Washington (AFP) – The United States said on Wednesday it was in talks with Argentina on a $20 billion program of economic support, buoying Argentina’s markets and its embattled leader Javier Milei, a close ally of President Donald Trump. The right-wing Milei has been struggling to ease market jitters ahead of midterm elections, which could determine the future of his austerity agenda. The battered peso rebounded after US Treasury Secretary Scott Bessent announced his department was negotiating with Argentine officials on “a $20 billion swap line with the Central Bank.” Argentina’s currency rose 2.4 percent to 1,333.90 pesos to the US dollar on the announcement, which came a day after Bessent and US President Trump held talks with Milei in New York. The United States is also ready to buy the country’s dollar bonds, Bessent added.
Milei, a key Latin American ally of Trump, thanked the US president and Bessent for their “support and confidence.” Economy Minister Luis Caputo, writing on X, hailed the dawn of a “new era” and called on all Argentines to work to “make our country great again” — reprising Trump’s “Make America Great Again” slogan. Swap lines are transactions that usually involve two central banks agreeing to swap their currencies at a set exchange rate for a specified period. It is unclear, however, whether the talks with Argentina involve the Federal Reserve. Bessent also said Washington was prepared to deliver “stand-by credit” from the Treasury’s exchange stabilization fund.
During his talks with Milei on the sidelines of the UN General Assembly on Tuesday, Trump had sought to downplay his ally’s woes, promising “help” while saying: “I don’t think they need a bailout.” “He, like us, inherited a mess and what he’s done to fix it is good,” Trump told reporters.
The peso fell sharply after 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 added Wednesday that the US Treasury “stands ready to purchase Argentina’s USD bonds and will do so as conditions warrant,” among other measures. “As President Trump has stated, we stand ready to do what is needed to support Argentina,” he wrote. He said that the South American country “has the tools to defeat speculators, including those who seek to destabilize Argentina’s markets for political objectives.” His remarks echoed a claim by Milei that the left-wing opposition has been deliberately stoking “panic” to weaken him.
The Trump administration’s plans raised questions domestically. Senator Elizabeth Warren, the top Democrat on the Senate Banking Committee, wrote a letter dated Monday to Bessent seeking further information about a potential “bailout” of Argentina. “It is deeply troubling that the president intends to use significant emergency funds to inflate the value of a foreign government’s currency and bolster its financial markets,” she said. Bessent shot back at Warren’s criticism, saying she and others “failed to act when presented with a historic opportunity to stabilize Latin America economically and geopolitically during the Obama years.” Free-marketeer Milei’s election was cheered by investors in 2023 but he has begun to hemorrhage support after two years of biting austerity and a corruption scandal involving his sister.
© 2024 AFP
