Market calm returns to Argentina after President Trump and US Secretary Bessent pledge strong support

ARGENTINA - In Brief 24 Sep 2025 by Joaquin Cottani
Last week, Argentina’s economy faced intense pressure as the nominal exchange rate hit the ceiling of its exchange band and country risk surged to 1,450 basis points. Yet, the government, led by President Javier Milei and Economy Minister Luis "Toto" Caputo, pulled off two bold moves that swiftly reversed the tide: the MEP exchange rate dropped by 7%, and country risk fell by 400 basis points.  As I noted in my previous report, the earlier strain on the exchange rate, public bonds, and Merval shares stemmed from two factors. Economically, an overvalued exchange rate and insufficient reserve accumulation fueled instability. Politically, the ruling party’s electoral defeat in Buenos Aires on September 7 deepened market unease. The government’s latest measures caught markets by surprise. First, they announced a temporary suspension of taxes on agricultural exports up to $7 billion until October 31, encouraging agricultural exporters to liquidate foreign currency ahead of the mid-term elections. Second, they secured a commitment from the U.S. Treasury to support Argentina via the Exchange Stabilization Fund, a swap mechanism akin to the one that saved Mexico during the 1995 Tequila Crisis. Mr.  Caputo’s economic team has consistently demonstrated a knack for last-minute market-calming measures. Consider their track record: In January 2024, post-devaluation (from 360 to 800 pesos per dollar), the Central Bank (BCRA) introduced import scheduling (calendarization) and issued BOPREAL bonds to settle debts with importers, stabilizing import payments.In August 2024, a tax amnesty program bolstered BCRA reserves despite rising imports and spurred economic recovery through increas...

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