The United States has cleared up any doubts about its commitment to Javier Milei. Treasury Secretary Scott Bessent announced this Wednesday that the White House is working “with investment funds and private banks” on a new line of credit for Argentina of $20 billion “aimed at the sovereign debt market.” The money, if the plan comes to fruition, promised by Bessent a month ago. If we add the rescue granted in April by the International Monetary Fund, also at the request of the United States, the Trump Government will have guaranteed Latin America’s third-largest economy $60 billion to keep it alive. The help is completed with. The first operation occurred on October 9 and the second on Wednesday, both for an unspecified amount.
The Treasury’s direct intervention in a currency market is an unusual operation, evidence of the weakness of Milei’s plan. The United States seems committed to stabilizing the peso in a scenario of high volatility and shortage of reserves in the Central Bank. The fiscal adjustment and zero emission model undertaken by the far-right president is going through a month of great turbulence after the market warned that the accumulation of reserves would be insufficient to cover debt commitments. In less than two weeks, mid-term legislative elections will be held and the incipient financial disaster predicted a major defeat for the president’s party against the Peronist opposition.
Trump’s help was supposed to put things in order, but not everything is so simple when it comes to the president of the United States. The Republican received Milei at the White House on Tuesday with the idea of showing the world that the Argentine had his support. But what should have been a lunch behind closed doors became a meeting open to the press where Trump expanded without restraint in front of his Argentine guests. Before the astonished gaze of Milei’s entourage, If Milei wins in October, there will be a rescue; If, however, he loses, the United States “will not be so generous,” the Republican warned. The markets immediately understood the message: Argentine debt bonds lost up to 7%, the Buenos Aires Stock Exchange collapsed and the peso depreciated against the dollar.
The Government tried to do damage control. Trump had not been referring to the legislative elections but to the presidential elections of 2027, they said without much conviction from the Argentine delegation in Washington. The Minister of Economy, Luis Caputo, announced the announcement of an imminent trade agreement with the United States. “We hope that there will be announcements soon about the agreement, everything came out ten points,” he said, in an attempt to change the axis of the discussion. He then attributed the markets’ reaction to the conditions imposed by Trump to “a misunderstanding.” Trump “was taken half literally and then the market, which is not at the meeting and cannot know everything that was happening there, interpreted it differently,” he said.
Bessent later came out in support of him with a battery of advertisements. The United States will support Argentina, he said, as long as Milei implements appropriate policies, whatever the election result in October. And to reaffirm the commitment, he detailed the new aid fund. “This is a private sector solution for Argentina’s next debt payments. Many banks are interested in it and many sovereign funds have expressed their interest in being part of it. In total it would be 40 billion dollars for Argentina,” he explained, if the 20 billion dollars of the swap. The plan is that the support is enough to change the expectations of investors, who until just a month ago were predicting a new catastrophe for the Argentine economy. The first reaction was moderately positive. Argentine bonds listed on Wall Street had started the day with losses of 1.2% and by mid-afternoon they were already up 3%.
It will be known in the coming days whether the announcements are enough to calm a highly stressed bond market. “The problem is that there is no firm commitment,” an operator from one of the main Argentine investment agencies cautiously warns. “By adding possibilities and non-executables, they can give us billions of dollars of ‘full support’ without seeing the effects,” he says.
The focus will now be on the electoral result. Milei will add deputies and senators, even in defeat, because he starts from a very low floor and puts few seats at stake. The minimum objective of the Casa Rosada is to reach the 86 deputies necessary to block Congress from overturning the presidential vetoes that Milei applies to the laws that he considers contrary to fiscal balance. If the far right does not reach that magic number, any help from Trump could be insufficient.
