Follow Scott Bessent, the US Treasury Secretary who just announced that his strategic bet on Argentina’s currency has paid huge returns. Under his leadership, the US did something unprecedented last September in Argentina’s economy. To stabilize the currency, they bought up the freefalling Argentine peso and established a swap line, allowing the country to exchange pesos for dollars. This intervention helped to stabilize the Argentine economy and stop the further depreciation of its currency.
At first, it didn’t matter that the US was buying Argentina’s pesos. They concluded an economic swap line extension, which will enable Argentina to exchange up to $20 billion pesos for dollars. By the middle of December, Argentina had swapped about $2.5 billion in pesos through this arrangement. The US provided $872 million in support through reserves held at the International Monetary Fund (IMF), demonstrating a commitment to assist Argentina during its financial crisis.
Bessent business climate explained the challenges with the Argentine economy that are still prevalent today. Even with last week’s intervention, he said, big challenges remain. He addressed ongoing concerns and said he was pleased with the outcomes of the operation. Stabilizing a strong American ally while creating wealth for American taxpayers…well that’s two birds with one stone.
“Stabilising a strong American ally – and making tens of millions in profit for Americans – is an America First homerun deal,” – Scott Bessent
Democrats have criticized the high-risk strategy that Bessent has been pursuing, charging that he’s put taxpayer dollars at risk. Opponents counter that the financial return on investment is obvious right away. They caution that depending on US intervention might short-circuit Argentina’s own efforts to stabilize its economy.
Brad Setser, an expert on international economics, quoted these sentiments in warning against over-reliance on external support. He expressed particular concern about the possibility that Argentina might fail to show sufficient seriousness about re-establishing its reserves.
“I do remain worried that the Argentines are relying too heavily on the expectation that Secretary Bessent will ride to the rescue … and therefore aren’t showing enough urgency in their plans to rebuild their own reserves.” – Brad Setser
Instead of hiding this maneuver, Bessent used social media to announce its success, demonstrating a model of transparency. He reiterated the US’s strong commitment to its allies, but to do so in a financially sustainable way. Since then the US has stopped holding any Argentine pesos in its exchange stabilization fund. Fulfilling this commitment would be a powerful step in the direction of embedding more sustainable economic practices within the federal government.
Argentina, in turn, has now fully repaid the fiscal assistance it received from the United States. This represents a historic settlement to a long, complicated economic relationship. As both sides deal with the challenges that lie ahead after the intervention, we’ll be watching these new developments in Argentina’s financial landscape closely.