U.S. Intervenes in Argentine Economy with Peso Purchase and $20 Billion Swap ...

The United States has taken significant steps to bolster Argentina's struggling economy, announcing the direct purchase of Argentine pesos and the finalization of a $20 billion currency swap framework with Argentina's central bank. U.S. Treasury Secretary Scott Bessent confirmed these measures on Thursday, October 9, 2025, following four days of intensive meetings in Washington with Argentine Economy Minister Luis Caputo. This rare intervention underscores Washington's commitment to supporting a key ally in Latin America amidst Argentina's acute liquidity challenges and persistent currency volatility.

Secretary Bessent stated that the U.S. Treasury is prepared to take "exceptional measures" to provide stability to markets, emphasizing that "only the United States can act swiftly." The move is widely seen as a critical lifeline for President Javier Milei's government, particularly ahead of Argentina's legislative elections scheduled for October 26. The Argentine peso has experienced considerable depreciation, losing over 27 percent of its value against the dollar this year, contributing to an inflation rate that reached 180 percent year-over-year by March 2025.

The currency swap arrangement, essentially a loan of $20 billion in U.S. dollars, aims to provide Argentina with much-needed foreign currency liquidity. This financial support package comes as Argentina grapples with low central bank reserves and an exchange rate that many consider overvalued when adjusted for inflation. The direct purchase of pesos by the U.S. Treasury is an unusual step, described by finance specialists as "unheard of," highlighting the extraordinary nature of this intervention to prop up the embattled currency.

The agreement also reflects a strong political alignment between the Trump administration and President Milei, whose libertarian economic policies have included aggressive fiscal consolidation efforts. While the international community, including the International Monetary Fund (IMF), has expressed support for Argentina's fiscal strategy, the U.S. intervention provides immediate and direct financial backing. This support is crucial as Argentina faces significant debt payments in early 2026 and continues its efforts to stabilize its economy.

• Historical Economic Instability: Argentina has a long history of economic volatility, marked by hyperinflation, currency crises, and multiple sovereign debt defaults. The country experienced hyperinflation peaks of 3,000% in 1989 and has averaged nearly 50% annual inflation since 2000.
• Historical Economic Instability (Continued): This chronic instability has led to "stop-go" economic cycles, making foreign currency reserves and exchange rate stability perennial concerns.
• Milei's Economic Reforms: Since taking office, President Javier Milei has pursued an ambitious reform agenda focused on aggressive fiscal consolidation, aiming for a zero deficit. His administration has implemented significant spending cuts and reduced annual inflation from nearly 300% in early 2024 to under 40% by October 2025, according to some reports.
• Milei's Economic Reforms (Continued): However, these reforms have come with social costs and political challenges.
• Purpose of Currency Swap Lines: A currency swap line is an agreement between two central banks to exchange currencies, allowing one central bank to obtain foreign currency liquidity from the other. These arrangements are crucial tools for preserving financial stability, preventing market tension from affecting the real economy, and ensuring that domestic commercial banks have access to necessary foreign currency.
• U.S. Strategic Interests: The U.S. intervention is motivated by a desire to support a key ally in Latin America, particularly given the ideological alignment between President Donald Trump and President Javier Milei. Secretary Bessent channeled former ECB President Mario Draghi's "whatever it takes" sentiment, signaling a robust commitment to Argentina's stability.
• U.S. Strategic Interests (Continued): However, some analysts question whether the intervention serves genuine U.S. national interest or is primarily politically driven.
• Argentina's Liquidity Crisis: Argentina is currently facing an "acute illiquidity" crisis, with central bank reserves falling to approximately $9 billion by April 2025, below the IMF's target. The peso's depreciation and the widening gap between official and parallel market exchange rates indicate continued market distrust.
• Argentina's Liquidity Crisis (Continued): This financial vulnerability makes the U.S. swap line and peso purchases critical for short-term stability.
• International Monetary Fund Context: The international community, including the IMF, has been actively involved in supporting Argentina. The IMF approved a new $20 billion loan program for Argentina in April 2025.
• International Monetary Fund Context (Continued): Despite this, Argentina remains the IMF's largest lending risk exposure, owing an additional $43 billion, underscoring the severity of its financial challenges.
• Market Skepticism and Future Outlook: While the U.S. intervention provides immediate relief, some economists express skepticism about its long-term effectiveness, citing Argentina's history of defaulting on its sovereign debt. The intervention is seen by some as a measure to provide a "rickety bridge" for Milei through the upcoming legislative elections without an embarrassing devaluation.
• Market Skepticism and Future Outlook (Continued): The success of these measures will depend on Argentina's ability to implement sustainable economic reforms and regain market confidence.
• Unprecedented Direct Intervention: The U.S. Treasury's direct purchase of Argentine pesos in the open market is a highly unusual step, representing only the fourth time since 1996 that the United States has purchased another nation's currency in this manner. This direct intervention highlights the urgency and perceived severity of Argentina's financial situation, as well as the U.S.'s willingness to employ unconventional tools to support its ally.