The United States has signaled strong backing for Argentina's economy as financial markets reel from recent volatility.
Treasury Secretary Scott Bessent announced that Washington is prepared to implement "what is needed" to steady the Latin American nation's assets following a sharp selloff.
This pledge comes in the wake of poor electoral results for President Javier Milei's coalition earlier this month, which triggered investor flight from the peso and government bonds.
Bessent highlighted potential measures including central bank currency swaps, direct currency buys, and acquisitions of dollar-denominated debt.
Decisions on these interventions will follow discussions between President Donald Trump, Bessent, and Milei in New York on Tuesday.
The announcement spurred an immediate rally in Argentine stocks, bonds, and the peso, offering temporary relief to the beleaguered currency.
At the core of the proposed aid is the Treasury's Exchange Stabilization Fund (ESF), a 91-year-old resource established in 1934 to safeguard the dollar during the Great Depression.
This fund, boasting total assets of $219.5 billion as of July 31, enables actions like foreign currency transactions, loans to governments, and use of IMF Special Drawing Rights.
Experts note that while the ESF's full value appears substantial, liquid resources hover around $30 billion, including Treasury securities, cash, and foreign holdings.
The tool has proven effective in past crises, supporting efforts in Mexico and Brazil during the 1990s, Uruguay in 2002, and global responses to the 2008 financial meltdown and 2020 pandemic.
Bessent described the assistance as "large and forceful," underscoring its role in providing a short-term lift to the peso and Milei's political fortunes ahead of midterm elections.
Analysts caution that attached conditions could complicate Argentina's existing debt landscape, potentially reshuffling priorities among creditors like China.
Argentina's economic woes trace a long history of instability, with the nation holding the IMF's largest debt at over $40 billion.
In April, Buenos Aires obtained $42 billion in support from the IMF, World Bank, and Inter-American Development Bank to sustain its finances.
Milei, elected in 2023 on vows to curb hyperinflation and reverse decline, has pursued aggressive right-wing reforms, drawing admiration from US conservatives.
His alliance with Trump, highlighted by Milei's presence at the January inauguration, partly motivates this US engagement.
The support diverges from Washington's approach to Brazil's leftist administration amid its handling of former President Jair Bolsonaro's legal matters.
As midterm polls loom next month, this infusion could fortify Milei's push for broader legislative backing to advance his libertarian agenda.