US President Donald Trump indicated that the US$20-billion support package the United States is considering for Argentina may depend on the performance of libertarian leader Javier Milei in the upcoming midterm elections, which has introduced new uncertainties in the currency market. “If he wins we’re staying with him, and if he doesn’t win we’re gone,” Trump informed reporters Tuesday, further noting that the governments also intended to discuss a potential free-trade agreement. Short-term peso interest rates surged into the triple digits, reflecting a lack of intervention from both the US and Argentina in the currency market for a consecutive trading day. Argentina’s bonds experienced a decline across the curve, reversing previous gains. While Trump at other points dismissed suggestions that US assistance was intended to bolster Milei politically, he also consistently underscored that the US$20–billion currency swap – designed to stabilize Argentina’s peso and soothe financial markets in the South American nation – was meant to convey support for the Argentine leader’s economic philosophy. “We want to help Argentina,” Trump stated, emphasizing trade as a means to strengthen the nation. “They possess an excellent product, and historically, we engaged in substantial trade.” Milei is approaching a crucial midterm election in less than two weeks, which will significantly influence the trajectory of his reform initiatives. As a libertarian economist, Argentina’s president has wielded a chainsaw to advocate for reductions in government expenditure and a range of austerity measures that have not resonated well with the electorate, contributing to an increase in disapproval ratings.
Remarkable financial support from the United States, however, is proving to have minimal impact on Milei’s popularity among voters. Should his libertarian party secure between 35 percent and 40 percent of the congressional vote on October 26, it would be perceived by investors as a significant achievement. Anything below 30 percent, however, would probably prompt a significant sell-off. “Conditioning the support of the US administration to a Milei victory in an explicit way could actually be a political blow to the libertarians’ campaign,” stated Ramiro Blazquez. The nation’s dollar notes set to mature in 2035 experienced a decline of 2.4 cents on the dollar, trading at approximately 57 cents, as indicated by pricing data. This represents the most significant decline since September 30. The absence of intervention in the currency market by either government also impacted trading dynamics. The overnight collateralised peso repo rate, referred to as caución in Argentina, experienced a significant increase, rising to 115 percent from 77.5 percent on Monday. The Argentine peso spot rate declined nearly one percent to 1,360 per dollar on Tuesday, with peso futures experiencing a similar downturn. This month’s vote will refresh nearly half of Congress, whereas Argentina’s subsequent presidential election is scheduled for 2027. Milei’s spokesman, Manuel Adorni, identified that upcoming vote as a pivotal moment for the nation. “Today in Argentina, there exists a government that advocates for the right ideas,” he stated. “Should Argentina choose to pursue socialism or regress in 2027, the outcomes described would not materialize, and we would revert to previous conditions.” Trump was also queried regarding China’s acquisition of soybeans from Argentina and the intention to impose port fees on US vessels, yet he dismissed the inquiries. “I suppose it’s to be expected, given the context of China, and it’s quite natural,” Trump remarked. “It will ultimately hold no significance.”
The US president indicated his dissatisfaction should Argentina pursue closer relations with Beijing. “Can do some trade, but you certainly shouldn’t be doing beyond that,” Trump stated. “It is clear that engaging in military activities with China is inadvisable.” Treasury Secretary Scott Bessent interjected to clarify that US assistance was not contingent upon Argentina terminating its US$18-billion currency swap with China. “Any reporting to that effect is incorrect,” he stated. “This aid is predicated on robust policies, and reverting to the unsuccessful Peronist policies would prompt a reconsideration from the US.” In response to inquiries regarding comments on Argentina’s efforts to reduce Chinese influence, Bessent stated: “I was referring more to ports, military bases, observation facilities that have been created in Argentina.” The Milei team conveys ambiguous foreign exchange policy indications in anticipation of the Trump meeting. Trump was also inquired whether Milei ought to dollarize Argentina’s economy, a commitment he made during his 2023 campaign. Trump deferred the question to Bessent, who stated that the US was “very happy with the current currency arrangement.” Since April, Argentina has permitted the peso to float within a specified range as part of its arrangement with the International Monetary Fund. Nonetheless, authorities have intervened on several occasions within the range, which extends in both directions daily.
Last week, the US Treasury engaged in direct purchases of pesos following the Argentine authorities’ unsuccessful attempts to halt the depreciation of the currency. In an interview on Sunday, Economy Minister Luis Caputo indicated that Washington remains prepared to persist in its purchases of pesos and bonds. Federico Sturzenegger stated that Argentina is “going to a floating exchange rate pretty soon.” He subsequently elaborated on his comments, indicating that the trading bands would “widen over time allowing, eventually, to transition to a floating exchange rate.” The extent of the United States’ expenditures in Argentina’s currency market remains uncertain, and further specifics regarding the financial assistance have yet to be disclosed. The White House and the Treasury did not provide an immediate response to the request for comment. Trump broadly expressed endorsement for Milei’s economic strategy, asserting that his counterpart was “really on the verge of tremendous economic success” in the crisis-prone nation that has repeatedly defaulted on its sovereign debt. “It’s a very significant election attracting global attention due to his remarkable performance.” However, this situation is accompanied by certain difficulties, which they are currently experiencing, but they are beginning to emerge from it. “I think the victory is very important,” Trump stated. The financial lifeline, announced by Bessent last week, signifies a remarkable US intervention in foreign markets – a move that critics argue contradicts Trump’s “America First” agenda and jeopardizes taxpayer dollars.
Certain Democrats have characterized the arrangement as politically driven, intended to bolster a leader perceived as an ideological counterpart to Trump, and have raised concerns regarding the sway of potential beneficiaries, such as hedge funds and asset managers believed to be advocating for the deal. US agricultural stakeholders have expressed discontent, as the currency swap comes on the heels of Argentina’s sale of millions of tons of soybeans to China – a country that has halted its purchases of the US commodity due to ongoing trade tensions. Supporters have framed the currency swap as a strategic move to provide Argentina with additional time for stabilization and the implementation of Milei’s reforms. Bessent has also defended the deal, characterizing a robust and stable Argentina as aligning with US strategic interests.