On October 9, US Treasury Secretary Scott Bessent announced a $20 billion currency swap line with Argentina’s central bank and said that the US had begun directly purchasing pesos in foreign exchange markets to prop up the country’s currency. Six days later, he announced the Treasury was arranging an additional $20 billion facility with private banks and sovereign wealth funds. In recent weeks, the Trump administration has spent around $400 million buying pesos in multiple interventions.
The main objective of the rescue effort is to support Milei, whose libertarian reform agenda has earned enthusiastic backing from Trump. And Milei has delivered impressive results since taking office in December 2023, slashing monthly inflation from 25% to 1.5%, achieving a fiscal surplus in his first month, cutting 15% of the federal workforce, and reducing the poverty rate by around 10 percentage points.
However, Milei’s currency policy has become his Achilles heel. His attempts to defend exchange rate bands that keep the peso artificially strong—a strategy that’s drained Argentina’s dollar reserves and fueled capital flight. A heavy loss in Buenos Aires province elections in early September triggered a run on the peso that sent it plunging to record lows, and bond yields soared, precipitating US support.
Despite Trump’s efforts, the peso’s recovery was brief and continues to hover near its lows. Forward contracts indicate investors are betting on post-election devaluation. The intervention has triggered political backlash in the US with critics questioning why Washington is bailing out a country whose soybean farmers compete directly with those in the US. The results of the October 26 midterm election, where Milei’s La Libertad Avanza party won half the seats in the Chamber of Deputies and a third of the seats in the Senate, will only strengthen his reform agenda.
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