Anna Hartz
Trump Bets on Milei as Peso Teeters Before Key Elections
In times of crisis, countries often turn to allies for a financial lifeline. Argentina is now relying on the United States to help stabilize its economy before a crucial election.
This Monday, the Central Bank of Argentina announced that the US Treasury has launched a $20 billion currency swap, reports El Economista.
The goal is to stabilize the peso, strengthen reserves, and give the central bank more tools to manage the market.
A Show of Support
The announcement came as a show of support from Donald Trump for Argentine President Javier Milei.
Trump hopes this will shore up the peso and help Milei’s libertarian party ahead of Sunday’s legislative elections. For now, the news has not calmed the exchange market.
A Looming Currency Crisis
The wholesale dollar has climbed to 1,480 pesos, just below the government’s 1,489-peso ceiling. The retail dollar, sold to the public, has already passed that level.
Banco Nación, the reference bank for exchange houses, sells it at 1,495 pesos. At this pace, the government will have to use the bailout immediately to prevent a currency crisis before voters head to the polls.
Not a Gift
Under the swap, the US will deposit $20 billion in the Central Bank. In return, Argentina will give the Treasury an equivalent amount in pesos, roughly $28 trillion.
This is not a gift. Argentina must return the money with interest over time. Meanwhile, it can use the funds to increase its foreign currency liquidity.
Emergency Loan
In practice, this is an emergency loan to help Milei survive the week without a full-blown crisis. Investors began selling pesos after the Peronists won big in Buenos Aires in early September.
They fear that Milei’s party might lose the legislative elections. If that happens, Milei’s chances to pass reforms in the remaining two years of his term will shrink.
At the same time, Peronist Axel Kicillof, former Economy Minister, would gain influence ahead of the 2027 presidential race.
Previous Support
Trump previously promised to support Argentina with whatever funds are needed. This swap is only the first part of a two-step rescue plan.
Treasury Secretary Scott Bessent announced a second $20 billion package last week.
The Future Election
The big question now is what counts as a victory for Milei. Winning more seats than the Peronists would be one measure.
Even a blocking minority could be enough to maintain veto power over opposition laws. Analysts expect the government to lift the peso ceiling after the elections, which will likely lead to a sharp devaluation.
Many Argentines are already buying dollars in advance. The swap may provide relief, but demand for dollars remains intense.
This article is made and published by Anna Hartz, which may have used AI in the preparation
