Bessent Backs Argentina Fully as Milei Hunts Down More Dollars

Core Insights - The US is reinforcing its presence in Latin America by supporting Argentina's President Javier Milei, who is seen as a strategic geopolitical ally [2][4] - Milei's government is taking measures to stabilize the peso, including a temporary halt on agricultural export tariffs, which have generated $4.1 billion in tax revenue this year [3][5] - The US Treasury Secretary has pledged to provide various stabilization options to Argentina, which may include currency swap lines and direct currency repurchases [6][7] Economic Measures - Milei's administration has spent over $1 billion in foreign reserves to defend the peso, leading to a 4% gain in the currency after a period of decline [5][13] - The IMF has a $20 billion program with Argentina, and US support is seen as crucial for promoting stabilization and growth [11][12] - Argentina is facing a liquidity crisis rather than a solvency crisis, with concerns about political sustainability affecting market access [10] Political Context - Milei's recent electoral challenges include a significant defeat in a provincial election and rising disapproval ratings, raising concerns about his governance ability [14][15] - The upcoming midterm elections on October 26 will be a critical test for Milei, as his party's lead over the Peronist opposition has diminished [14][15] - Analysts suggest that a successful meeting between Milei and US officials could bolster investor confidence and Argentinian assets [15] Market Reactions - Following Milei's announcements, investor panic subsided, leading to a rebound in Argentina's dollar bonds and stock index [5][15] - The economic recovery under Milei has shown signs of faltering, with forecasts indicating potential declines in output and elevated unemployment [16]