Bessent Backs Argentina Fully as Milei Hunts Down More Dollars

(Bloomberg) --

US Treasury Secretary Scott Bessent pledged to provide “all options for stabilization” to President Javier Milei as he works to keep Argentina from falling back into crisis, prompting a rebound in the South American country’s assets.

Most Read from Bloomberg

When a College Dies, Who Gets the Campus? Trump Cancels Trail, Bike-Lane Grants Deemed ‘Hostile’ to Cars Should We Let Public Transit Die? Over 5,000 NYC Rent-Stabilized Apartments Headed for Auction Tenants Seek to Unionize One Private Equity Firm's Entire Housing Portfolio

Bessent and President Donald Trump will speak with Milei in New York on Tuesday and “more details will be available shortly after this meeting,” Bessent said Monday in a thread on X. Options include, but aren’t limited to, currency swap lines, direct currency repurchases and US dollar-denominated debt from the Treasury’s exchange stabilization fund.

Leia em português.

The announcement calmed investors who, by Milei’s own reckoning, had started to “panic,” yanking money out of the country day after day out of fear that the government would abandon its defense of the peso and let it plunge. For the first time in eight days, the currency gained on Monday, strengthening more than 4% after the central bank burned through more than $1 billion in foreign reserves late last week to prop it up. Argentina’s dollar bonds and benchmark stock index also soared.

“For Washington, Milei represents more than an economic partner: He is also a strategic geopolitical ally as the US seeks to build a bloc of like-minded governments in Latin America,” said Claudio Zampa, founder of Switzerland-based Mangart Capital Management.

In addition to spending precious hard currency reserves to defend the peso, Milei’s government announced a temporary halt on agricultural export tariffs on Monday in a bid to convince farmers to sell their dollars in the local currency market. The levies have generated $4.1 billion in tax revenue for the government so far this year, money Milei is now willing to forgo to prop up the peso.

Supporting Milei reinforces the Trump administration’s more robust presence in Latin America. Bessent called Argentina “a systemically important US ally” and emphasized private investment opportunities in the country.

By contrast, Trump imposed steep tariffs on neighboring Brazil before its Supreme Court sentenced former leader Jair Bolsonaro to prison for plotting a coup, with Bessent slapping sanctions on the wife of the judge who led the charge in a separate announcement Monday. The US president has also attacked boats of alleged drug traffickers in a warning to Venezuela’s Nicolas Maduro.

Weiterlesen

A direct loan from the US Treasury to a foreign country would be highly unusual but isn’t unprecedented. Back in early 1995, President Bill Clinton had the Treasury pull $20 billion from its currency stabilization fund to lend to Mexico as part of a broader foreign rescue package to stabilize a collapsing peso.

Milei, for his part, has carefully cultivated ideological ties with Trump, congratulating him in person at Mar-a-Lago shortly after his election victory in November 2024. A month after Bessent’s visit, Milei hosted Robert F. Kennedy Jr. as Argentina joined the US in withdrawing from the World Health Organization. The libertarian president has also tightened Argentina’s comparably open immigration laws.

What Bloomberg Economics Says...

“Argentina has been facing a liquidity crisis since Sept. 7 more than a solvency crisis. Lack of confidence in the political sustainability of the macro plan had foreclosed the possibility of market access but, provided fiscal discipline continues and rates decline, the country did not have a problem of debt sustainability as much as a problem of debt management.”

— Jimena Zuniga, Latin America geoconomics analyst and Argentina economist

For the full analysis, click here.

Fresh US support for Argentina would come on top of its $20 billion program with the International Monetary Fund, which was finalized in April. IMF Managing Director Kristalina Georgieva welcomed Bessent’s comments on Argentina, saying in a post on X “this underscores the crucial role of partners in promoting strong policies for stabilization and growth” in Argentina.

Bessent, during a rare visit by a US Treasury Secretary to Argentina five months ago, called the IMF deal a “fulcrum day” for the crisis-prone nation. At the time, he downplayed the chances that Milei would need to spend money to defend the peso. “The good thing about having the money is the bigger your war chest, the more unlikely that you’re going to have to intervene,” Bessent said in an interview in Buenos Aires. “It’s going to be a smoothing function. I’m going to be watching it closely.”

The Argentine president and his economy minister, Luis Caputo, both thanked Bessent for his latest show support in separate posts on their X accounts. The Treasury Secretary said later Monday at a briefing the US is prepared for a “large and forceful” intervention in Argentina, according to a CNBC report.

Milei’s central bank sold $1.1 billion over three days last week to prop up the peso in Argentina’s currency market as pressure boiled over and sovereign bonds posted the worst losses in emerging markets. Investors grew concerned in recent weeks after a bribery scandal hit Milei’s sister and top adviser, Karina, and then his government unexpectedly lost a key provincial vote by a landslide.President Javier Milei promised present-day pain to secure Argentina’s economic future, but his vision is now in jeopardy. Despite Milei’s success in slashing the inflation rate from 300% to just over 30% in two years, Argentina’s markets tumbled after Milei’s party suffered a defeat during Buenos Aires’ provincial election. Will Argentinians be willing to withstand more pain or are they ready to return to Peronism?Source: Bloomberg

If the Treasury’s announcement ends up being as strong as it looks, it could move political concerns around the midterm elections to the background, said Matias Montes, head of strategy at EMFI Securities. “The most important thing is for the exchange market to calm down so the central bank doesn’t lose any more foreign currency,” he said

Argentina’s midterm elections on Oct. 26 will be Milei’s biggest electoral test since taking office in 2023 and polls show his disapproval rating rising, while his party’s lead ahead of the Peronist opposition party has been cut in half. Beyond the bribery allegations and provincial election wipeout, Milei’s rivals in Congress have overturned some of his vetoes on popular spending items, such as education and healthcare, raising investor concerns about his ability to govern.

Milei’s sit-down with the US president and his treasury secretary “could be the bridge Argentina needs” to regain momentum heading into the next month’s vote, which will refresh more than half of Congress, according to Malcolm Dorson, senior portfolio manager at Global X Management. “If Milei and Bessent walk out of tomorrow’s Trump meeting with even a vague roadmap for near-term US support, it’s bullish for Argentinian assets,” Dorson said.

The economic recovery on Milei’s watch has faltered as output slightly contracted in the second quarter and analysts forecast another decline between July and September. Unemployment remains elevated compared to pre-Milei levels and more employers in key sectors like manufacturing and construction intend to lay off workers in the coming months than those who plan to hire, according to government surveys.

--With assistance from Leda Alvim.

(Updates with Milei’s panic comment and export tax measures, adds new US sanctions announcement on Brazil, freshens market pricing, and adds context on Milei courting Trump, beginning in third paragraph.)

Most Read from Bloomberg Businessweek

Inflation Is Worse Than the CPI Shows, Says Ex US Comptroller How Trump Broke Corporate America’s Most Valuable Consultant ‘I Was a Weird Kid’: Jailhouse Confessions of a Teen Hacker Paramount’s New Boss Faces a Media Industry Under Assault MrBeast on His Quest to Turn YouTube Fame Into an Entertainment Empire

©2025 Bloomberg L.P.

Kommentare anzeigen