US Treasury Secretary Scott Bessent pledged to provide “all options for stabilisation” to President Javier Milei as he works to keep Argentina from falling back into crisis, prompting a rally in the country’s assets.
Bessent and US President Donald Trump will speak with Milei in New York on Tuesday and “more details will be available shortly after this meeting,” Bessent said Monday in a thread on X.
Options include, but aren’t limited to, currency swap lines, direct currency repurchases and US dollar-denominated debt from the Treasury’s exchange stabilisation fund.
Argentina’s dollar bonds touched session highs after the announcement, with notes maturing in 2035 jumping almost eight cents on the dollar to trade above 55 cents, according to indicative pricing data compiled by Bloomberg. The peso strengthened nearly three percent to 1,432 per dollar as of 12.45pm local time, and the benchmark S&P Merval stock index was up more than six percent.
“For Washington, Milei represents more than an economic partner: He is also a strategic geopolitical ally as the US seeks to build a bloc of like-minded governments in Latin America,” said Claudio Zampa, founder of Switzerland-based Mangart Capital Management.
Supporting Milei reinforces the Trump administration’s more robust presence in the region. Bessent called Argentina “a systemically important US ally” and emphasised private investment opportunities in the country.
By contrast, Trump imposed steep tariffs on neighbouring Brazil before its Supreme Court sentenced former leader Jair Bolsonaro to prison for plotting a coup. The US president has also attacked boats of alleged drug-traffickers in a warning to Venezuela’s Nicolas Maduro.
A direct loan from the US Treasury to a foreign country would be highly unusual but isn’t unprecedented. Back in early 1995, President Bill Clinton had the Treasury pull US$20 billion from its currency stabilisation fund to lend to Mexico as part of a broader foreign rescue package to stabilise a collapsing peso.
Milei, for his part, has carefully cultivated ideological ties with Trump, visiting him at Mar-a-Lago shortly after his election victory in November 2024. Fresh US support for Argentina would come on top of its US$20-billion programme with the International Monetary Fund, which was finalised in April.
IMF Managing Director Kristalina Georgieva welcomed Bessent’s support for Argentina, saying in a post on X “this underscores the crucial role of partners in promoting strong policies for stabilisation and growth” in Argentina.
Bessent, during a rare visit by a US Treasury Secretary to Argentina five months ago, called the IMF deal a “fulcrum day” for the crisis-prone nation. At the time, he downplayed the chances that Milei would need to spend money to defend the peso. “The good thing about having the money is the bigger your war chest, the more unlikely that you’re going to have to intervene,” Bessent said in an interview in Buenos Aires. “It’s going to be a smoothing function. I’m going to be watching it closely.”
Argentina’s President and his economy minister, Luis Caputo, both thanked Bessent for his latest show support in separate posts on their X accounts. The Treasury Secretary said later Monday at a briefing the US is prepared for a “large and forceful” intervention in Argentina, according to a CNBC report.
Milei’s Central Bank sold US$1.1 billion over three days last week to prop up the peso in Argentina’s currency market as pressure boiled over and sovereign bonds posted the worst losses in emerging markets. Investors grew concerned in recent weeks after a bribery scandal hit Milei’s sister and top adviser, Karina, and then his government unexpectedly lost a key Buenos Aires Province vote by a landslide.
In addition to burning through precious hard currency reserves to defend the peso, Milei’s government announced a temporary halt on crop tariff exports on Monday in a bid to bring in more dollars.
If the US Treasury’s announcement ends up being as strong as it looks, it could move political concerns around the midterm elections to the background, said Matias Montes, head of strategy at EMFI Securities. “The most important thing is for the exchange market to calm down so the Central Bank doesn’t lose any more foreign currency,” he said
Argentina’s midterm elections on October 26 will be Milei’s biggest electoral test since taking office in 2023 and polls show his disapproval rating rising, while his party’s lead ahead of the Peronist opposition party has been cut in half. Beyond the bribery allegations and provincial election wipeout, Milei’s rivals in Congress have overturned some of his vetoes on popular spending items, such as education and healthcare, raising investor concerns about his ability to govern.
Milei’s sit-down with the US president and his Treasury secretary “could be the bridge Argentina needs” to regain momentum heading into the next month’s vote, which will refresh more than half of Congress, according to Malcolm Dorson, senior portfolio manager at Global X Management. “If Milei and Bessent walk out of tomorrow’s Trump meeting with even a vague roadmap for near-term US support, it’s bullish for Argentinian assets,” Dorson said.
The economic recovery on Milei’s watch has faltered as output slightly contracted in the second quarter and analysts forecast another decline between July and September. Unemployment remains elevated compared to pre-Milei levels and more employers in key sectors like manufacturing and construction intend to lay off workers in the coming months than those who plan to hire, according to government surveys.
by Patrick Gillespie & Nicolle Yapur, Bloomberg
