It's Raining Swaps
After renewing the Yuan swap with the PBoC, it looks like Milei's US buddies will also lend a hand.
Welcome Avatar! The last couple of days it’s been hard to sift through the tariffs and figure out what the long term consequences will be. But so far, Argentina seems to be sandwiched comfortably between China and US Treasury swaps.
As we discussed in A Perfect Storm, time is running out for the current exchange rate policy in Argentina. The speed of the initial IMF disbursement is key, and this week Minister of Economy Caputo admitted that the crawling peg has reached its end, confirming that Argentina will move toward a more flexible exchange rate policy with a managed float of the dollar from August onwards.
At the same time, US Treasury secretary Scott Bessent will travel to Buenos Aires next week to meet with President Milei and Minister Caputo, potentially to discuss extended USD access next to the IMF agreement.
On the same day, the BCRA confirmed it renewed the currency swap with China of $18 billion dollars. All circumstances remaining equal, it seems that Argentina find itself in a privileged position in this current tariff and currency war.
It’s like the scent of a lingering perfume of days past, when the country’s neutrality allowed it to trade with all sides in previous conflicts. But everyone knows conditions never remain the same and just like before, Argentina could be forced to pick sides.
So what is likely to change and will it prove to be beneficial or detrimental to Argentina? Let’s find out.