The United States finalized a $20 billion currency swap agreement with Argentina on Thursday, marking the most significant bilateral intervention between the two countries to date.
US Treasury Secretary Scott Bessent announced the deal as a necessary step to stabilize Argentina’s weakening peso and restore confidence in Latin American markets.
This move comes at a critical time, with President Javier Milei’s libertarian reforms facing increasing political resistance ahead of the country's midterm elections.
Both governments worked closely over several days to address deepening financial instability and rising pressure on Argentina’s central bank reserves.
How did the $20 billion swap agreement come together?
Senior finance officials from both the US and Argentina began talks earlier in the week as Argentina’s Treasury rapidly depleted its reserves in defense of a plunging peso.
US Treasury Secretary Bessent and Argentine Finance Minister Luis Caputo met in Washington to negotiate the specifics, focusing on liquidity support rather than a direct bailout.
The agreement allows Argentina to exchange its pesos for up to $20 billion in US dollars.
In return, the US government directly acquired Argentine pesos, aiming to provide immediate market relief and buy time for ongoing economic reforms to take hold.
Did you know?
The IMF currently counts Argentina as its largest single borrower, with $41.8 billion in outstanding loans, nearly twice the amount of the following highest country.
What triggered the urgent intervention by US officials?
Over just two days before the deal, Argentina’s central bank sold more than $1 billion in foreign reserves to prevent a total collapse of the peso.
Official data showed money-market rates had surged to over 80 percent, and the peso itself slipped relentlessly, reinforcing the urgency for external support.
Credit markets responded immediately, as Argentine dollar bonds jumped more than 4 cents across maturities upon news of the swap.
The currency, which closed at 1,425 pesos per US dollar, saw a modest 0.8 percent gain after the US announcement, signaling initial market approval.
How have markets and Argentine policymakers responded?
International investors and bondholders celebrated the agreement, with Argentina’s 2035 bonds rising sharply to above 60 cents on the dollar, their highest level in two weeks.
The infusion of potential liquidity reassured markets, which were facing a wave of upcoming debt obligations, including $500 million in payments due by the end of November.
Argentine policymakers hailed the measure as a lifeline for Milei’s reform agenda.
Central bank officials credited US intervention with preventing an even steeper slide in reserves and expressed optimism that reforms would be sustainable with stabilized currency flows.
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Why is the deal stirring political debate in both countries?
The move has proven controversial in the United States, where some Democratic lawmakers and U.S. agricultural groups argue that the effective support for Argentina comes as American soybean farmers remain shut out of the Chinese market.
Argentina, by contrast, recently lifted export taxes on grains, prompting $7 billion in new sales agreements primarily with China.
The Trump administration framed the swap as an expression of 'America First economic leadership' while emphasizing that the deal was not a bailout but rather a reciprocal credit facility.
Critics contend the intervention may encourage future dependencies or signal uneven treatment among US trading partners.
What is the road ahead for Argentina's financial recovery?
Looking forward, the swap line is expected to provide Argentina with crucial breathing space ahead of key debt repayments and an ongoing IMF review.
IMF Managing Director Kristalina Georgieva has described the talks for a broader aid package as reaching a decisive stage, with the US, the World Bank, and the Inter-American Development Bank all involved in ongoing negotiations.
Argentina’s central challenge remains its persistent illiquidity and reliance on external support to meet near-term financial obligations.
While initial market reactions have been positive, much depends on the success of President Milei’s reforms and the future course of global commodity prices. The US-Argentina swap marks a watershed for global financial diplomacy.
As policymakers from both countries prepare for a high-profile White House meeting during major multilateral conferences next week, international markets will watch to see if this rare intervention sets a precedent for future crises.
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