Much Ado About Nothing in Argentina’s Economy

The agreement with the fund is, but it isn't. In Argentina, nothing is easy, and closing the deal with the International Monetary Fund (IMF) was not going to be the exception. Yes, we can say that the USD 20 billion number being talked about is excellent, and the country needs it to come out of its economic coma. Debt payments are being pushed forward, giving the government’s finances some breathing room. The still-skeptical financial market is waiting to pay heavily.

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: Argentina’s Economic Paradox

The government achieved another political victory in Congress, again showing that it can align the legislative branch with its goals despite lacking strong representation in the Chamber of Deputies. Will we see a reloaded version of the Liberty movement after this year's elections?

The rumors of fresh external funding are now materializing—with USD 20 billion as the headline—a big number. However, the market remains anxious and appears to be waiting for the funds to hit the Central Bank before reacting. Part of the current dollar dynamics reflects this tension.

The economic team, on its part, continues to execute the stabilization program and shows month by month that its primary policy anchor remains intact. Another fiscal and financial surplus adds to market confidence. When combined with a trade surplus, arguing that the government won't meet its goals. Becomes harder. Exchange rate liberalization? Not yet. The current environment—with strong demand for dollars and the delayed entry of harvest and RIGI dollars—does not justify opening the short-term FX market. Likely, the government will hold off until there's a lower peso stock and Base Money aligns with Broad Monetary Aggregates.

But uncertainty lingers. How will the market and the government manage the interest rate differential between peso-denominated debt and the scheduled devaluation? How sustainable is this framework before rising peso liabilities trigger market concern? The Strong Peso, now treated as a scarce asset, puts pressure on rates. Who wins in the end? Will Argentina become a highway for doing business and prove it can sustain long-term economic growth? With fresh funding, the answer—for now—is yes.

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#data.

Is Argentina's Economic Shift Positive or Negative?

Spoiler alert: It's complex. Not even with the headline figure of the agreement with the IMF could Argentine bonds recover or country risk decrease. The Merval closed the week in the green but seems to lack strength. The U.S. dollar, on the other hand, is gaining momentum and continuing to rise. Financial and trade surpluses are shaping what could get complicated. It will be complete, but the Central Bank will continue selling foreign complexes.

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Dollar and the Strong Peso

Despite attempts to stabilize the peso, the dollar surged 4% this week. The approval of the approval of the Emergency Decree (DNU) couldn’t change the prevailing trend. A new reality? Policy anchors are still in place, but that seems irrelevant right now. The expectations shock worked last year. This year, markets and households want real news and fresh money. Coverage in the dollar futures market reflects this need.

The USD 20 billion IMF agreement exceeded expectations and provides substantial maneuvering room—clearing debt obligations and recapitalizing the Central Bank, which now gains another layer of support for its Strong Peso strategy. Still, recent trends show the Central Bank has been heavily selling dollars (USD 1 billion in just a few days), signaling a sharp break from past months. The widening FX gap also illustrates this. Will the upcoming harvest save the day once again? Will the government continue to win, or will it be the market’s turn to push back?

Recomposition of Public Accounts

There is a DNU, and there are USD 20 billion available to continue this long journey toward restoring public finances. The twin surpluses persist, though the trade balance is starting to feel the pressure. As long as the government maintains both a fiscal and financial surplus, the pace of recovery will stay on track. Economic growth is pushing up imports, and the trade balance is not what it used to be. Agriculture and energy should be able to offset this shift, but the battle will be hard-fought in the short term.

National Public Sector

We now have the fiscal data for February, and it shows another month in which primary spending grew in real terms and outpaced revenues: +19% YoY vs +5.5% YoY. Breaking it down, 11 of the 16 spending components increased in real terms. The most notable increases were transfers to provinces (+115.4% and +91.8%), social allocations (+50%), and pensions (+40%).

Despite the rise in spending, the government still achieved a financial surplus. For the primary surplus, 1,176,915 million were taken to the coffers, and in the financial one, 310,726 million—equivalent to approximately +0.5% of GDP and +0.1% of GDP, respectively. These results were achieved without the PAIS tax.

Central Bank of the Argentine Republic – BCRA

Everyone’s talking about the fresh IMF funds—and for good reason. The government’s debt is unsustainable. Until now, it's been paying out of its pocket despite inheriting a bankrupt Central Bank with approximately USD12 billion in net reserves. The wallet is empty. Last year’s significant currency purchases in the MULC went largely toward debt payments, limiting reserve accumulation. Both gross and net reserves remain critically low, and that’s exactly what the market is watching to decide if Argentina can pull out of the hole.

Economic Activity

Economic activity remains strong, and corn trucks are rolling into the ports in full force. The harvest appears to be progressing well for much of the agribusiness sector. The government monitors foreign currency inflows closely, aiming to shift the FX market dynamics.

The index confirmed that economic activity grew by 2.1% year over year in Q4 2024 and by 1.4% quarter over quarter. This puts the total GDP contraction for 2024 at just -1.7 %, far from the depths of previous crises. With macroeconomic stability established, investment is picking up and surged +11% in the quarter.

The trade surplus contributed USD 227 million. With imports now normalized, they're rebounding and slowly reducing the net positive figure. Imports increased by 42.3% Yyear over a year while exports grew +10.1% Yyear over the year. The question is: Will Muerta have enough muscle to sustain the trade surplus?

Deregulations

Structural reforms continue at full speed. This week brought significant regulatory changes in road safety and transportation. Autonomous vehicles are now authorized, and by 2027, traditional toll booths will be replaced. Goodbye VTV, hello RTO.

Key changes to the toll system:
The decree outlines a transition to a “free flow” model without physical toll stops, leading to cost savings in time, fuel, and vehicle wear.
Implementation timeline:

• By December 31, 2025: all national highways must have automated payment (e.g., TelePASE)

• By December 31, 2026: at least 50% of tolls must use free flow (license plate scanning)

• By June 30, 2027: 100% free flow nationwide

“Decree 216/25 introduces a major change to the Tourism Law 25,997. For an economy to function, the state must focus on what is within its remit, and the private sector must focus on what is theirs. Unfortunately, in recent years, the state has become involved in doing what private actors should do, distorting and hindering the market.

Here are four examples of incredible destinations or tourist experiences that many Argentines don’t even know about:

1. Carlos Pellegrini is the heart of the Iberá Wetlands. It is. It is one hour by plane from Buenos Aires (but no flights) or 10 hours by car (with 60 km of dirt roads).

2. Sierra de los Quinteros in La Rioja: a 500-meter-tall cliff with a walkway to infinity, where condors fly overhead just one or two meters above (all day long). It’s 40 minutes from Córdoba airport (but there are no flights). Currently, it takes 3 hours by car from La Rioja.

3. Campo de Piedra Pómez in Antofagasta de la Sierra is a unique lunar-like landscape. It is just 50 minutes by air from Córdoba (again, no flights). Today, it’s accessible only after a 7-hour drive from the capital of Catamarca.

4. A hot air balloon ride in Buenos Aires Province (the image used was from the U.S.). This activity exists only in very limited form here, perhaps because the importation of hot air balloons is currently banned (a restriction that is days away from being lifted).

A good tourism policy is about removing the obstacles our tourism entrepreneurs face—identifying what's blocking connectivity or driving up the costs of the resources they need to work. It’s not about doing the jobs they should be doing. And by the way, if you don’t know these destinations, we’ve been doing something wrong.

The changes introduced to National Tourism Law No. 25,997 focus the State’s role on promoting and marketing the country and our tourism sector but remove the State's power to plan the industry to grant discretionary subsidies or training. It is not the function of the national government to decide which regions or tourism sectors within a province should be developed—much less to impose centralized criteria on how providers should be trained, especially when today’s tourism experience is largely immersive and has endless dimensions (perhaps a better plan is to offer a family dinner experience rather than a visit to Buenos Aires Cathedral). Tourism growth should come from the initiative of its actors, free from State interference or restrictions.”

ARCA’s two new measures simplify foreign trade:

• Removed private entities from customs verification in hidden exports

• Digitized post-shipment declarations, eliminating in-person customs visits

The Street

The real average wage for registered private-sector workers (SIPA) rose by 1.6% month over month in January. It is now 5% higher than in November 2023. This sustained improvement helped push unemployment down from 6.9% to 6.4% in Q4 2024, according to Indec. Notably, 3 million fewer people are living in poverty compared to November 2023. The wage recovery made January the strongest revenue month for some in five years.

Inflation

January, wholesale inflation peaked at 1.6%, slightly higher than in previous months. The disinflation path is progressing, but not in a straight line.

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Actionables

It was another challenging week for Argentine financial assets. Volatility remains sky-high; not even the DNU’s approval calmed things down. Still, Friday brought some relief, as news of the USD 20 billion IMF deal lifted the mood. It’s all very early, and while the government seems to have a firm grip on policy, market trust is still lacking. Country risk hasn’t eased, the dollar continues to rise, and the Merval stays flat.

For now, those holding pesos continue to enjoy attractive returns. The high positive real interest rate appears to be here to stay. With falling inflation and the recent uptick in fixed and CER-linked rates, there are solid opportunities for smart treasury management to squeeze out some extra yield.

We still see sovereign debt struggling to rally. But when we look back at the week’s macro and fiscal figures, the conclusion is clear: Argentina’s country risk premium is living on borrowed time. Fiscal and trade surpluses remain in place. That’s why we continue accumulating bonds—because we believe in fundamentals and have a strong heart (which you'll need for this kind of volatility).

The markets welcomed the IMF agreement… to a point. Argentina is Argentina: Investors are waiting for the fine print, the signature, the official stamp, the actual disbursement—and maybe even for the sausage-making machine to kick in.

The day when gross and net reserves take a real leap forward is approaching. The path is drawn. And so far, nothing is knocking the economic team off course.

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

PS: Follow me on Twitter and LinkedIn, and let's discuss the Argentine economy's challenges