U.S. Support or Political Move? Argentina's Risky Peso Strategies

Argentina’s President Javier Milei is on the verge of a major political resurgence after his libertarian party, La Libertad Avanza, took a commanding lead in Sunday’s midterm elections, based on preliminary tallies. With 92% of ballots counted, the party captured 41% of the vote and secured 64 out of 127 seats in the lower house, while the Peronist opposition trailed with 24.5%, according to

. This result reverses the setback from the September provincial elections, which had led to a sharp decline in the peso and prompted U.S. financial intervention. The victory strengthens Milei’s efforts to implement austerity measures, which echo Trump-era policies and have attracted both international backing and domestic pushback.

U.S. Treasury involvement in Argentina’s economic stabilization ramped up prior to the election. Last week, a $20 billion currency swap deal was completed with Argentina’s central bank, alongside direct Treasury purchases of pesos to help steady the currency, according to a

. Treasury Secretary Scott Bessent described the swap—financed by the Exchange Stabilization Fund—as a “bridge to a better economic future,” dismissing accusations of a “bailout” and assuring lawmakers that taxpayer money was not at risk, as noted by . Nonetheless, the timing of the move has sparked controversy, with some critics calling it a “pre-election favor” intended to help Milei stay in power.

Financial markets initially experienced turbulence, as the peso ended a five-day losing streak with a slight 0.1% uptick. However, experts warn that fundamental issues—such as inflation exceeding 100% and a precarious fiscal situation—remain unresolved. JPMorgan and Citigroup intervened in Argentina’s currency market to support the peso, as first reported by the

, while U.S. officials reportedly sought $20 billion in private investment to reinforce Argentina’s debt markets. Fitch Ratings recognized the swap as a short-term buffer against a downgrade but emphasized that Argentina must build its own foreign reserves for lasting stability, according to .

Milei’s win also carries strategic weight for U.S. interests in Latin America. The Trump administration has promoted Argentina as a counterbalance to China’s expanding economic influence, which includes a smaller swap arrangement with Beijing. Separately, the U.S. International Development Finance Corporation (DFC) is in talks with Argentina on critical minerals and infrastructure projects, aiming to reduce the country’s debt while strengthening U.S.-Argentina economic ties, as reported by

.

Despite the apparent electoral gains, Milei’s reform agenda still faces obstacles. Achieving at least 35% of the vote was seen as essential for a veto-proof majority in Congress, but even with increased support, rapid legislative changes may be elusive. According to JPMorgan analysts, while U.S. backing could lower Argentina’s political risk premium, the country’s default risk remains high unless credible steps are taken to replenish foreign reserves, as noted by

. Additionally, Economy Minister Luis Caputo has stated there will be no changes to the peso’s trading bands—a policy critics argue artificially sustains the currency’s value.

The election results have also reignited political friction at home. Opposition leaders accused the U.S. of interfering in Argentina’s domestic affairs, with former Defense Minister Jorge Taiana accusing Trump of “blackmailing the Argentine people” on social media. Meanwhile, American lawmakers have called for greater transparency regarding the swap deal’s terms, including collateral and potential risks to taxpayers.

As Argentina’s markets await post-election direction, uncertainty persists. Although Milei’s party appears set to expand its influence in Congress, the durability of U.S.-supported economic strategies—and the peso’s stability—will hinge on the administration’s ability to enact structural reforms without worsening fiscal vulnerabilities. For now, the peso’s modest recovery and a rally in dollar-denominated bonds indicate cautious optimism among investors, though concerns remain about the possibility of a “Black Swan” event if political or economic instability returns.