US Treasury channels Draghi’s “whatever it takes” moment to halt Argentina’s crisis. And stolen cars spark a diplomatic tussle between Chile and Bolivia.
MARKETS
US Treasury promises Milei bailout
Back in 2012, the sovereign debt crisis in southern Europe sparked fears of a dramatic Eurozone breakup, with debt defaults and an unravelling of the common currency all seen as a possibility. That was until Mario Draghi, then-chair of the European Central Bank (ECB), uttered his most famous promise: “Within our mandate, the ECB is ready to do whatever it takes to preserve the euro.”
His phrase signalled that the monetary authority would not hesitate to buy distressed bonds from Greece, Spain, Italy and other struggling countries, marking the end of that market panic.
Yesterday, US Secretary of the Treasury Scott Bessent might have done the same for Javier Milei. After a dramatic end of the week where the Argentine Central Bank had to sell more than USD 1 billion of its loaned IMF reserves to stop its currency peg from breaking, triggering an unprecedented bond selloff, Bessent took to X before Monday’s market open to reassure investors.
“These options may include, but are not limited to, swap lines, direct currency purchases, and purchases of US dollar-denominated government debt from the Treasury’s Exchange Stabilization Fund.”
That Bessent’s words echoed Draghi’s so closely meant they were taken seriously by investors, who re-purchased Argentine bonds en masse, creating surges of up to 24% in one day. The country’s risk premium fell from nearly 1500 to 1100 basis points in a matter of hours.
The announcement was followed by a bilateral meeting in which Trump sang Milei’s praises. “If you look at where they were when he first ran for office and where they are now, it’s pretty amazing the job he’s done,” Trump said, endorsing his Argentine counterpart for re-election in 2027.
👉 Why it matters. Bessent’s history as a currency speculator added weight to his words, as he was part of the team that famously “broke” the Bank of England in 1992, with a USD 10 billion bet that the pound was overvalued. With US support, Milei’s administration believes it can postpone an unpopular devaluation until after the October 26 midterm election without depleting its foreign currency reserves and risking default.
The use of the Treasury’s Exchange Stabilization Fund brings back memories of 1995, when a similar promise by the Bill Clinton administration marked the end of Mexico’s financial crisis — although Mexico still had to allow for a free-floating currency after the loans, with the Mexican peso continuing to depreciate for most of the decade.
Back then, Clinton’s team justified the bailout due to Mexico’s status as a recent NAFTA ally and the risks of increased economic migration across the US southern border, as well as to prevent further regional contagion. Trump, meanwhile, is already facing questions about ideological favoritism, with Milei getting large aid packages while sanctions on Brazil continue to deepen.
As part of Milei’s bet to stabilize the peso until the midterms, the government also announced that no export taxes would be levied on agricultural exports until the end of next month — a massive incentive for the country’s farmers to export their grains ahead of schedule, even if it risks more financial imbalances after the vote.
🔔 You read it here first: Argentina flirts with another debt default
BORDER ISSUES
Chile and Bolivia tussle over … stolen cars?
Political tension between Bolivia and Chile is hardly new. But the latest flashpoint is unusual: the clandestine trade in stolen and undocumented cars, much of which are smuggled across the Chilean border into Bolivia.
The controversy erupted this month after Rodrigo Paz, a centrist candidate who led the first round of Bolivia’s presidential election, suggested in an interview that owning a chuto car — as these undocumented vehicles are known — “would not be a sin” under his administration. Paz went further, saying he would consider legalizing such vehicles if elected, and that preserving the current framework “would be a mistake.”
The remarks drew swift condemnation in Chile. Long under pressure to curb rising crime, officials in President Gabriel Boric’s leftist government rejected the idea, warning it would embolden criminals.
“Establishing some form of [stolen asset] legalization is an incentive to keep driving crime up,” Interior Minister Álvaro Elizalde said. “We want to have a collaborative relationship with all our neighbors, but respecting the rule of law is a basic principle.”
Backlash came in Bolivia as well. The country’s automotive chamber denounced Paz’s proposal, warning it would devastate legal car sales, jeopardizing an industry that is worth USD 3 billion annually and employs more than 60,000 workers.
According to chamber estimates, more than 1.6 million undocumented vehicles have entered Bolivia from Chile since 2013. Industry representatives urged the next president to take the opposite approach to what Paz has proposed, advocating stricter policing and stronger support for the formal car market.
👉 Why it matters. The 900-kilometer border between Chile and Bolivia has been a source of conflict for nearly two centuries, dating back to when Bolivia lost its coastline in the War of the Pacific (1879-1884). Tensions have persisted, and border security has become a top political issue in northern Chile in recent years, with voters citing crime and illegal migration as urgent concerns.
Chile and Bolivia severed formal diplomatic relations in 1978 and have maintained only consular-level ties since. Bolivia has repeatedly taken its case for restored coastal access to international courts, but judges have ruled that Chile has no obligation to negotiate its territory.
This time, however, Bolivia’s outgoing president Luis Arce appeared to align with Santiago. He blamed the recent surge in car theft — up 185% by some estimates — on political rhetoric that has “provoked a negative effect on people’s behavior.” While Paz has not withdrawn his proposal, he later added that if cars were proven to be stolen, they “would be returned to their countries of origin.”
QUESTION OF THE WEEK
Last week, we asked which historically famous Peruvian port was built by the Spanish in 1537 and is still operational today. 80% of respondents got it right; it was the port of Callao.
🟩🟩🟩🟩🟩🟩 The Port of Callao ✅
⬜️⬜️⬜️⬜️⬜️⬜️ The Port of Veracruz
⬜️⬜️⬜️⬜️⬜️⬜️ The Port of San Antonio
🟨⬜️⬜️⬜️⬜️⬜️ The Port of Rosario
QUICK CATCH-UP
🧒 In a stark legal turnaround, Bolivian lawmakers raised the minimum legal age for marriage to 18 years old, eliminating all prior exceptions. The measure targets the elimination of underage marriages, which totalled 4,800 in the past decade despite efforts to reduce the practice. A previous reform still allowed individuals aged 16 and 17 to marry with parental consent.
⛽ Panama opened negotiations to construct an interoceanic gas pipeline that would run parallel to its famous canal. Authorities say 23 companies are currently competing for the project, which would span 76 kilometers and facilitate fuel transportation between the US East Coast and Asia. Works could start by 2027 and cost between USD 2 to 8 billion, estimates say.
📝 Ecuador’s president, Daniel Noboa, is organizing a new referendum, with voters set to be questioned on constitutional reforms including public funding for political parties and whether foreign military bases should be let back into the country. Courts are still analyzing whether other questions can be included, most notably one that would launch a new constituent assembly.
✋ Outgoing Chilean President Gabriel Boric will reportedly back former Socialist Party head of state Michelle Bachelet as his candidate for UN Secretary General, local media reports. But her nomination could be challenged by Donald Trump’s administration, which has veto power at the UN Security Council.