Sometimes it just takes a signal to steady markets.
Perhaps one of the most well-known examples of this in (relatively) recent times was the declaration by Mario Draghi, the president of the European Central Bank, that headed off a renewed euro crisis in 2012 (we may have to find out whether something similar will work this year or next, but that is a discussion for another time).
Speaking in London at a moment when rising Spanish and Italian borrowing costs seemed to herald very stormy times ahead, Draghi said that “within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.”
As I noted skeptically back then, that phrase bought some time, but for how long? Well, although it was not, and is not, the end of the story, Draghi’s words — and the promise of massive intervention that lay behind them — did the trick.
In October last year, Argentina’s peso looked to be facing collapse just ahead of midterm elections that could have posed a severe threat to Javier Milei’s reform program. An intervention to help the perennially embattled peso was going to take more than words. The U.S. Treasury stepped in.
As we wrote in an editorial at the time:
For a president who prides himself on putting America first to throw a massive lifeline to Argentina, a country led by Javier Milei, a fierce opponent of bailouts, is doubly jarring, but that is just what has happened.
The Treasury has finalized a $20 billion swap line with Argentina’s central bank. In practice this means lending Argentina up to 20 billion badly needed greenbacks (without, conveniently, any requirement for congressional approval: The same maneuver was adopted by the Clinton administration as part of the Mexican bailout in 1995). Any such loans are collateralized with Buenos Aires’s unloved pesos. The Treasury has also been buying them in the markets to help prop up the price….
Extending money to Argentina is, as generations of infuriated creditors have discovered, extremely risky. But if Treasury Secretary Scott Bessent’s lifeline gives Milei enough breathing space, it should attract other cash…giving a fresh tailwind to reforms that could transform Argentina into a prosperous, powerful American ally and a beacon in the region. This would inevitably mean a sharp diminution of Chinese influence in a country that is not only the eighth-largest in the world but also resource-rich — oil, gas, soy, grains, copper, lithium, fashionable rare metals, and more besides — and located where the Monroe Doctrine’s writ once ran. The administration has made a big gamble, but it was right to do so.
Well, the prospect of a dollar inflow (and the reality of some of it) helped stabilize things by enough to avoid a peso crisis wrecking Milei’s plans. His LLA did very well in the midterms, and Argentina’s reform process rolls on.
Writing the other day about the news that horizontal drilling pioneer Harold Hamm’s Continental Resources has been buying interests in Argentina’s massive Vaca Muerta (“Dead Cow”) oil field, I noted a few signs of the country’s progress:
Under new management, Argentina’s GDP grew by between 4.5-5.5 percent in 2025. Forecasts for 2026, less of a bounce back year, stand at between 3-5 percent. Inflation dropped to around 31 percent in 2025. This decline is expected to continue in 2026, although estimates for full year inflation are all over the place, ranging from 10-20 percent. In 2023 it was 211 percent.
Hamm had told the Financial Times that his company “like[s] the rock” in Vaca Muerta, but he also likes the way that Milei is transforming Argentina. “He could be on his way to a real turnaround. . . . We think it could be a real deal for the country and for our company as well.”
But what about the U.S. Treasury’s dollars?
Well, the news is good. Argentina drew down much less than the Treasury had provided for, $2.5 billion rather than $20 billion. The promise of more had been enough. As Treasury Secretary Bessent posted yesterday, the Treasury’s U.S. Exchange Stabilization Fund “currently does not hold any pesos.” Moreover, the whole operation (presumably including the market interventions) had made a profit of “tens of millions” of dollars.
Bessent:
Setting the course for Latin America, a strong and stable Argentina that helps anchor a prosperous Western Hemisphere is in our clear best interest.
In summary, Treasury deployed the Exchange Stabilization Fund exactly in-line with its congressional purpose and our ESF actions worked precisely as Congress intended: to stabilize Argentina in its crisis moment of acute, short-term, and urgent illiquidity pressure on both exchange rate and financial stability. The international community – including @IMFNews through its large existing program – has been unified behind and remains strongly supportive of Argentina and its current reforms and prudent fiscal strategy. But only the United States could act as swiftly as we did in October to preserve market and exchange rate stability.
To reiterate, the ESF has never lost money. Our nation has been fully repaid while making tens of millions in USD profit for the American taxpayer. With Argentina stabilized, the markets are now meeting the Argentine Republic’s financing needs under President Milei’s visionary leadership.
Argentina still has a long way to go, but the Treasury’s intervention looks to have been very well done indeed.