U.S. Treasury Secretary Bescent said on September 22 that the United States is ready to provide financial support to Argentina with "large-scale and powerful" actions, butSpecific measures will be announced after U.S. President Trump meets with Argentine President Millais during the UN General Assembly in New York on 23rd.¡£

Argentina's financial markets were in turmoil after the first local elections this month, which overshadowed the Milley government's expectations for the mid-term elections in October.Analysts believe the U.S. government supports Argentina to boost Milley's sentiment.

Strong support

Besent said earlier that day via social media that all options were on the table to stabilize Argentina¡¯s finances, including but not limited to currency exchanges, direct currency purchases, and purchases of government bonds valued in U.S. dollars with the U.S. Treasury¡¯s Foreign Exchange Stability Fund.

Milley then thanked the U.S. government via social media for ¡°unconditional support to the Argentine people¡±.

Bescent told reporters later on the 22nd that it will judge whether the United States should take immediate action depending on the market and capital flow, but no one should question the determination of this administration and himself. He did not disclose the specific measures that the United States might take, only saying that it would be a "large-scale and powerful" action. At the same time, Bescent only said on behalf of the U.S. Treasury that the U.S. action would not be attached to new requirements or conditions beyond the terms of Argentina's current loan agreement with the International Monetary Fund.

According to Reuters, Argentina signed a four-year loan agreement of $20 billion with the International Monetary Fund in April this year, which required Argentina to cancel currency control and relax exchange rate restrictions on the Argentine peso.

Argentine Foreign Minister Herald Wetzhein also confirmed to the Argentine radio station Mitre on the 22nd that the two sides are negotiating on financial support, but the loan amount is much lower than the outside rumors of $30 billion.

According to the U.S. Wall Street Journal, the Foreign Exchange Stability Fund was founded in the 1930s by the U.S. Treasury Department, and the Treasury Secretary was authorized by Congress to make full use of the relevant funds to provide loans to foreign countries facing serious financial difficulties.

Meaning of elections?

Besent also stressed that the U.S. government has confidence in the economic reforms Millais has implemented in Argentina.

According to the "Wall Street Journal", after Milei was sworn in as president in December 2023, he won praise from Trump and other American conservatives for attacking the left and cutting spending on a large scale. Milei's government drastically reduced tariffs and lifted import restrictions. In July this year, Argentina's monthly inflation rate dropped from nearly 26% at the beginning of his tenure to 1.9%.

However, according to media reports such as AFP, Argentine¡¯s concern for high unemployment rates exceeds concern for inflation, leaving the Milley government under pressure. The Milley-led ruling coalition, the Liberal Progress Party, lost in the Buenos Aires provincial parliamentary elections held on Sept. 7 this year. This election is seen as a ¡°test stone¡± for the midterm parliamentary elections on October 26, and Milley hopes to win a congressional re-election to further push for economic reform.

After the elections in Buenos Aires, Argentina's financial markets fell into turmoil and the central bank stabilized its currency exchange rate, selling more than $1 billion in total last Wednesday, the government announced on October 22 that it would temporarily cancel the pre-debit tax on exports of agricultural products such as cereals and meat before October 31 in order to promote the sale of related products in the international market to increase the supply of dollars, stabilize the currency exchange rate, and ease foreign exchange tensions.

Trevor Yates, an investment analyst at Global X Fund in the United States, told the Wall Street Journal on the 22nd that the financial support provided by the United States to Argentina is expected to boost Milei's election. Mark Sobel, chairman of the Official Forum of Monetary and Financial Institutions, an American think tank, and a former senior official of the Ministry of Finance, also told Reuters that the U.S. government is trying to support Argentina before the October election, "if they can go that far".

However, Sobel believes that the overvaluation of the peso is a problem that must be solved, but measures to solve this problem may trigger inflation, which in turn will exacerbate the challenges Milei faces before the election.