Buenos Aires (Argentina) (AFP) – The US Treasury said Monday it stood ready to “do what is needed” to support Argentina’s economy, as President Javier Milei battles to calm jittery financial markets. Self-declared “anarcho-capitalist” Milei, a close ally of President Donald Trump, has been faced with a run on the peso, having to sell off dwindling foreign reserves in the aftermath of a provincial election trouncing for his party.
As he seeks a US loan to cover debts reaching maturity, Milei is due to meet Trump and Treasury Secretary Scott Bessent on the sidelines of the UN General Assembly in New York on Tuesday. Bessent wrote on X Monday that “all options for stabilization are on the table.” These may include “swap lines, direct currency purchases, and purchases of US dollar-denominated government debt from Treasury’s Exchange Stabilization Fund,” he said. Swap lines are transactions in which two central banks agree to swap their currencies at a set exchange rate for a specified period.
The Argentine peso has been falling sharply since Milei’s party was beaten by the center-left Peronist movement in a Buenos Aires provincial election on September 7. The vote was seen as a litmus test for national legislative elections scheduled for October 26. Bessent wrote that Argentina “is a systemically important US ally in Latin America” and Washington was confident Milei’s “support for fiscal discipline and pro-growth reforms are necessary to break Argentina’s long history of decline.” “Opportunities for private investment remain expansive, and Argentina will be Great Again,” he added.
Milei thanked Washington for its “unconditional support for the Argentine people.” The budget-slashing libertarian wrote on X that “those of us who defend the ideas of freedom must work together.” International Monetary Fund head Kristalina Georgieva also welcomed Bessent’s statement and underscored “the crucial role of partners in promoting strong policies for stabilization and growth for the benefit of the people of Argentina.”
– ‘Working on it’ –
Argentina’s Foreign Minister Gerardo Werthein, meanwhile, said “there has been much speculation” on a possible Treasury loan, “with amounts of $30 billion mentioned, which is absolutely incorrect…” He told Radio Mitre it was true that “we are working on it, but for a much smaller amount.” The United States in April backed an agreement Argentina struck with the International Monetary Fund for a loan of $20 billion, as well as $12 billion from the World Bank and another $10 billion from the Inter-American Development Bank. Bessent at the time poured cold water on the idea of a direct credit line from the United States.
Argentina, which has a track record of economic crises and hyperinflation, is the IMF’s biggest debtor. It borrowed $44 billion from the IMF in 2018 — the lender’s biggest-ever loan — and has since renegotiated repayment terms. The government in Buenos Aires said Monday it would suspend taxes on grain and meat exports until October 31 as part of efforts to boost the economy. The objective was to “generate a greater supply of dollars,” presidential spokesman Manuel Adorni said on X. Reducing taxes should make grain cheaper on the global market, boosting sales.
Nicolas Pino, president of the SRA agricultural producers’ association, said the tax should be permanently scrapped for Argentina’s biggest export sector. Financial markets reacted to Monday’s developments with a rise in Argentine bonds and shares on Wall Street and in Buenos Aires, as well as a significant strengthening of the peso.
© 2024 AFP
