.
The impending midterm elections are viewed as crucial, with analysts emphasizing the importance of policy adjustments afterwards. Milei expressed gratitude to Bessent and Trump, promising to collaborate towards economic prosperity in the hemisphere. Investors responded positively to the support pledge, noting that without it, Argentina might face a significant financial crisis. Meanwhile, some U. S. Senate Democrats introduced legislation to stop using the Exchange Stabilization Fund for such foreign assistance.
with information from Reuters
