The US Treasury said Monday it stood ready to "do what is needed" to support Argentina's economy, as President Javier Milei battles to calm jittery financial markets.
Milei, a close ally of President Donald Trump, has been faced with a run on the peso, having to sell off dwindling foreign reserves in the aftermath of a provincial election trouncing for his La Libertad Avanza party.
As he seeks a US loan to cover debts reaching maturity, Milei is due to meet Trump and Treasury Secretary Scott Bessent on the sidelines of the UN General Assembly in New York on Tuesday.
Bessent wrote on X Monday that "all options for stabilisation are on the table."
These may include "swap lines, direct currency purchases, and purchases of US dollar-denominated government debt from Treasury's Exchange Stabilisation Fund," he said.
Swap lines are transactions in which two Central Banks agree to swap their currencies at a set exchange rate for a specified period.
Argentina’s peso has been falling sharply since Milei's party was beaten by the opposition Peronist movement in a Buenos Aires Province legislative election on September 7.
The vote was seen as a litmus test for national midterm elections scheduled for October 26.
Financial markets reacted with a sharp depreciation of the peso and a fall in Argentine assets.
‘Important ally’
Bessent wrote that Argentina "is a systemically important US ally in Latin America" and Washington was confident Milei's "support for fiscal discipline and pro-growth reforms are necessary to break Argentina’s long history of decline."
"Opportunities for private investment remain expansive, and Argentina will be Great Again," he added.
Milei thanked Washington for its "unconditional support for the Argentine people."
The budget-slashing libertarian wrote on X that "those of us who defend the ideas of freedom must work together.
International Monetary Fund head Kristalina Georgieva also welcomed Bessent's statement and underscored "the crucial role of partners in promoting strong policies for stabilisation and growth for the benefit of the people of Argentina."
The Central Bank sold more than US$1 billion in reserves last week, causing JP Morgan's country risk index to shoot above 1,400 points. On Monday, it fell by 300 percentage points.
Argentina's Foreign Minister Gerardo Werthein, meanwhile, said "there has been much speculation" on a possible Treasury loan, "with amounts of US$30 billion mentioned, which is absolutely incorrect..."
He told Radio Mitre in an interview it was true that "we are working on it, but for a much smaller amount."
The United States in April backed an agreement Argentina struck with the International Monetary Fund for a loan of US$20 billion, as well as US$12 billion from the World Bank and another US$10 billion from the Inter-American Development Bank.
Bessent at the time poured cold water on the idea of a direct credit line from the United States.
Argentina, which has a track record of economic crises and hyperinflation, is the IMF's biggest debtor.
It owes the IMF US$44 billion under a 2018 loan agreement – the lender's biggest ever – on which it has since renegotiated repayment terms.
Export duties halted
Milei’s government in Buenos Aires said Monday it would suspend duties on grain exports until October 31 as part of efforts to boost the economy, encourage the sale of foreign currency and increase the supply of dollars.
Argentina is one of the world's leading food producers and ranks among the top exporters of soybeans and soybean products.
The measure will remain in effect for just over a month and applies to all crops.
Later in the day, the Milei administration also slashed them for livestock and poultry.
The objective was to "generate a greater supply of dollars" Presidential Spokesperson Manuel Adorni said on X.
"The old policy seeks to create uncertainty in order to boycott the government's programme. In doing so, they are punishing Argentines: we will not allow it," Adorni said in his post.
“This is the only government that, in the face of adversities, responds by lowering taxes,” he added.
Reducing taxes should make grain cheaper on the global market, boosting sales.
The government reduced duties on agricultural exports last July, slashing them from 33 percent to 26 percent for soybeans and from 31 percent to 24.5 percent for by-products.
Nicolás Pino, president of the Sociedad Rural Argentina (SRA) agricultural producers' association, said the tax should be permanently scrapped for Argentina's biggest export sector.
“We don't like the temporary nature of this,” Pino said in an interview with the LN+ television news channel.
Estimates say that agricultural producers are withholding the equivalent of more than US$7 billion in exports.
“Argentina clearly needs dollars, and dollars from the agricultural sector are welcome,” Pino noted.
"We support any measure that involves eliminating duties, even if they are temporary. We still need to see the details of how it will work and when it will become operational," said Gustavo Idigoras, president of the CIARA Argentine Chamber of the Oil Industry and the CEC Cereal Exporting Centre.
– TIMES/AFP/NA
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