US may double support for Argentina to $40bn conditional on policy reforms
SCREWING OVER US FARMERS FOR MILEI
The United States has purchased Argentine pesos on the open market and is establishing a $20bn facility to invest in Argentine sovereign debt, Treasury Secretary Scott Bessent confirmed on October 15. Combined with the initial $20bn currency swap line, total US support for Argentina would reach $40bn.
Bessent described the arrangement as "a private-sector solution to Argentina’s coming debt payments."
Argentine markets responded positively, with the benchmark Merval index surging 10% during the trading session. Local stocks closed up 1.7% after rising over 4% earlier, while international dollar bonds gained ground. The Argentine peso declined 1.7% to 1,378 per dollar.
While President Donald Trump initially suggested US support would hinge on President Javier Milei's performance in the upcoming midterm elections, Bessent said the assistance is "policy-specific" and will continue "as long as Argentina continues enacting good policy."
“A win [for Milei in the mid-terms] would entail keeping a blocking level on any bad policy, for the president to be able to veto the policies. And so [the aid] is not election-specific; it is policy-specific," he said in a bit to clarify Trump's earlier comments.
This assurance comes as Milei faces a challenging electoral landscape. Polls show a tight race between his La Libertad Avanza party and Peronist Fuerza Patria, with LLA trailing by over 10 points in Buenos Aires province. Political scientist Gustavo Marangoni told AFP that Milei has "no chance of winning a majority," estimating his party would capture approximately one-third of available seats.
Central Bank President Santiago Bausili confirmed the $20bn currency swap would be operational within two weeks, following intensive documentation work. "We've been working for the past two weeks, essentially day in and day out, with full dedication to complete the documentation associated with the swap, and we hope to be able to execute the free market agreement containing the terms of the swap very soon," Bausili told Infobae.
This substantial US financial package represents a critical lifeline for Argentina, which has defaulted on its sovereign obligations three times since 2000, as it seeks to cover foreign currency debt payments in 2026. However, the conditional nature of US support hinted at by Trump poses a major challenge for the libertarian administration.
“The current strategy is extremely fragile,” Barry Eichengreen, a professor of economics and political science at the University of California, Berkeley, told NBC News.
“Even if Argentines manage to skate through thin ice this time, there are always more bumps in the road."
Argentina also enjoys the backing of the IMF, with a $44bn programme renegotiated last April which granted a further $20bn Extended Fund Facility (EFF). Bloomberg estimates Buenos Aires' current exposure to the fund to be around $55bn.
Argentines will go to the polls on October 26 to elect half of the seats in the Chamber of Deputies and a third of the seats in the Senate, where Milei currently lacks the support needed to advance his bold economic plans.
Bessent, who recently described Argentina as a "systemic ally" of the US, expressed confidence that Milei's right-wing coalition would "do quite well and continue his reform agenda."
Argentine President Javier Milei met with US President Donald Trump at the White House on October 14 to strengthen bilateral ties, securing a crucial endorsement ahead of Argentina's upcoming midterm legislative elections.
The meeting followed the US activation of a $20bn currency swap with Argentina, triggering a massive rally in Argentine stocks and bonds. The libertarian leader arrived in Washington at 1:00 a.m. local time amid heightened security, staying at the official Blair House residence across from the White House, which is reserved for close allies to the president, Infobae noted.
Trump publicly backed Milei's electoral prospects during their meeting. "Your career has been an amazing one, and it's going to continue with the election. You're going to win the election. We're going to endorse you. I'm going to endorse you today. Fully endorse you," Trump told Milei in front of reporters.
However, he attached a critical condition to his support. "If a socialist wins, you feel a lot differently about making an investment," Trump stated.
"We're not going to let somebody get into office and squander the taxpayer money from this country. I'm not gonna let it happen," he said. "If [Milei] loses, we are not going to be generous with Argentina."
Argentines will go to the polls on October 26 to elect half of the seats in the Chamber of Deputies and a third of the seats in the Senate, where Milei currently lacks the support needed to advance his reform agenda.
Despite suggestions that assistance is tied to electoral results, Trump insisted the Treasury swap agreement was about helping "our neighbours." US Treasury Secretary Scott Bessent, who recently described Argentina as a "systemic ally" of the US, expressed confidence that Milei's right-wing coalition would "do quite well and continue his reform agenda."
This unprecedented US intervention in Argentine finances underscores the strategic importance both leaders place on their ideological alliance. While the $20bn swap provides critical financial support for Argentina's 2026 debt obligations, Trump's explicit electoral endorsement and conditional aid threats represent a remarkable departure from traditional diplomatic norms, potentially influencing voter sentiment as the midterm elections fast approach.
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