Despite a U.S. bailout package, the Argentine peso continues to sell off ahead of a crucial election that could trigger another sharp depreciation.
Friday, Currency fell 0.4% The exchange rate is currently close to 1,492 pesos against the US dollar. The exchange rate has hit a record low and is below where it was before the Trump administration announced interest rate cuts. $20 billion currency swap protocol.
While news of the lifeline briefly sparked a surge earlier this month, the peso has since given up gains and is down more than 40% against the dollar so far this year.
This is despite efforts by Argentine President Javier Milley to secure an IMF bailout and defend the peso by depleting the country’s foreign exchange reserves.
The financial turmoil comes as voters become disillusioned with Milley’s liberal economic plan, which has won praise from Trump and other Republicans. Although he has already made significant progress Economic growth has slowed in terms of curbing deficits and inflation, and Argentina’s so-called crawling peg to the dollar is considered unsustainable.
Recent regional elections delivered a crushing defeat for Milai, raising the possibility that he will devalue the peso. This Sunday’s parliamentary elections are expected to further turn against his party, putting additional pressure on the currency.
Trump has defended his rescue operation, but opposition has grown louder from supporters who say it is inconsistent with his “Make America Great Again” agenda.
“They have no money, they have nothing, they are struggling to survive,” Trump told reporters aboard Air Force One last weekend.
Finance Minister Scott Bessent argued that aid to Argentina was necessary to prevent a “failed state” and called the currency swap line “a bridge to a better economic future for Argentina, not a bailout.”
But U.S. intervention has so far failed to prevent the peso from sliding to a record low, although market participants are reportedly seeing signs that the Treasury Department is taking action. Sold for hundreds of millions of dollars to support it.
Gloomy outlook for Wall Street
Wall Street is pessimistic about Argentina’s prospects and the Trump administration’s ability to keep Mire’s economic reforms on track.
RSM chief economist Joseph Brusuelas said in a report Wednesday’s blog post Currency intervention has failed, and it is predicted that if voters reject Milai again, the peso is likely to plummet by 15%-30%.
He noted that the United States was also trying to arrange additional loans to Argentina from U.S. banks that Reportedly seeking collateral or guarantees They will become whole again.
“Given that the Mire government has exhausted $20 billion in IMF aid, it is necessary to ask the question: Will the United States get something in return?” Brusulas said.
Buenos Aires could devalue the peso and default on its debt, he said, noting that the country is a “serial defaulter” that has tried to renegotiate its foreign debt nine times since 1816.
In fact, Argentina still has dollar-denominated debt coming due, requiring at least $18 billion to be repaid next year.
A U.S. monetary lifeline would be most effective if it were front-loaded and effective immediately, Mauricio Monge, senior Latin America economist at Oxford Economics, said in a note on Tuesday.
But it’s unclear whether that is the case, especially since Trump has said further aid will depend on the increasingly unlikely chance that Milley’s allies will win on Sunday.
“If history has taught us anything about Argentina, it is that past bailouts have proven futile when political support waned,” he added. “As Milei’s approval rating declines and political support wanes, the likelihood of reimposing capital controls and currency devaluation increases, prompting savers to switch to the dollar.”