Remonetization, Cash Cushions & Export Taxes

A short week to take the edge off the adrenaline of living in Argentina. The dollar barely fed those rooting for it to go up or down. The market has already forgotten the removal of FX controls and has returned to the cepo-induced lethargy. With the “Anker point” trending, money demand steps onto the field and prepares to be the star.

Dear ArgenGrowther, changes ahead!

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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

A very short week left us with a calm dollar, some announcements, and an economic team with a clear direction. When the Executive Branch sets a course, the program moves forward—rocky at times, yes—but unwaveringly focused on the horizon. Week by week, decisions align with that course, gradually fixing public accounts and, at the same time, preparing the path for sustainable growth.

Tax cuts are the order of the day. Everyone is asking for them. Everyone. The government is listening and delivering—bit by bit, little by little. Because there’s one non-negotiable anchor: the fiscal surplus. The removal of export duties on a large portion of the industrial sector points that way, but also raises questions in the agricultural industry.

Export taxes are still crushing the main foreign currency-generating and producing sectors. How much more could it generate under lower tax pressure? Hard to know. But considering it has survived decades of absurd tax burdens and some of the most erratic macroeconomic conditions in the world, it’s reasonable to believe that if macro stability is achieved and Argentina’s cost of doing business is reduced, the agricultural sector has much more to offer than it’s currently contributing.

A calmer global landscape will help Argentina avoid the shocks of international volatility. With our issues, we have more than enough. In the meantime, we continue waiting for politics to ask us to dance a tango—or to sing us a proper electoral-year milonga.

If wages recover and the country grows, everything will be easier. Will the day come when Doña Rosa doesn’t know the name of the economy minister?
Could Argentina become that “boring country” where doing business is simple and breaking news is less urgent?

Today, we’re cautiously saying: maybe yes..

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Is Argentina's Economic Shift Positive or Negative?

Spoiler alert: meh. The dollar’s calm helps, and agri data is positive, but the market seems indifferent. It has already forgotten that there are no FX controls and that the Central Bank is no longer bankrupt and still struggles to gain momentum.

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The dollar and the Strong Peso

Welcome, lower exchange rate volatility. At least this week, no one was obsessing over the dollar rate. Trading in a tight range all week, it closed practically at the same level as the week before.

As we’ve mentioned, seasonality will favor the peso in the coming months, and the number of trucks arriving at the Rosario port confirms it.

Restoration of Public Accounts

Let’s revisit what we’ve been saying every week: the economic team is working to fix not just the Central Bank, but the entire State. Over the past 20 years, intra-State debt has soared. To simplify, we could say it’s one of the reasons why the Central Bank ended up with negative net reserves—chronic fiscal deficits had to be financed somehow.

There’s no need to repeat how harmful the public account mess has been for the country.

The government has been talking a lot about the “Anker point” and remonetization. This week, they clarified their view. Ultimately, remonetization can happen through two channels:

1. Treasury injecting pesos via debt buybacks (excess demand for pesos)

2. Central Bank buying dollars at the band’s floor (excess dollars)

They are not perfect substitutes and don’t operate at the same speed. The “Anker point” reflects banks’ preference to lend to the private sector instead of financing the government. The government has built a cash cushion in pesos to have a safety net and cover any weak debt auctions without affecting the disinflation plan. The goal remains to strengthen macro stability.

Strengthening private credit, stabilizing liquidity, and building fiscal buffers are today’s true anchors in the remonetization process. This is not a coincidence—it’s a strategy in a still dynamic equilibrium.

“Anker Point” and dollar purchases at the band’s floor in a dynamic general equilibrium.
In dynamic general equilibrium, remonetization via Treasury peso injections during primary auctions to cancel debt, and monetization via BCRA dollar purchases at the floor, are not perfect substitutes. From a policymaker's perspective, one must stay ahead and increase optionality in scenarios with multiple equilibria.

Remonetization via Treasury injections in primary auctions against debt cancellation reflects an excess demand for pesos/liquidity and an excess supply of public securities held by banks (“Anker Point”). This is consistent with real interest rates that are endogenously strongly positive, stemming from a virtuous process of falling inflation, lower nominal rates, and rising money/credit demand from the private sector, all with a fixed broad monetary base.

Due to macro fundamentals, cleaned-up balance sheets, and expected flows, remonetization via BCRA USD purchases at the band’s floor results from excess demand for pesos/excess dollar supply. The (moving) floor level of the band is connected to the recapitalization of the Central Bank with USD 20 billion in immediate, freely available reserves. The priority is to keep “M” stable within the band while maintaining the disinflation goal.

This means remonetization via USD purchases at the floor doesn’t necessarily resolve the excess demand for pesos/liquidity or the excess supply of Treasury securities held by banks. There are two reasons:

• Adjustment speeds differ. The Treasury may experience less than 100% rollover in a debt auction (“Anker Point”) before reaching the band’s floor.

• The “Anker Point” reflects banks’ optimal portfolio decision to increase private sector exposure (credit to households and businesses) over public sector exposure due to macro stabilization and no need for Treasury financing. This dynamic is independent of the FX level at which the BCRA monetizes and, in some auctions, inelastic to the Treasury’s cut-off rate.

Policymakers must stay ahead and build optionality for multi-equilibrium scenarios. Hence, the Treasury has been preemptively building a peso reserve cushion for over a year through the primary surplus and net local market placements, as the minister has explained on several occasions.

Treasury’s peso reserves are now reinforced by the BCRA’s transfer of profits to the Treasury, which will be deposited back into the BCRA with a neutral monetary effect. These funds were generated from the fiscal surplus and the Treasury’s financial strategy (roughly matching the sterilizing primary surplus estimated for the full year). The Treasury’s peso reserves act as a buffer to cover potential Treasury auctions with less than 100% rollover—again, for good reasons—and debt cancellation, reinforcing intertemporal fiscal solvency, in response to banks’ excess liquidity and increased credit demand from households and firms (a virtuous cycle).

The peso buffer also reduces expected rate volatility, encouraging longer investment durations in line with the Treasury’s financial strategy. As more players join the game (mutual funds, foreign investors, etc.), this tension should ease, accelerating real rate compression and local currency bond demand.

Central Bank of the Argentine Republic

Let’s briefly revisit the new monetary framework. The BCRA defined a broad money target (private M2) with some flexibility, which brings benefits in this new phase.

At the same time, the target projects 20% real growth by year-end. This allows the Central Bank to contain rate increases by injecting pesos when needed. We saw it, for instance, in auctions with weak rollovers: the Treasury injects pesos, cancels debt, and liquidity flows back into the system.

The logic is clear: if the “Anker Point” holds—banks preferring private over public credit—the banking system will need to channel more deposits into loans. And for that, more money is required.

The key? Inject pesos without losing the anchor. Avoid rising rates due to a shortage of lendable funds. In plain terms: if credit wants to grow, don’t let it run out of fuel.

With the BCRA’s transfer to the Treasury, the Broad Monetary Base (which no longer has a target) increased, as shown in the following chart.

It’s been confirmed that in May there will be a new Bopreal auction for companies still “cepod,” for dividends prior to 2025 and commercial debts prior to 2024. The maximum issuance will be USD 3 billion, with up to USD 1 billion eligible for tax payments. The interest rate will be 3% and will be subscribed in pesos at the official exchange rate. The peso vacuum cleaner enters the scene again to reduce the money supply further.

National Public Sector

The shift in the public sector is total—even provinces are catching up. For the first time in 20 years, the country achieved a national fiscal surplus and a consolidated surplus across provinces—a change of era. This week, President Javier Milei announced plans to replace the VAT with a national and provincial tax. It's too early to draw conclusions, but a bit of tax competition among provinces would be lovely.

It’s not too early to hear the increasingly loud call for tax cuts from the business sector, and the government is responding. This week, it was the turn of a large portion of the industrial sector, which can now export without paying duties.

The National Government will eliminate export duties on 88% of industrial products. From now on, 4,411 products will no longer pay export taxes of 3–4.5% on the merchandise value. The measure will initially benefit 3,580 companies—almost 40% of Argentine exporters.

The Treasury’s cushion at the Central Bank has once again risen sharply with the BCRA’s profit transfer of ARS 11.9 trillion, reaching ARS 13.7 trillion after last week’s ARS 2.2 trillion auction payments.

Economic Activity

Soy production fell this year, according to the Rosario Grain Exchange, by 10% compared to last year, particularly in the northern region. At the same time, the wheat planting area is expected to increase for the upcoming season.

We also looked at recent dairy production data. Comparing Argentina with New Zealand shows we have plenty of room to grow, but will that growth ever come?

Meanwhile, crude steel production hit 330,800 tons in March, a +37% YoY increase.

RIGI

LNG keeps making waves. Golar and Vaca Muerta gas producers—YPF, PAE, Pampa, and Harbour—have struck a deal. The goal is to increase exports by USD 2.5 billion starting in 2027, recurring yearly. The first investment phase is already RIGI-approved, and Argentina’s energy future looks promising.

On the Streets

Formal wages keep recovering, and what once looked like a brutal crisis—thankfully—didn’t materialize. Wages are rising month by month, the country is growing, and with inflation trending down, purchasing power may finally start to recover after years of erosion. Informal labor remains sky-high, and that includes the public sector.

Naturally, real wage improvement contributes to lower poverty levels. The IMF’s Staff Report shows that poverty is down and social assistance has surged.

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Actionables

A very short week here showed an Argentina somewhat anesthetized. The dollar barely moved, country risk increased, and the Merval is still flat despite an improved global outlook. The “end of FX controls” narrative seems exhausted, and the electoral driver is entering the game.

We’re in a country where politics is the beating heart of the economy, and that’s a big part of the problem. This year won’t be the exception. Until the elections, we’ll keep dancing to the legislative beat.

We’re still watching the peso curve closely. With the dollar stable, other dynamics may emerge. There will be no deep dive this time—it was a short week, and there was not much movement.

The international climate has calmed, which helps reduce volatility. However, that tailwind hasn’t hit yet, and Argentine assets remain sluggish.

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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