Argentine President Javier Milei has rejected investor calls to allow the peso to float freely following his victory in midterm elections, after the US spent an estimated $2bn propping up the Argentine currency last month.
Buoyed by an unexpectedly large win over the leftwing opposition Peronists, Milei vowed in an interview with the Financial Times to accelerate his free-market reforms and deepen his alliance with President Donald Trump. “We have to ensure . . . we can kill the socialist ideas which have ruined this country for 100 years,” he said.
Milei suggested that he would keep the peso within gradually widening bands against the US dollar at least until elections in late 2027 to temper Argentina’s chronic volatility, dismissing criticism that the policy had led to the currency becoming overvalued earlier this year.
“We have a programme and we are going to keep maintaining it,” Milei said of the currency. Investment banks have argued Milei should capitalise on renewed market optimism following the elections to liberalise the exchange rate and rebuild reserves after the current regime came under attack in October.
In a move without precedent this century, the US Treasury stepped in to buy pesos and announced a $20bn credit line as a run on the Argentine currency threatened Milei’s election prospects. Scott Bessent, Treasury secretary, said he would do whatever it took to rescue a key strategic ally.
“The US Treasury made timely interventions when it saw a business opportunity,” Milei said, referring to Bessent’s description of the peso in October as “undervalued”. This differed from many local economists who maintained it was overvalued.
“What do you think is worth more?” Milei asked. “The judgment of an expert who has been very successful and has the North American Treasury behind him, like Mr Bessent . . . or a group of domestic dimwits?”
Pressure on the exchange rate has eased since Milei’s poll victory, as the peso strengthened from the bottom of its target trading range. The president said he had no plans to alter the design of the bands, whose upper and lower limits move outwards by 1 per cent each month, noting that at that rate they would be “much wider” in two years’ time.
“The bands are designed so that they open over time — and the moment will come when they are irrelevant,” he said.
Milei argued that an “increase in demand for money” in the coming months, as election uncertainty ends and the economy gathers steam, would make it easier for authorities to buy dollars for central bank reserves.
He said investors arguing for a free float of the currency had been influenced by “local economists and consultancies, who have systematically been wrong on this”.
Milei said Bessent had first agreed during a visit to Buenos Aires in April — when Argentina switched from a fixed exchange rate to floating within bands — that the government could come under attack from opponents ahead of the midterms and might need market support.
Bessent said last month that support for Argentina was part of a new “economic Monroe doctrine”, as the US seeks to reassert its influence in Latin America and halt China’s rapid expansion.
“The US has openly decided to be the leader of the region and I strongly celebrate that,” Milei said. “Before the US was concerned with helping non-allies, feeding its own enemies. Today, they’ve made a Copernican shift, which is fabulous. That is: support for allies, and no support for non-allies. I think it’s brilliant.”
He said Trump could count on Argentina’s full support as he used the US military to blow up speedboats carrying drugs in the Caribbean and Pacific. Milei said he was “totally in agreement” with Trump’s pressure on Venezuelan president Nicolás Maduro, whom he described as a “narco-dictator”.
The president stressed that the rally in Argentine assets after his La Libertad Avanza party won the midterms “makes us optimistic” that Argentina could return to global capital markets next year.
“I think in 2026 Argentina will be in the market. And the [US] swap line will cover Argentina’s liquidity position if Argentina can’t roll over its debts. That is to say, Argentina will not default. Our commitment to paying our debts is unbreakable.”
Bessent has also spoken of a $20bn facility funded by private banks to invest in Argentine sovereign debt. Milei claimed negotiations would “take time”, but insisted the plan was still active.
The IMF also supported Milei’s reforms with a $20bn loan deal in April, bringing the total the country owes the fund to $56bn.
While Milei has tamed the dire inflation he inherited, Argentina’s economy has stalled in recent months. Spending cuts and interest rate increases designed to curb price pressures have crimped businesses’ access to credit and reduced consumers’ purchasing power.
Milei said labour and tax reforms that he planned to present to congress this year would revive the economy.
“We are firing up all the growth engines,” he said, claiming that maintaining a balanced budget, cutting taxes and deregulating could allow growth to climb from a projected 4 per cent this year to “between 7 and 10 per cent a year . . . from next year”.
The tax reform aims to slash 20 different taxes and put $500bn back into Argentines’ pockets by 2031, the end of a hypothetical Milei second term, the president said. More flexible labour laws would bring some of the 42 per cent of Argentines who work off-the-books into the formal economy.
With a specially made artisanal bronze chainsaw sitting on his table at the Casa Rosada presidential palace — echoing the tool he brandished on the campaign trail — Milei pledged to keep slashing the Argentine state, which he said accounted for 42 per cent of GDP when he took office.
“We are aiming to take public spending to 25 per cent of GDP. We have already cut by 11 percentage points, we have six still to go.”
Analysts warn that to pass reforms, Milei’s La Libertad Avanza party — which still lacks a majority in congress — needs to build alliances with small moderate opposition parties or provincial governors who control legislative voting blocs.
Some investors were concerned by the resignation last Friday of cabinet chief Guillermo Francos, a veteran operator who was Milei’s top political negotiator. Milei has said negotiations will now be led by newly appointed interior minister Diego Santilli, a member of former president Mauricio Macri’s PRO party, “a man of dialogue and consensus”.
The president said he was showing commitment to building political coalitions “through acts”, pointing to conciliatory speeches and a meeting with 20 of Argentina’s 24 regional governors.
Latin America was undergoing a “liberal renaissance”, Milei added, expressing hope that elections in several big nations over the next year would return conservative governments: “We hope the blue wave continues. We’ve had enough reds.”
Surveying the globe from the presidential palace, Milei said he was in no doubt that “the failure of woke ideology has been proven”.
“The world today is heading towards a different format, in which there will be a bloc led by the United States, a bloc led by Russia and a bloc led by China,” he said. “In this world order, the United States understands that its bloc is in America — and without doubt, we are its biggest strategic ally.”
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