Unprecedented rescue and financial tension: Argentina on a tightrope

Unprecedented Intervention of the U.S. Treasury in Argentina

For the first time in history, the U.S. Treasury directly intervened in the Argentine foreign exchange market through a unprecedented financial rescue operation. On Thursday, October 10, through three international banks –Santander, Citibank, and JP Morgan– Washington sold dollars and bought pesos in the local market, marking the formal start of a aid package agreed with the government of Javier Milei for US$20 billion. This currency swap scheme was implemented using resources from the U.S. Currency Stabilization Fund: Scott Bessent's Treasury converted SDR (Special Drawing Rights) at the Federal Reserve into dollars, then transferring them to accounts of these banks to channel them to their subsidiaries in Argentina and acquire pesos –a maneuver without precedent, according to former Central Bank officials. Finally, the United States bought Argentine pesos directly and formalized a currency exchange line for US$20 billion with the Central Bank, an unusual move aimed at stabilizing the turbulent Argentine financial markets.

The initial effect of this external injection was promising but fleeting. The surprise intervention brought some calm: local bonds and stocks surged up to 10%, and the official exchange rate fell slightly (closing that day at $1,420, below the previous day's $1,430). President Milei himself celebrated the agreement, thanking Secretary Bessent and President Trump for their “strong support,” while his minister Luis Caputo even claimed it was “the day Argentina regained international credibility.” However, reality would soon put that official optimism into question in the following days.

Market on Fire Before Elections

The U.S. intervention aimed to curb a currency escalation fueled by political and economic uncertainty on the eve of the legislative elections at the end of the month. Despite the dollar sales driven by the U.S. Treasury in the official market, the Argentine peso continued to be under intense pressure: the wholesale dollar rose 3.4% on Friday, October 17, and parallel quotes surged up to 5%, reflecting the persistent dollarization of portfolios by savers and investors seeking refuge before the imminent election. Traders confirmed that the U.S. Treasury bought pesos again that Wednesday, Thursday and Friday, but the intervention was not enough to relieve the pressure –financial dollars (cash with settlement, MEP) closed above 1,500 pesos, marking new historical highs.

The currency tension became evident in the market: during much of those days there was practically no private dollar supply, forcing last-minute official interventions to avoid greater disorder. “In the final minutes, the Treasury appeared selling, which allowed to sweep buying positions and mark a wholesale close at $1,450…,” described a trader, noting how foreign influence barely managed to contain the run that day. Still, the dollarization sentiment dominated: “Bessent's intervention is no longer enough to alleviate the market's dollarization mood,” admitted a financial analyst, warning that the appetite for dollarization surpassed even Washington's stabilization attempts. In parallel, the sovereign bonds in dollars plummeted ~3% and the country risk rose again, reflecting persistent investor distrust regarding Argentina's solvency.

Behind this voracious demand for foreign currency lies an economy in chronic crisis: triple-digit inflation, stagnant activity, and international reserves at critical lows. The Central Bank was losing hundreds of millions of dollars per day to maintain an already devalued official exchange rate (the official dollar neared $1,500, a record), while gross reserves fell to ~US$41 billion, their lowest level since September. Moreover, Argentina bears a monumental unpaid debt with the IMF (US$41.8 billion, the largest owed to the organization) and repeated failed rescues in the past that failed to stabilize the economy. This explosive cocktail of factors fueled the feeling that, even with unprecedented foreign assistance, the peso could collapse after the elections if there is no clear course.

A Geopolitical Rescue: the U.S. Moves Its Pieces

The magnitude of U.S. aid is driven not only by economic considerations but also geopolitical ones. Analysts interpret Washington's intervention as a strategic bet: a show of political confidence in Milei's liberal government and, at the same time, a move to displace China's influence in Argentina. It is no secret that Beijing has become an alternative financial support for the country in recent years (there is an ongoing swap with China for about US$5 billion, and Chinese companies participate in key sectors). In fact, The Wall Street Journal revealed that in negotiations for the new financial agreement with Milei, Trump officials explored greater U.S. access to Argentina's strategic resources –for example, uranium exploitation– with the explicit goal of limiting China's access to those resources. In other words, the rescue comes accompanied by geopolitical expectations: aligning Argentina with the West and closing the “back door” to the Asian power in the Southern Cone.

A spokesperson for the U.S. Treasury expressed this bluntly, justifying support for Buenos Aires in terms of the America First doctrine: “Stabilizing Argentina is 'America First'”, he stated, indicating that a strong and stable Argentina contributes to a prosperous Western hemisphere, which aligns with U.S. strategic interests. This statement makes it clear that Washington sees its assistance as an investment in the Western sphere of influence. Underlying this is the global struggle: if Argentina collapses or falls into China's orbit, the entire region could tilt towards the East, something unacceptable to Washington's strategy. Bessent himself publicly praised Milei for his international stance, calling him an ally committed to “removing China from Argentina.” The implicit conditionality is evident, even though the Argentine government denies having compromised its foreign policy: the country is expected to correspond to the rescue by distancing itself from Beijing and embracing the U.S. geoeconomic agenda.

Threats, Conditions, and Loss of Sovereignty

The extraordinary nature of this aid was underscored by its direct political interference. In an almost unprecedented scene, U.S. President Donald Trump openly conditioned financial support on the outcome of the Argentine elections: he threatened to withdraw aid and “not be generous” with Argentina if Milei and his coalition do not emerge victorious at the polls. “If (Milei) loses, we are not going to waste time or U.S. taxpayer money,” Trump declared during a meeting with Milei, suggesting that for Washington, the rescue is tied to the country's not “turning left” after the elections. U.S. presidents rarely intervene so openly in the democratic processes of other countries; this warning crosses a diplomatic line and constitutes unusual external pressure on the Argentine electorate.

The domestic reaction was immediate. Even opposition leaders of different persuasions agreed to denounce the implied subordination. The message was clear: national sovereignty would be subordinated to the will of a foreign government if such terms are accepted, and the people themselves must reject that tutelage at the polls. In summary, the episode fueled accusations of betrayal of sovereignty and ignited the debate over to what extent the country is willing to cede autonomy in exchange for temporary financial relief.

This sui generis rescue did not go unnoticed in the United States either. Alarm bells rang among Democratic opposition legislators, who questioned using public funds to save a foreign government aligned with Trump. A group of senators even introduced the “No Rescue for Argentina Act” to block the use of the Treasury Stabilization Fund for this assistance. Figures like Elizabeth Warren criticized support for Milei: “It is inexplicable that President Trump is supporting a foreign government... Trump promised 'America First', but he leaves the bill to Americans.” Additionally, sectors of Trump's own voter base –such as U.S. agricultural producers– view any benefits to Argentina unfavorably, seeing it as a competitor in soybean exports. These internal political tensions in Washington make the promised support even more precarious: aid could evaporate if the political climate in the U.S. changes or if Milei stops being seen as “useful” to White House interests.

The Arrival of Wall Street and the Demand for Guarantees

While the Argentine government clings to this external lifeline, the true owners of the money demand their conditions. In recent days, emissaries from Wall Street arrived in Buenos Aires to ensure that their loans will be protected. Jamie Dimon, the famous CEO of JP Morgan Chase and considered the most powerful banker in the world, visited Argentina and met with Minister Caputo to negotiate the details of a new US$20 billion loan to the country, a loan that would be backed by the U.S. Treasury. JP Morgan is one of the four major international banks involved in this negotiation along with Citibank, Goldman Sachs, and Bank of America –all entities that are simultaneously discussing with Secretary Bessent in Washington the terms of emergency financing for Argentina.

Dimon's presence highlighted that creditors demand extraordinary guarantees before proceeding. According to reports, these banks do not trust the weak local guarantees and expect Washington to assure repayment: they are considering that the U.S. Treasury issue a special bond or some mechanism to secure the operation. In other words, they demand that the United States put its face (and its checkbook), given the little confidence that Argentina's payment capacity inspires in the financial circuit. No wonder, while these meetings took place, the Argentine Central Bank still had to intervene with its scarce reserves (selling US$45 million in one day) to keep the dollar within the established band, and it was perceived that without continuous assistance from the U.S. Treasury, the foreign exchange market would overflow. The visit of the captains of global banking in search of “security” reinforces the image of a country that has lost control of its immediate financial destiny: now it is foreign bankers and Washington officials who, in reality, set the tone for how much the peso is worth and at what price Argentina is financed.

This scenario raises serious questions about economic sovereignty. If to avoid a collapse the government has to beg for help from foreign powers and last-resort insurers, accepting their clauses, who truly governs economic policy? The triumphant tone with which the authorities announced the swap and the arrival of funds contrasts with the reality of a financial tutelage: Argentina is walking a tightrope sustained by external interests, where a political misstep could cut that tightrope abruptly.

Conclusion: Shared Risk for Argentina and the West

Argentina's situation in these critical days exposes a double danger. On one hand, the country faces enormous economic risk: it has embarked on a radical free market experiment under Milei, trusting that this time “it will be different,” but the results so far have been an increase in poverty and social impatience in the face of an endless adjustment. If the rescue provided by the U.S. fails to stabilize the economy –something many analysts and citizens fear, given the history of unfulfilled promises– Argentina could be headed for an even deeper crisis. A post-electoral collapse of the peso or a default next year would leave the country on the brink of the abyss, without the safety net of the U.S. Treasury (which could withdraw at any moment, as Trump warned) and with credibility shattered. Argentine society would pay the highest price: more inflation, more recession, and possibly political turmoil if the “remedy” of Milei does not work and bridges have been burned with other potential allies.

On the other hand, the United States and its Western allies are also playing with fire. The Trump administration has bet heavily, involving taxpayer money and political capital to bolster an ideological ally in Buenos Aires. If that bet fails –for example, if the opposition gains momentum and reverses the pro-American opening, or if despite aid the Argentine economy collapses– the geopolitical blow will be felt in Washington. Not only would billions have been squandered in a futile rescue, fueling internal criticisms of “why save Argentina?”, but it would also lose influence precisely where it tried to reinforce it. The narrative that “a strong and stable Argentina contributes to a prosperous hemisphere” would turn into its opposite: an unstable Argentina could drag the region towards spheres of influence outside the West, opening the door for powers like China to fill the void.

In conclusion, the events of the past few weeks have laid bare the extreme fragility of the Argentine economy and the risky wager of the U.S. in the Southern Cone. The third nationalist position leads us to reflect critically: Argentina needs fundamental and sovereign solutions, not conditional patches that mortgage the future. The ongoing rescue, with all its spectacularity, has raised alarm signals both in Buenos Aires and Washington. The gravity of the moment is undeniable – the economic fate of the nation is at stake, and with it, the credibility of the West in the region –. It remains to be seen whether this rescue will be able to prevent the abyss or if, on the contrary, we will once again find that no external intervention can replace the autonomous and responsible reconstruction of our country.

Sources: National and international media (Buenos Aires Times, AP, Reuters, Infobae, Punto Biz, Ámbito Financiero, among others).