President Milei, a close ally of former US President Donald Trump, is grappling with a depreciating peso, forcing his government to deplete its dwindling foreign exchange reserves. Seeking a loan from the US to meet upcoming debt obligations, Milei is scheduled to meet with Trump and former US Treasury Secretary Scott Bessent on the sidelines of the UN General Assembly in New York on 23/9.
On 22/9, Bessent posted on X, "All options for stabilization are on the table." He indicated these could include "currency swaps, direct foreign exchange purchases, and US dollar-denominated government bonds from the Treasury's Exchange Stabilization Fund." A currency swap is an agreement where two central banks exchange currencies at a fixed rate for a specific period.
The Argentine peso plummeted after Milei's party suffered a defeat in the Buenos Aires election on 7/9, a vote seen as a barometer for the national elections on 26/10. Last week, the peso hit a record low against the US dollar on the black market, trading at 1,510 pesos to the dollar.
 |
People walk along a street in Buenos Aires, November 2023. Photo: Reuters |
People walk along a street in Buenos Aires, November 2023. Photo: Reuters
Bessent described Argentina as "a systemically important ally to the US in Latin America." Washington believes Milei's commitment to fiscal discipline and growth-promoting reforms is essential to ending Argentina's economic decline.
"The opportunity for private investment remains vast. Argentina will be great again," Bessent stated. Milei later expressed gratitude to Washington for its "unconditional support for the Argentine people."
International Monetary Fund (IMF) Managing Director Kristalina Georgieva welcomed Bessent's statement, emphasizing "the crucial role of partners in promoting policies that support stabilization and growth, for the benefit of the Argentine people."
Speaking on Radio Mitre, Argentine Foreign Minister Gerardo Werthein acknowledged rumors of a potential loan from the US Treasury. "The figure of 30 billion USD that has been mentioned is incorrect." He confirmed that the two sides are "working on it, but with a much smaller number."
In April, the US supported an agreement between Argentina and the IMF for a 20 billion USD loan. Argentina also secured a 12 billion USD loan from the World Bank and an additional 10 billion USD from the Inter-American Development Bank.
Milei, an economist, argues that Argentina needs to restore financial order. Years of deficits have led to 9 sovereign defaults in the nation's history, diminishing its standing among global investors.
The country has experienced repeated economic crises and hyperinflation. Official figures put inflation at 33.6% in August, following a period of triple-digit inflation for a year.
Argentina is currently the IMF's largest debtor, having borrowed 44 billion USD in 2018 – the largest in the organization's history – and has since renegotiated repayment terms multiple times.
The Argentine government announced a suspension of export taxes on grains and meat until 31/10 to stimulate the economy and generate more USD. The tax cuts are expected to make Argentine grains more competitive globally, boosting sales.
Ha Thu (according to AFP, Reuters)
