Treasury Secretary Scott Bessent described Argentina as a \u201cbeacon\u201d for South America, saying its leader, President Javier Milei, is doing a \u201cfantastic job\u201d of reversing decline in the country. And Bessent hinted that he hoped the turnaround of Argentina\u2014with the White House\u2019s help\u2014may cause a ripple effect throughout the region.<\/p>\n
The U.S. government has been clear that it will support Milei\u2014though has stopped short of putting its hand into its own coffers<\/a> to boost Argentina\u2019s economy. In September, Bessent wrote on X<\/a> that \u201call options for stabilization are on the table,\u201d suggesting that swap lines<\/a>, direct currency purchases, and purchases of U.S.-dollar-denominated government debt from Treasury\u2019s Exchange Stabilization Fund were all possibilities. \u201cOpportunities for private investment remain expansive,\u201d he added.<\/p>\n A matter of weeks later and Bessent has narrowed the scope, telling CNBC<\/a> in an interview yesterday that the U.S. is providing a swap line, adding, \u201cWe are not putting money into Argentina.\u201d A swap line is a standard agreement between two central banks to exchange currencies, to stabilize financial markets in one or both nations because it guarantees sufficient supply of a foreign currency. At a given date the swap is reversed. Given the fact that the U.S. dollar is the global currency, this adds a significant safety net to Argentina\u2019s economy.<\/p>\n Bessent made America\u2019s motivation to support Argentina clear: \u201cWhat we\u2019re doing is maintaining a U.S. strategic interest in the Western hemisphere.<\/p>\n \u201cAmerica First doesn\u2019t mean America alone,\u201d he added to CNBC\u2014referencing a warning from JPMorgan CEO Jamie Dimon, who noted the U.S. may isolate itself because of President Trump\u2019s foreign policy rhetoric. Bessent added: \u201cLook, when you have a failed state in South America like Venezuela, now we are having to track down and blow up these cartel ships. So \u2026 you don\u2019t want to create another failed state.\u201d<\/p>\n He continued: \u201cMany of the governments down there moved from far left to center right. We did not support them, and then they took a hard lurch to the left.\u201d Describing Argentina\u2014now run by Milei on the right of the political spectrum\u2014as a \u201cbeacon,\u201d Bessent added there\u2019s \u201ca chance now for many other countries to come along, Bolivia, Ecuador, I think Colombia after the elections.<\/p>\n \u201cWhat you don\u2019t want are these failed economic models,\u201d he added. \u201cAnd Argentina has 100 years of decline, and President Milei is working against history, and he\u2019s done a fantastic job \u2026 What\u2019s encouraging in Argentina, it\u2019s the young people who made the decision not to impoverish their nation.\u201d<\/p>\n No real conversion<\/p>\n Despite the lifeline from the world\u2019s biggest economy, traders have yet to be convinced of Bessent\u2019s belief that Milei can \u201ccontinue advancing Argentina\u2019s positive economic momentum.\u201d<\/a><\/p>\n A little over a week after Bessent announced his pledge to back the nation, traders drove the price of the peso down against the dollar with Bloomberg reporting<\/a> that the domestic government had been forced to sell dollars in order to stem the slump. Meanwhile, Argentine dollar bonds due in 2035<\/a> were down to 51.45 cents this week, marking a six-day decline. <\/p>\n As Paul Donovan, UBS\u2019s chief economist, noted to clients this week: \u201cBessent\u2019s parody of \u2018whatever it takes\u2019 has been met with a collective \u2018whatever\u2019 from foreign exchange dealers.\u201d He explained: \u201cWith Argentina supplying China with soybeans, enabling China to avoid buying soybeans from U.S. farmers, the politics of direct U.S. assistance to Argentina is complicated.\u201d<\/p>\n Some of those wrinkles are likely to be ironed in out meetings over the coming days, with Bessent having confirmed that Argentina\u2019s economics minister, Luis \u201cToto\u201d Caputo, will lead a delegation to Washington, D.C., \u201cto meaningfully advance our discussions in person regarding options for delivering financial support.\u201d<\/p>\n