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A Year to Remember: Historic Milestones and Challenges for Argentina
The market began in 2024 clouded with doubts about the government’s ability to stabilize the macroeconomy and secure political support to lead the country. Yet, as the year ends, markets eagerly buy into everything the government offers. Confidence has grown significantly among investors and business leaders, although there’s still much progress to be made. This transformation didn’t happen overnight—it required calculated decisions, steady communication, and results that restored market confidence. As we close the year, Argentina’s economy stands at a crossroads: the financial markets reflect optimism, while the real economy signals challenges that will demand attention in 2025.
The market began in 2024, clouded with doubts about the government’s ability to stabilize the macroeconomy and secure political support to lead the country. Yet, as the year ends, markets eagerly buy into everything the government offers. Confidence has grown significantly among investors and business leaders, although much progress remains. This transformation didn’t happen overnight—it required calculated decisions, steady communication, and results that restored market confidence. As we close the year, Argentina’s economy stands at a crossroads: the financial markets reflect optimism, while the real economy signals challenges that will demand attention in 2025.
Dear ArgenGrowther,
Every week, we present the key data from the past week and delve into various aspects of our beloved Argentina to assess their impact, understand what's happening, and make better decisions. The newsletter is divided into four main sections:
Brief Reflection
Data
Understanding What's Happening in Detail
Actionable Items
- Sponsor of the week -
Brief Reflection: Two Argentinas, One Future
We close the year experiencing two starkly different realities—what else is new? Argentina and its ceaseless dichotomy show us that the financial market continues its honeymoon with rising bonds, booming stocks, and declining country risk. Yet, the real economy signals trouble, especially in agriculture, where defaults are mounting. The recent announcement by Los Grobo of its inability to meet financial obligations is a striking example.
Don't let the trees block the forest view; the situation in the agricultural sector doesn't take away from what the government has achieved. The macroeconomy is light years ahead of where it was at the beginning of the year. We won’t list all the improved economic variables as we've highlighted them throughout the year in this column. However, this achievement will go down in history, paving the way for a promising 2025—a goal we all share.
This week, the virtuous circle showed some cracks, raising doubts about the real economy's resilience. While the financial side inspires confidence, the government has played its cards well, leaving skeptics in the cold. With strategic financial maneuvers, the government seems to be laying the groundwork for an economy that facilitates business rather than hinders it. Are we closer? Today, we regrettably close the year with uncertainty.
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Is Argentina's Economic Shift Positive or Negative?
Spoiler alert: The dubious closes the year. With the Merval returning to green and bonds at high, while country risk continues to fall, the novelty came from the Central Bank, which closed the last week of the year selling currencies. The data coming from the financial sector is ugly.
Understanding in Detail: Dollar and the Strong Peso
Dollar and the Strong Peso
The dollar gained strength again this week, approaching ARS 1,200, reflecting high demand and a nearly ARS 150 increase from recent lows. This demand highlights ongoing tensions in the peso-dollar dynamic, underscored by the government’s inability to sterilize all dollars purchased in recent months. President Javier Milei’s comments indicate a potential policy adjustment, suggesting the Peso Fuerte could be appreciated when necessary—a significant factor for those tracking currency trends.
Public Accounts Recomposition
Despite promises to reduce taxes, the 2025 budget projects a 0.55% increase in effective tax pressure. Losses from the removal of the PAIS tax are expected to be compensated by higher income taxes, export duties, and fuel levies. However, the agricultural sector’s struggles raise questions about the feasibility of maintaining export duties without further economic strain.
Historic Surplus
For the first time in 123 years, Argentina achieved a financial surplus without default—a milestone that signifies a potential turning point. The ARCA report reveals that USD 32.151 billion was declared in assets during tax amnesty. Of this, USD 22.165 billion was cash, with the remainder in real estate, vehicles, and corporate shares.
Economic Activity
The agricultural sector remains a focal point of concern as the year closes. Defaults by major players like Los Grobo Agropecuaria highlight deep structural issues affecting the industry. These challenges are not isolated—other companies like Surcos and Agrofina have also faced financial difficulties, pointing to broader weaknesses in the sector.
A significant drop in agrochemical sales, excess inventory, and reduced distribution capacity has severely impacted Agrofina's cash flow. Meanwhile, Los Grobo Agropecuaria cited illiquidity in the promissory note market, challenges in collecting credits, and financial troubles in a related company as key reasons for failing to meet a USD 100,000 promissory note.
These events raise alarms for a sector that has traditionally been one of Argentina's strongest economic pillars. External pressures, such as fluctuating commodity prices and adverse weather conditions, have compounded the difficulties. The elimination of export duties (DEX) is seen as a critical measure to restore profitability, but questions remain about whether the government will prioritize this reform amid ongoing fiscal constraints.
Despite these challenges, agriculture plays a vital role in generating econdrivetivity. The sector’s recovery will depend on targeted policies that address liquidity issues, support credit access, and incentivize production. The stakes are high, and 2025 will be pivotal in determining whether agriculture can regain its footing in Argentina’s economy.
RIGI Projects
Progress continues in renewable energy development under the RIGI framework. YPF Luz secured approval for the first project, a USD 211 million investment in a 305 MW solar park in Mendoza. Six additional projects await approval; more are expected in the coming weeks. This marks a significant step toward diversifying Argentina’s energy portfolio and boosting economic growth through sustainable development.
Deregulations
In 2024, the government eliminated 800 outdated regulations to foster economic freedom. These changes removed barriers to business, streamlined bureaucracy, and ended hereditary charges in public positions. Further deregulations in 2025 could catalyze investment and entrepreneurship, setting the stage for long-term growth.
The Street
Optimism filled the streets this holiday season. Families celebrated in peace, buoyed by the progress made throughout the year and hopeful for what lies ahead. From this space, we extend our warmest wishes to all Argentinians and those who cherish this country.
The last full week of the year closed as expected: green for sovereign bonds, with country risk compressing further to near 600 basis points—a level unseen since November 2018. Bonds continue to accrue daily interest and remain compelling for those confident in Argentina's recovery, though not for the faint-hearted.
The Merval joined the rally, closing the week and the year on a high note. After a historic year, it signals strong momentum heading into 2025.
In the peso market, dollar demand has steepened the yield curve. Short-term notes offer yields above 3% monthly for the first time in a while. As we've emphasized recently, the carry trade isn’t for everyone. However, for those who trust the government's strategy and foresee the MEP dollar aligning with the official rate, the market presents another attractive entry point.
For the bold investor, Taking dollar repos at 2% and holding Bopreales yielding 9% can create an appealing rate differential. However, this strategy suits only those with strong stomachs; conservative or moderate profiles should steer clear.
Final Thoughts: Optimism with Caveats
Argentina ended the year in better shape than it began, with a far stronger macroeconomic environment. Yet, the challenges in the real economy, particularly in agriculture, highlight the road still ahead. Balancing progress in financial markets with improvements in everyday economic activity will be crucial for sustainable growth.
If you’ve enjoyed this analysis, please share your thoughts, comments, and feedback. Let’s keep the conversation about Argentina’s transformation alive.
Nau Bernués
Founder, ArgenGrowth