{"id":75862,"date":"2025-10-12T13:36:10","date_gmt":"2025-10-12T13:36:10","guid":{"rendered":"https:\/\/www.newsbeep.com\/ie\/75862\/"},"modified":"2025-10-12T13:36:10","modified_gmt":"2025-10-12T13:36:10","slug":"bessents-big-gamble-on-argentina-has-a-narrow-road-to-pay-off","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ie\/75862\/","title":{"rendered":"Bessent\u2019s big gamble on Argentina has a narrow road to pay off"},"content":{"rendered":"

For Scott Bessent\u2019s $20 billion bet on Argentina to pay off, a lot of things have to go right \u2014 things that in the past, in Argentina, have tended to go wrong.<\/p>\n

The Treasury secretary announced a lifeline Thursday that\u2019s designed to pull the country\u2019s financial markets out of deepening turmoil, and a close political ally out of a hole. The U.S. is offering swap arrangements to shore up the peso \u2014 and it\u2019s already stepped in directly to buy the currency, a move with few precedents in recent decades.<\/p>\n

“It\u2019s not a bailout at all,\u201d Bessent told Fox News late Thursday. To a lot of observers, still waiting for the details to be fleshed out, it sure looks like one. It\u2019s been delivered by an administration that promised to put America first, to a country with a long track record of squandering other people\u2019s money and defaulting on its own debts.<\/p>\n

Argentina\u2019s President Javier Milei \u2014 perhaps the Trump administration\u2019s strongest backer in Latin America, where superpower rivalry with China is heating up \u2014 has vowed to leave all that bad history behind. He says he\u2019s finally putting the country\u2019s public finances in order and getting a grip on rampant inflation, even if it means taking a chainsaw to the budget.<\/p>\n

Milei “is trying to break 100 years of bad cycles,\u201d Bessent posted on social media Friday. “We do not want another failed or China-led state in Latin America.\u201d<\/p>\n

Financial markets were inclined to believe Milei could pull it off \u2014 until a few weeks ago, when his party suffered a stinging defeat in a key provincial ballot. Then, confidence suddenly began to drain away. The peso entered a nosedive that threatened to send inflation soaring back up \u2014 right before an even bigger electoral test, with midterms now two weeks away.<\/p>\n

The essence of Bessent\u2019s bet is that, with U.S. financial muscle behind him, Milei can win them. And then, with a supportive congress, get his economic program on track and investors onside once again. Analysts say that\u2019s not impossible, just hard.<\/p>\n

“It\u2019s a gamble that all the problems that Argentina now faces are a function of politics, that Milei can pull a rabbit out of the hat and do better than expected in the October elections,\u201d says Brad Setser, a former Treasury official now at the Council on Foreign Relations.<\/p>\n

<\/p>\n

\"U.S.<\/p>\n

<\/a><\/p>\n

\n U.S. President Donald Trump meets with Argentina President Javier Milei during the United Nations General Assembly at U.N. headquarters in New York on Sept. 23.
\n | Doug Mills \/ The New York Times\n <\/p>\n

But Setser sees problems with the country\u2019s economic program that won\u2019t go away even if that happens \u2014 adding more layers of risk to the U.S. intervention. “It\u2019s a bet that the peso is not structurally overvalued,\u201d he says. “It\u2019s a bet that the band can hold.\u201d<\/p>\n

In the past week-and-a-half or so, Argentina\u2019s Treasury burned through $1.8 billion to prop up the currency and keep it within the band it\u2019s supposed to trade in \u2014 and was reckoned to be running low on funds before Bessent stepped in. U.S. intervention triggered a peso rebound as well as a surge in government bonds on Thursday. The country\u2019s markets were closed Friday for a public holiday.<\/p>\n

The case for Milei, which has driven healthy market returns for most of the last two years, is that his chainsaw has delivered. Argentina posted its first budget surpluses since 2009, and inflation is down to around 30% from peaks almost 10 times higher. That achievement is key for his pitch to voters.<\/p>\n

But it\u2019s underpinned by careful management of the peso, which kept the lid on import prices \u2014 while storing up strains.<\/p>\n

All this is familiar terrain for the U.S. Treasury chief, who was involved in perhaps the most famous foreign-exchange trade in history. In 1992 Bessent\u2019s analytical work helped George Soros win $1 billion by betting against the British pound. Now he\u2019s essentially on the opposite side \u2014 backing a currency around which speculators are circling.<\/p>\n

Bessent told Fox News Thursday that he thinks the peso is undervalued. Most economists take the opposite view, saying the currency is too strong and hurting Argentina\u2019s competitiveness. You don\u2019t need economic theory to make that argument: the evidence is in plain sight at shopping malls across the border in Chile, where Argentine buyers have been on a spree thanks to the peso\u2019s new purchasing power.<\/p>\n

\u201dThere is broad agreement that the FX regime must change,\u201d and the peso should be allowed to float more freely, Barclays economist Ivan Stambulsky wrote this week. “Many think the adjustment is close at hand.\u201d<\/p>\n

But not imminent. Any such move before elections would likely be disastrous for Milei. And U.S. intervention means he doesn\u2019t have to make it \u2014 yet.<\/p>\n

Exactly what form that intervention will take remains unclear. More detail may emerge when Milei visits President Donald Trump at the White House next week. Bessent has signaled that the Treasury\u2019s Exchange Stabilization Fund will be deployed, perhaps including its Special Drawing Rights \u2014 a form of global reserve cash issued by the International Monetary Fund. The Treasury turned to Spain\u2019s Banco Santander as its conduit for Thursday\u2019s peso purchases.<\/p>\n

The first Trump administration also considered intervening in Argentina to buy pesos, during a similar bout of turbulence, but ruled out the option amid a sense that it would be sending good money after bad, according to a person familiar with those discussions.<\/p>\n

There\u2019s a chance for Argentina now to put itself on a good economic track if Milei does well in the midterms, but everything has to go perfectly and the administration is essentially looking to keep markets in line until election day, the person said. If the Treasury\u2019s SDRs are part of the deal then they\u2019d most likely be used to repay some of the $55 billion that Argentina owes to the IMF, the person said.<\/p>\n

That debt pile makes Argentina by far the Fund\u2019s biggest borrower. It\u2019s a legacy of IMF bailouts that have repeatedly turned sour \u2014 most dramatically in 2001, when a crash triggered massive civil unrest, and most recently in Trump\u2019s first term, when then-President Mauricio Macri\u2019s market-friendly reform program was collapsing.<\/p>\n

The IMF agreed to dole out more cash to Argentina yet again in April this year, but only over widespread internal objections. Fund chief Kristalina Georgieva has been involved in recent talks with Bessent and with Milei\u2019s government. She hasn\u2019t signaled that more IMF money will be forthcoming at the lender\u2019s annual meetings next week.<\/p>\n

One reason the U.S. is stepping into the gap and offering its own credit may be its desire to reduce Chinese influence in Latin America. The Trump administration seems to be paying more attention to the region than its predecessors, and ready to use both carrots and sticks. It\u2019s threatened military action against Venezuela and hammered Brazil with tariffs \u2014 both countries are Beijing allies \u2014 and is now offering sweeteners to Milei.<\/p>\n

Argentina has an $18 billion swap line with the Chinese central bank, which pre-dates Milei but was extended by him this year. Bessent said Milei is “committed to getting China out of Argentina.\u201d<\/p>\n

While an assertive approach to China has bipartisan support in Washington, Bessent\u2019s aid for Argentina has already been questioned on both sides of the aisle.<\/p>\n

There\u2019s concern among some Republicans that U.S. soybean farmers, who compete with their Argentine peers to sell the crop to China, may be inadvertent victims of the rescue plan. Bessent was recently photographed looking at what appeared to be a text from Agriculture Secretary Brooke Rollins expressing concern about the Argentina proposal.<\/p>\n

Meanwhile Democrats have attacked the administration on the grounds that cash for Argentina is a betrayal of Trump\u2019s “America First\u201d agenda. Sen. Elizabeth Warren has submitted legislation that would block the Treasury from using its fund in the rescue, and quizzed asset managers over whether they played a role in the deal.<\/p>\n

Bessent on Thursday called Argentina a country of “systemic importance,\u201d without explaining what that consists of \u2014 and said helping Milei is fully compliant with America First. “I\u2019ll tell you why,\u201d he told Fox News\u2019s Laura Ingraham late Thursday. “Do you want to be shooting at more gunboats like in Venezuela?\u201d<\/p>\n

However much traction that argument gains, the timing of Bessent\u2019s support package for Argentina represents another kind of political risk. It arrives at a time when Washington\u2019s own operations are frozen amid a fiscal standoff.<\/p>\n

That adds another layer to the whole gamble, says Setser at the Council on Foreign Relations. On top of all the other bets, he says, Bessent is making another one too: “A bet that the U.S. political system will be comfortable putting money into Argentina, when the U.S. government is shut down and not writing checks to Americans.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"For Scott Bessent\u2019s $20 billion bet on Argentina to pay off, a lot of things have to go…\n","protected":false},"author":2,"featured_media":75863,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[3858,72,114,969,113,61,60,25717,19144,7914,425],"class_list":{"0":"post-75862","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-argentina","9":"tag-business","10":"tag-china","11":"tag-donald-trump","12":"tag-economy","13":"tag-ie","14":"tag-ireland","15":"tag-javier-milei","16":"tag-latin-america","17":"tag-scott-bessent","18":"tag-u-s"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/75862","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/comments?post=75862"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/75862\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media\/75863"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media?parent=75862"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/categories?post=75862"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/tags?post=75862"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}