Let’s Float, My Love, Let’s Float, My Love

The U.S. dollar is groggy, stumbling through Argentina’s new monetary regime. Currency exchange rate bands are now in place, and the Peso Fuerte—stronger than ever—asserted its presence, dominated the narrative, and demonstrated that the removal of currency controls (cepo) has, so far, been a resounding success. The Argentine government continues to overcome major challenges, yet inflation remains a persistent threat. Will we ever reach a day when inflation vanishes and the dollar becomes irrelevant in everyday conversation?

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:

1. Brief Reflection

2. Data

3. Understanding What's Happening in Detail

4. Actionable Items

Brief Reflection

It’s hard to shift focus away from the lifting of currency controls (cepo) and Argentina’s new phase of its economic reform program. Floating—what does it even mean anymore? Many Argentinians don’t know or have forgotten what it’s like to have a floating exchange rate. Can the country live with the uncertainty of not knowing tomorrow’s dollar exchange rate? Yes. We adapt. We move forward. We are Argentinians, after all.

Still, it’s crucial to understand that exchange rate bands reduce volatility and, in return, offer greater predictability. And if the government’s plan unfolds as intended, that predictability could be substantial.

So, what does the government want?

A U.S. dollar at ARS 1,000. If this were to happen, it would yield substantial macroeconomic benefits. It would allow businesses to plan, pay suppliers, save, and invest more confidently, strengthening the Argentine peso as the Central Bank accumulates foreign reserves.

However, —and this is a significant caveat —the appreciation of the peso will likely lead to increased dollar-based inflation unless structural reforms are implemented beforehand. This could weaken Argentina’s international competitiveness. Dollar-denominated wages will also rise sharply. However, so far, inflation in pesos has outpaced inflation in dollars. Is the Argentine business sector ready to change past habits and reduce prices if the exchange rate drops?

Could Argentina’s rapid pace be what helps restore macroeconomic order so quickly that we don’t even notice it? If GDP was growing at 6% before the CEPOL exit, where are we headed now? This growth could fuel an economic boom that eases the recovery of macroeconomic fundamentals and public accounts. If Argentina sustains high growth rates, living conditions will improve.

Ultimately, we’ve got a small preview of what could be. The cepo was lifted, and MEP-official dollar convergence prevailed. Those who were tired of reading here last year that this outcome was likely are now reaping the reward, simply by listening to the government’s signals and daring to believe. The economic program was robust, and the conviction behind it was strong enough to make it happen. Now, it not only seems that the MEP will converge to the official rate, but it might trade at a lower level. The Peso Fuerte is here to stay. Argentina has turned a page.

We reiterate that the boldness, determination, and courage to remove currency controls amid a global crisis instilled confidence in Argentina’s financial markets. Market expectations flipped overnight, and for now, the government has delivered a convincing win. Will this same boldness, determination, and courage be enough to transform the country? Will Argentina become a fast lane for investment and business? Will it convince the world it has the right growth model? Are we getting closer? Today, the answer is a loud, confident yes.

I launched my renewed website! Have you visited it yet?

#data.

Is Argentina's Economic Shift Positive or Negative?

Spoiler alert: Positive. The lifting of the cepo, backed by international organizations, brought more than calm to Argentina’s financial markets. The dollar weakened, while bonds, stocks, and foreign reserves soared. These undeniable signals are reflected in the official exchange rate, the narrowing spread, and the Central Bank’s growing reserves.

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Dollar and the Strong Peso

We’re floating. In the first short week after the Cepo exit, the Argentine peso showed remarkable strength. But let’s be clear: we’re floating under heavy market pressure to sell dollars, and investors know it. The MEP exchange rate fell 15% in a week, wiping out the year’s entire gains and returning to New Year’s levels. That speaks volumes.

Expected volatility in the first week of floating—after six years of currency controls—caused wide spreads at Argentine banks between buy and sell prices. Now, the black market gap is a thing of the past, down to 3.5%. Thankfully, the discussion about the gap is over.

The market either trusts the peso or trusts the government's firm resolve to drive the dollar down to 1,000 pesos. Investors are not willing to bet against it—last year, that proved to be a costly mistake. Everyone is selling dollars and locking in peso returns.

Sentiment? First to sell, sells best. The Cepo exit came with strength and institutional support. The government will do everything in its power to adhere to its macroeconomic reform plan, which now appears to focus on strengthening the peso.

A straightforward logic applies here: if an importer believes the government will push the exchange rate to 1,000, they may delay imports or payments (as long as feasible) since fewer pesos will be needed to settle those bills later. On the flip side, exporters are rushing to liquidate—first to sell, then to sell at a better price. If every public signal suggests the dollar is headed to 1,000, fear sets in, especially for those with limited financial flexibility who must cover their costs.

In short, we could be witnessing a self-fulfilling prophecy—if the government has the strength and conviction. If everyone thinks the dollar will reach 1,000, the market itself will drive it there through basic supply and demand.

That said, it’s worth repeating that betting against the government last year came at a steep cost. The administration has already made it clear that it will not intervene within the currency bands. And while past performance does not guarantee future results, the market offers valuable insights to work with.

We haven’t even touched on the potential for increased dollar inflows from RIGI or the return of the “carry trade”—this time, the real deal. This week, the Central Bank authorized foreign capital to invest through the official foreign exchange market (MULC). In 2018, these flows reached nearly USD 27 billion—today, they are practically zero. The key difference this time is that foreign funds must remain invested in Argentina for a minimum of six months. A major change from the past, though the bitter taste of prior episodes still lingers.

Simple: with no money printing (constant pesos) and increased dollar inflows (via RIGI or carry), the exchange rate should logically trend downward. If we add the fact that the government has a fiscal surplus and can soak up pesos that way, we’re adding more firewood. And this firewood is feeding the flames of the Peso Fuerte and its appreciation. All roads lead to the hornero.

Public Accounts Recomposition

Phase 3 is underway. At least for now, it has been demonstrated that the exit from currency controls CEPo) was carried out with remarkable strength, surprisingly low volatility for Argentina’s standards, and a currency that has, so far, remained stable. Additionally, the Central Bank of Argentina is no longer in default, and twin surpluses were returned in March. We’ve exited a long, dark tunnel—and it’s a sunny day.

This path of public accounts recovery and fiscal surplus corresponds directly with Argentina’s public debt-to-GDP ratio, which has declined sharply over the past year following a brutal rise during the 2023 devaluation. When compared to peer countries and developed economies, Argentina's ratio of public debt held by private creditors is now very low. This suggests the issue isn’t about debt stock but rather about debt flow. The debt-to-GDP ratio fell from 56.5% in November 2023 and 99.4% in December 2023 to 43.7% (including immediate disbursements from the IMF and other international organizations).

And what’s next in this story? The government has outlined that with the following assumptions — a real interest rate (r) of 5%, real economic growth (g) of 5%, and a primary surplus of 1.5% of GDP — the debt-to-GDP ratio could fall to around 32.8% within seven years. Of course, these are projections in a country where seven years feels like a lifetime.

Central Bank of the Republic of Argentina (BCRA)

The Central Bank is no longer bankrupt — and that’s worth celebrating. Net foreign reserves are now positive, estimated at USD 4.8 billion, while gross reserves exceed USD 38 billion.

On the monetary front, only ARS 3 trillion in LEFIs remain outstanding, while the Treasury holds ARS 6 trillion in its Central Bank account. Excess pesos have been gradually removed from circulation thanks to increased economic activity. Soon, a new Bopreal is expected, which should mop up at least ARS 3 trillion more.

Argentina’s IMF targets do present some challenges, but the economic team appears firmly in control. A critical clarification regarding a widely circulating rumor: the dollar does not need to reach 1,000 for the Central Bank to begin buying foreign currency (and accumulating reserves) to meet the IMF’s goals. Reserve targets can also be achieved through alternative mechanisms, such as repurchase agreements (repos) or debt issuance. As long as such avenues exist, the market appears confident that the government will meet its target for reserve accumulation.

National Public Sector

A strong surplus was recorded in March: ARS 745.339 million primary surplus and ARS 398.909 million financial surplus. The recent agreement with the IMF came with an even more ambitious full-year fiscal surplus target, meaning the budgetary anchor remains very much in place.

Argentina has changed, and both the provinces and the City of Buenos Aires have improved their primary balances compared to last year, resulting in positive fiscal results for 2024.

Treasury Auctions

On Monday, the very first day after the CEPo, the Treasury held an auction that, with hindsight, proved to be an excellent trade for investors. ARS 5 trillion were awarded, broken down as follows:

Fixed Rate:

✅ Lecap 5/25, TEA 55.5%, ARS 2.4 trillion
✅ Lecap 6/25, TEA 53%, ARS 1.3 trillion
✅ Lecap 07/25, ARS 0.2 trillion

CER-Linked:

✅ TZXO5, CER +0.8%, ARS 0.5 trillion
✅ TZXO6, CER +9%, ARS 0.3 trillion

Dollar-Linked: Declared deserted

TAMAR:

✅ Letamar 7/25, TAMAR +5%, ARS 0.6 trillion
✅ Bontamar 4/26: Declared deserted

Given recent volatility, it makes sense that the government focused on the short end of the peso curve, avoiding validation of longer rates that had spiked due to external shocks and concerns about the exchange rate anchor. Once that volatility eased, the peso curve collapsed. As inflation continues its downward trend, this should allow for a long-awaited recovery of the peso bond curve.

Currently, privately held peso-denominated debt is quite low. If foreign investors return and the Treasury continues to run a surplus with less debt, market-driven rates are unlikely to rise. This creates further incentives to lock in rates, boosting bond demand and compressing yields once again. The government is nurturing yet another virtuous cycle in Argentina’s peso debt market.

Economic Activity

Following weeks of high financial volatility, Argentina’s economic activity may experience a slight decline in April. But in agriculture, port entry in Rosario is already triple what it was last year.

Argentina still has massive opportunities. Take corn, for instance — the potential for ethanol production is huge, especially when compared with Brazil and the U.S. Currently, only 4% of Argentine corn is converted to ethanol.

March’s energy trade balance was strongly positive at USD 527 million. And this is just the beginning. Without energy, Argentina’s overall trade balance would have been in deficit. Instead, it posted a USD 323 million surplus, with exports increasing by 2.5% year-over-year and imports increasing by 38.7% year-over-year. We’re seeing clear results from macroeconomic discipline, deregulation, and government reforms. According to the Ministry of Economy and monthly INDEC data, Argentina saw the best Q1 export volume in history in 2025. Imports are soaring, but exports are keeping up.

Vista, the oil company, has announced the acquisition of Petronas Argentina and plans to add up to 400 new drilling locations to its inventory.

Deregulation

The Ministry of Deregulation is working non-stop. This week’s highlights: simplified procedures for importing used capital goods — a direct boost to Argentina’s productive capacity and cost structure. Also: the liberalization of yerba mate production. Yes, Argentina is a unique place.

The Street

Private sector real wages are now at levels not seen since August 2018, reversing seven years of lost purchasing power at a surprisingly rapid pace.

Inflation

March’s wholesale inflation rate of 1.5% shows a clear divergence from the consumer price index (CPI), which stood at 3.7%. Over the past 12 months, wholesale inflation stands at 27.7% — still elevated, but far below the astronomical levels previously seen. Inflation in Argentina remains a key economic challenge, but recent trends are encouraging.

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Actionables

If last week was crazy, this one certainly didn’t disappoint either. Fortunately, it wasn’t global market volatility driving the news — it was the lifting of the cepo and Argentina’s return to a floating exchange rate. Those who were positioned in pesos celebrated hard, and now a new opportunity emerges to evaluate which currency you should be in.

Celebration in the peso curve wasn’t just about the falling MEP. Interest rates have compressed, signaling a return of investor confidence in the Peso Fuerte under this new phase of Argentina’s macroeconomic program.? Those who lock in fixed rates early come out ahead. If you manage corporate liquidity and need pesos, don’t let them sit idle in a bank money market fund — the opportunity cost is huge. Even if you’re not fond of fixed rates, CER-linked bonds still offer real positive yields above 5% (as long as you avoid the ultra-short end). This is a great opportunity to lock in inflation protection.

Exchange rate bands will now be a key reference if your investment focus is dollar returns. We have plenty of information at hand. There’s very little chance, at least in the short term, that any asset will yield above the upper band. In just one week, Argentina made a full 180-degree turn — one week ago, we were drowning in uncertainty over the IMF deal and doubts about the exchange rate anchor. Now, the market trusts the Peso Fuerte so strongly that the only question is when it’ll hit 1,000. Upper band? Who wants you now? The pessimists will have to wait because, for now, the market is backing the economic plan and the Peso Fuerte.

With the lifting of currency controls and the allowance of foreign capital to invest in Argentina, things are normalizing. And with normalization comes renewed chatter about Argentina being reclassified as an emerging market. Stocks have picked up on this and are reacting early. Despite global turbulence, local equities are holding up. It’s still early, but if you enjoy high-risk, high-return scenarios, Argentina just opened a new door. The oil and gas sector is catching the attention of serious international funds.

Everything suggests that Argentina’s country risk will begin adjusting downward in the coming months. The economic team has set a clear path, and if followed, country risk will fall. That “if” doesn’t feel too far-fetched anymore — and it’s why we still like Argentine sovereign fixed income. (Don’t forget: it’s still Argentina, so not for the faint-hearted.) That said, we’re a strong-hearted team around here, and we remain very bullish on medium- and long-term sovereign debt, with returns still exceeding 10% per year in U.S. dollars.

Even commodity prices played along last week — soybeans, corn, wheat, oil — all rallied. For Argentina, better commodity prices mean smoother sailing in all other areas.

If you enjoyed this analysis, please share your thoughts, comments, and feedback. Let’s keep the conversation about Argentina’s transformation alive.

Nau Bernués
Founder, ArgenGrowth

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