The investment bank considered the US Treasury’s decision to buy Argentine pesos unprecedented and highlighted its stabilizing effect, although it warned about the fragility of the exchange rate scheme, electoral uncertainty and the sustainability of the economic program.
In a report with an optimistic tone, the investment bank Barclays celebrated the intervention of United States Treasury to stabilize the exchange market and support the government of Javier Mileicalling the measure “almost unprecedented” in recent history.
According to the analysis, the decision of the Secretary of the Treasury, Scott Bessentof acquire Argentine pesos It only records three precedents: the purchase of Japanese yen in 1998 and 2011, and euros in 2000.
The report, titled “Whatever is necessary means whatever is necessary (including buying Argentine pesos)”alludes to the famous phrase of the former president of the European Central Bank, Mario Draghiwhen it committed all possible resources to defend the euro in the midst of the 2012 debt crisis.
For Barclays, Washington’s explicit support represents a substantial change with respect to the previous situationby providing confidence and liquidity in a context of political and economic fragility. Although it recognizes that part of the market sees the support as insufficient to resolve the country’s structural imbalances, the bank maintains a contrary view: Treasury aid plays a key role in stopping a spiral of depreciation, inflation and political distrust.
“The intervention acts as a dam against disruptive scenarios and reduces the risk of a disorderly devaluation or an inflationary jump with political consequences,” the document states.
Four market concerns
Despite the favorable tone, Barclays identified four areas of concern among international investors following the announcement of the assistance program:
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Suspicions of an electoral maneuver. Some traders fear that the Treasury promise is just a political gesture before the election. Barclays dismisses this reading, arguing that a setback would imply a high reputational cost for Bessent and for the US administration.
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Macroeconomic sustainability. The report warns that an exchange rate regime with an overvalued peso could lead to a new crisis, although it is confident that the United States will demand a solid economic framework in exchange for its support.
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Persistence of support after the elections. Analysts recognize that the continuity of the program will depend on political developments and the electoral result, which could reactivate exchange tensions towards the end of the year.
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Containment capacity in the short term. Barclays estimates that, if dollarization pressures increase, they could apply temporary exchange controls to avoid a run before the elections.
Milei award USA
Dollarization: ruled out, but under observation
The report rules out that the dollarization is currently on the agenda, although he admits that support from the Treasury or even the Federal Reserve could make it technically possible in an extreme scenario.
“We do not believe this is on the table,” Barclays clarifies, but warns that a partial conversion – limited to money in circulation, some US$15 billion— could be financed with current liquid reserves (US$20,000 million) if there was formal US support.
Still, the bank warns that full dollarization would be negative for long-term prospectsdue to the risk of a banking crisis and the loss of monetary policy instruments.
Barclays maintains a position “Market Weight” on the Argentine debt and emphasizes that the intervention of the United States It was key to stopping the exit towards the dollar and stabilizing sovereign bonds after the announcement of swap for US$20,000 million.
“Treasury support provided exchange tranquility, but the market will continue to pay attention to the electoral result,” the report concludes, summarizing the feeling of caution that predominates among investors: confidence in external support, but alert to local political uncertainty.
Source: Ambito
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