US kicks off controversial financial rescue plan for Argentina

The United States has bought the Argentine peso, taking the next step in a controversial effort to calm a currency crisis that has hit the South American country and its president, Trump ally Javier Milei.

Announcing the purchase on social media, Treasury Secretary Scott Bessent said the US had completed terms for a planned $20bn (£15bn) financial rescue for the country.

“The US Treasury is ready to immediately take any exceptional measures deemed necessary,” he said.

The announcement helped boost the peso and Argentina’s debt in financial markets, but revived debate in the United States, where the decision to provide financial support to Argentina at a time when U.S. spending is being cut is under scrutiny.

“Donald Trump should help Americans get health care instead of using our dollars to buy Argentine pesos,” Democratic Senator Elizabeth Warren wrote on social media in response to the announcement, citing a key issue that has led to disagreement. Government shutdown in the USA.

Argentina faces mounting financial turmoil ahead of national midterm elections on October 26, as questions grow about whether voters will continue to support Milei’s cost-cutting free market reform agenda after recent losses in provincial elections.

As the value of the peso has fallen sharply in recent months, investors have been abandoning Argentine stocks and bonds.

Milei’s government tried to stabilize the situation, but these moves depleted the country’s reserves several months before billions of dollars in debt payments were due.

Bessent, who made his name as a currency trader involved in the “Black Wednesday” incident that forced Britain to devalue the pound in 1992. he said in a statement The success of Argentina’s “reform agenda” is of “systemic importance”.

“A strong, stable Argentina that helps anchor a prosperous Western Hemisphere is in the strategic interest of the United States,” he added. “Their success should be a bipartisan priority.”

The Treasury Department did not respond to questions seeking more details about U.S. support, including how many distressed pesos the administration was purchasing or the terms of a $20 billion currency swap line that would allow Argentina to convert pesos into dollars.

Speaking later to Fox News, Bessent said the support was not a bailout for Argentina and that the peso was undervalued.

Milei thanked Trump and Bessent for their support in her social media post.

“Together, as our closest allies, we will create a hemisphere of economic freedom and prosperity,” he said.

Argentina has failed to pay its debt three times since 2001, including most recently in 2020.

But investors, including some with ties to Bessent such as Robert Citrone, have taken a renewed interest in the country in recent years, betting on Milei’s libertarian financial reforms.

Since taking office in 2023, he has implemented deregulation and sweeping cuts in public spending in a bid to curb inflation and achieve a fiscal surplus (where the state spends less than its revenue).

Domestically, austerity measures have been met with increasing criticism as people’s purchasing power decreases and the country faces a possible economic recession.

But these measures helped rein in inflation and were widely welcomed by international investors and the International Monetary Fund, one of Argentina’s most important lenders.

Milei’s shaping of himself as a Trump-like figure and his “Make Argentina Great Again” rhetoric have also won him the admiration of many conservatives in the United States. He has met with Trump multiple times and another visit is expected next week.

However, the decision to subsidize Argentina sparked a backlash among American farmers, a key part of Trump’s voter base, who are concerned that China is shifting soybean purchases to countries including Argentina.

“Why would the US help save Argentina when it is taking over the largest market for American soybean producers???” Republican Senator Chuck Grassley, who represents Iowa, a major soybean producer, wrote on social media last month, when the United States first pledged its support.

Bessent’s announcement came after four days of meetings with Argentine economy minister Luis Caputo.

In his announcement, Bessent said the international community “is united behind Argentina and its prudent fiscal strategy, but only the United States can act quickly, and so will we.”

She had previously pushed back on suggestions that the support amounted to a bailout for what Warren called the administration’s “billionaire friends” in a statement on Thursday.

“The trope that we’re helping rich Americans who have interests here couldn’t be more false,” Bessent told CNBC earlier this month.

“What we are doing is maintaining U.S. strategic interests in the Western Hemisphere,” he said, warning that inaction could risk a “failed state.”