MercoPress. South Atlantic News Agency

Argentine economic frenzy slows down after US support and gov't's measures

Bessent assured Washington would bail out a key ally such as Argentina

After securing US financial support and implementing a temporary reduction in agricultural export taxes, Argentina's financial markets saw a significant turnaround on Monday.

Argentine stocks and bonds surged. The MERVAL index in Buenos Aires rose by 6%, while sovereign bonds like the AL41 jumped by 18.5%. In addition, the country risk index plummeted by 22%, dropping from a high of 1,516 to 1,136 basis points, and the US dollar fell sharply against the Argentine peso, below AR$1500.

The Libertarian Government of President Javier Milei also announced the temporary suppression of export duties for grain and meat until Oct. 31 to encourage the agricultural sector to add dollars to the local economy, with authorities foreseeing an inflow between US$4 and US$7 billion.

The measure, while providing short-term stability, comes at a fiscal cost, estimated by the Argentine Institute for Fiscal Analysis (Iaraf) to be around 0.15% of GDP (US$1 billion).

With Milei and Economy Minister Luis Toto Caputo about to leave for the United States to - among other things - beg Washington's bailout, US Secretary of the Treasury Scott Bessent posted on X that “Argentina is a systemically important U.S. ally in Latin America, and the @USTreasury stands ready to do what is needed within its mandate to support Argentina.”

In this critical scenario for Milei's La Libertad Avanza (LLA) ahead of next month's midterm elections, “all options for stabilization are on the table,” Bessent insisted.

“These options may include, but are not limited to, swap lines, direct currency purchases, and purchases of U.S. dollar-denominated government debt from [the]Treasury’s Exchange Stabilization Fund,” he explained. “Opportunities for private investment remain expansive, and Argentina will be Great Again,” he promised.

“We remain confident that President @JMilei's support for fiscal discipline and pro-growth reforms are necessary to break Argentina’s long history of decline,” the official from the President Donald Trump administration further noted. “My April comments make clear our commitment to Argentina's people and to President Milei.”

“@POTUS [President Trump] and I will meet with President Milei on Tuesday in Manhattan,” he also announced.

These remarks came as a relief for the South American country's volatile economy. With the support of the US government, the financial market reversed the negative trend, with the official quotation for the US dollar dropping from AR$1,515 to AR$1,470 in just minutes. However, the “blue” (a euphemism for black market) dollar remained at AR$1,500 and AR$1,520 buy/sell, respectively.

Monday's outcome in Buenos Aires' financial circles was deemed by the opposition as “electioneering.”