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US Treasury Secretary Scott Bessent has said a “large and forceful” intervention is on the table to support Argentina through a bout of severe market volatility, throwing a lifeline to libertarian President Javier Milei.
In comments to reporters and on social media on Monday, Bessent said Washington was considering purchases of Argentina’s currency or sovereign debt by a fund controlled by the US Treasury, adding that “all options” were on the table.
The US Treasury secretary evoked the words of Mario Draghi, the former president of the European Central Bank during the Eurozone crisis, to say the US would do “whatever it takes” to sustain Argentine financial markets.
“We’re sending a message that if you do the right thing, if you follow good policies, that if you’re aligned with the values of the United States . . . we are willing to provide assistance when things move out of equilibrium,” Bessent said.
Milei, a close ally of Donald Trump, is trying to contain a run on the peso and a slide in asset prices after a disappointing local election result unnerved markets.
The Argentine leader and Bessent are set to meet Trump in New York on Tuesday. The Treasury secretary said no intervention would be announced before the meeting, but added that no “conditionality” would be placed on Milei’s government in connection with the help.
“We’ll see where markets are and what the level of outflows are, or maybe the outflows turn into inflows,” he said.
On X, Bessent had called the South American country “a systemically important US ally in Latin America”, adding that the US Treasury “stands ready to do what is needed within its mandate to support Argentina. All options for stabilisation are on the table”.
He said that options for a support package “may include, but are not limited to, swap lines, direct currency purchases, and purchases of US dollar-denominated government debt from Treasury’s Exchange Stabilization Fund”.
The Exchange Stabilization Fund, which was set up in 1934, is controlled by the US Treasury secretary, who has “considerable discretion” in the use of its assets — which include about $22bn of liquid securities — to intervene in exchange rates.
The fund was most famously used to bail out Mexico in 1995 during the country’s so-called tequila crisis. The bulk of its $211bn of assets is in less liquid special drawing rights, reserves created by the IMF.
Argentina’s markets have tumbled since Milei’s party fared far worse than expected in elections in the province of Buenos Aires, ahead of midterm polls in October.
The surprise result, combined with a corruption scandal and a series of congressional defeats, has fuelled concern among investors about his ability to maintain support for his free market reforms.
The peso has plunged to the lower limit of its exchange rate band, and the central bank was forced to spend $1.1bn in three days last week to defend it.
Prices of Argentina’s dollar bonds have fallen sharply as investors took fright at how quickly Milei’s government was burning through its foreign currency reserves. Bonds due in 2029 and 2035 rallied by 6 to 7 cents in the dollar to 71 and 55 cents, respectively, after Bessent’s comments.
Argentina’s Merval stock index surged more than 9 per cent in US dollar terms on Monday. It remains down 49 per cent so far this year.
Milei is turning to the US after already tapping $20bn from the IMF this year, stretching the fund’s capacity for further bailouts to the limit.
Argentina had already missed initial IMF targets to rebuild foreign exchange reserves even before heavy intervention last week.
The country now makes up almost half of the IMF’s roughly $125bn in outstanding lending worldwide, far ahead of other big borrowers such as Ukraine and Egypt.
In a separate effort to boost the central bank’s firepower to defend the peso, Milei’s spokesperson earlier on Monday announced a temporary suspension of Argentina’s big taxes on grain exports. The move could encourage sales and increase the flow of export dollars into Argentina.
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