Ask Onix
US exits Argentine peso holdings after successful intervention
U.S. Treasury Secretary Scott Bessent announced on Saturday that Washington has fully recouped its financial support to Argentina, closing out its peso positions in the exchange stabilization fund with a profit.
Background: A high-stakes currency move
Last September, the U.S. stepped in to buy Argentine pesos as the currency faced steep declines. The intervention aimed to prevent further economic instability and bolster President Javier Milei's party ahead of midterm elections. Milei, a close ally of former U.S. President Donald Trump, saw his coalition secure a decisive victory in the polls.
The Treasury's decision drew criticism from Democratic lawmakers, who argued the move risked taxpayer funds on a nation with a history of financial crises. Bessent defended the strategy, framing it as a calculated effort to stabilize a key U.S. partner.
Outcome: Profit and repayment
In a social media statement, Bessent declared the operation a success, noting the U.S. not only recovered its investment but also earned "tens of millions in profit." He described the result as an "America First homerun deal."
Argentina's central bank confirmed in December that it had settled the swap line, exchanging $2.5 billion in pesos for dollars-far below the $20 billion initially available. Separately, the U.S. provided $872 million in support tied to IMF reserves, though the Treasury Department has not commented on that transaction.
Expert reactions: Short-term win, long-term concerns
Brad Setser, a senior fellow at the Council on Foreign Relations, acknowledged the operation's success but downplayed the profit as modest relative to the sums involved. "Getting your money back is a straightforward definition of success," he said, though he cautioned that Argentina's economic challenges persist.
"It's been a short-term success-Bessent got his money back. 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, Council on Foreign Relations
Market impact and lingering risks
The U.S. intervention initially halted the peso's slide, and the currency strengthened further after Milei's electoral victory. However, recent weeks have seen renewed depreciation, reflecting ongoing volatility in Argentina's economy.
Analysts warn that Argentina's heavy reliance on reserves to prop up the peso last year may undermine long-term stability. Setser emphasized the need for Argentina to prioritize rebuilding its own financial buffers rather than depending on external support.
