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A fresh bout of jitters is shaking Argentina’s financial markets, as investors express concerns about the lack of detail surrounding a promised US bailout for President Javier Milei and the difficulties in implementing it.
The peso plunged more than 6 per cent against the dollar on Tuesday before the central bank intervened to sell the US currency for the first time since Treasury secretary Scott Bessent pledged on September 22 to do “whatever it takes” to prop up the Trump administration’s most important ally in Latin America amid a crisis of confidence.
The peso clawed back most of its losses after the intervention to close 1.6 per cent lower on the day but Argentina stocks quoted abroad fell by 7 per cent. The additional yield demanded by investors to hold the South American nation’s debt over that of benchmark US Treasuries shot up a percentage point to 12.3 per cent, far above the level which would allow Argentina to borrow again on international markets.
“So far the Treasury bailout has been words but there hasn’t been anything concrete,” said Gabriel Caamaño, an economist at Buenos Aires-based consultancy Outlier. “The market continues to worry about the October [Argentine midterm] elections and a government performance which isn’t improving.”
Milei’s free-market government hit trouble after an unexpectedly poor regional election result in early September and an alleged corruption scandal put the peso under heavy pressure, forcing the central bank to burn through scarce reserves of dollars to defend it. Markets are worried that Milei’s attempts to keep the peso floating within fixed bands are doomed and that he faces difficult midterm elections on October 26.
Pressure on the peso intensified on Tuesday with the end of a brief tax holiday for agricultural exporters, which had boosted Argentina’s supply of dollars in recent days, and changes to central bank regulations which increased demand for the US currency in the official exchange market.
Argentina’s government announced amid the market turmoil that Milei would meet US President Donald Trump on October 14 at the White House. But the US Treasury has its hands full this week with the shutdown of the federal government and officials have not said when details of the promised Argentine bailout might materialise. A Treasury official did not respond to a request for comment.
Milei, a libertarian economist, did not refer directly to the market turbulence in an interview on Tuesday. Instead he tried to reassure investors by saying Argentina had already covered its 2026 financing needs and restated the three possible support mechanisms mentioned by Bessent — a $20bn currency swap line, US purchases of Argentine sovereign debt and direct currency purchases using the US Treasury’s Exchange Stabilization Fund.
Ernesto Revilla, chief Latin America economist at Citigroup, said the market was turning sceptical on Bessent’s promises. “You say you have a bazooka with the intention of not using it,” he said. “But people start to think: ‘What’s behind it? How certain is it?’ and the market has a lot of doubts because nothing is clear.
“There are doubts about how much money the Exchange Stabilization Fund has . . . there is doubt about the conditionality . . . doubts over the seniority of [any US] debt over other debt.”
Economists have noted that China has already extended an $18bn swap line to Argentina, of which $5bn has been used. They said it was unlikely that the US would agree to extend a $20bn swap line floated by Bessent without wanting Argentina to give up the Chinese credit line.
Although the US fund has $22bn of liquid assets, Argentina received its latest IMF bailout of $20bn only in April, as well as pledges by multilateral lenders to accelerate $12bn of loan disbursements. It owes about $290bn to foreign lenders, according to IMF figures.
Political opposition to a bailout of Argentina has surfaced in the US. Just before Bessent’s pledges of support, Milei gave Argentina’s soy farmers a tax holiday to encourage them to bring export dollars back into the country. The move raised about $7bn in a few days but incurred the wrath of US soyabean exporters, who compete with Argentina.
“Why would USA help bail out Argentina while they take American soybean producers’ biggest market???” asked Republican senator Chuck Grassley, who represents the soyabean-growing state of Iowa, on the social media platform X last week.
An Associated Press photo of Bessent’s phone last week showed a message, whose initials matched those of US agriculture secretary Brooke Rollins, complaining that the proposed bailout for Argentina had given Milei cover to make a move which hurt US farmers.
Amilcar Collante, an economist at the National University of La Plata, noted that Argentine authorities had bought about $2.2bn in the past week to bolster hard currency reserves.
“With that ammunition he might keep the foreign exchange market calm for a few days,” he said. “But everyone is doing their sums and saying: ‘I don’t know whether we get to October 26 without the floor of the [exchange rate] band being tested again”.
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