Washington’s rare move to buy pesos and open a massive swap line steadied Argentina’s markets — but set off a political storm.
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The US Treasury just threw Argentina a rare lifeline, moving to stabilise the country's markets by buying $20 billion (€17.28 bn) worth of Pesos as Buenos Aires battles dwindling dollar reserves.
“The US Treasury is prepared, immediately, to take whatever exceptional measures are warranted to provide stability to markets,” said US Treasury Secretary Scott Bessent, adding that the Treasury Department held four days of meetings with Argentine Economy Minister Luis Caputo in Washington DC to cement the deal.
The move steadied assets but triggered pushback on Capitol Hill, where critics claimed the US was bailing out the Argentinian economy — something Bessent denied.
Argentina’s libertarian President Javier Milei, a fervent admirer of US President Donald Trump, thanked the Treasury Secretary for his “strong support” and Trump for his “powerful leadership”.
“Together, as the closest of allies, we will make a hemisphere of economic freedom and prosperity,” Milei said in a social media post.
Bessent is coming under fire from US farmers and Democratic lawmakers for supporting an economy that directly competes with American producers in certain sectors.
US farmers are angry about the idea of rescuing Argentina, whose own farmers have benefited from a recent gush of sales of soybeans to China at the expense of their US counterparts. Lawmakers have pushed Trump to explain how this financial help aligns with his “America First” agenda.
After the announcement Thursday, a group of Democratic Senators introduced the “No Argentina Bailout Act”, which would stop the Treasury Department from using its Exchange Stabilisation Fund to assist Argentina.
“It is inexplicable that President Trump is propping up a foreign government, while he shuts down our own," Democratic Senator Elizabeth Warren of Massachusetts said in a statement.
“Trump promised ‘America First,’ but he’s putting himself and his billionaire buddies first and sticking Americans with the bill.”
It doesn't help that repeated bailouts have failed to stabilise the crisis-stricken economy of Argentina. As the International Monetary Fund's biggest debtor, it owes the global lender a staggering $41.8bn (€35.43bn).
Milei, a wild-haired far-right economist, came to office in late 2023 on the bold promise that this time would be different.
He vowed to take a chainsaw to reckless public spending that he inherited from his left-wing predecessor.
But his radical austerity programme has been painful, with no economic revival in sight and Argentinians are losing patience.
Now, Milei faces his greatest test yet as he heads into a midterm congressional election on 26 October that could decide the fate of his free-market experiment.
A disastrous defeat in local elections last month triggered a sudden exodus from Argentine assets as investors fretted over the country's political dysfunction, overvalued peso and rapidly depleting foreign exchange reserves.
The US financial help offers Milei a crucial reprieve. On Thursday, Argentina’s dollar-denominated bonds rose about 10% on Bessent's confirmation of the credit line and the Buenos Aires stock market surged 15%.
Economy Minister Caputo expressed his “deepest gratitude” to Bessent following the announcement.
“Your steadfast commitment has been remarkable,” he wrote.
Bessent made no mention of any economic conditions attached to the swap line for Argentina, leading many observers to criticise the intervention as a pre-election reward for a loyal friend rather than an investment in a strategic partner.
