The Clouds on the Horizon Appear, but the Government Remains Steadfast, Soaking Up the Sun

We weren’t bored, were we? No matter when you read this, Argentina always has something to offer. Politics doesn’t let up and will remain at the center of the stage until the elections. Meanwhile, the economic landscape continues to show its contrasts. On one hand, the government remains unfazed by the opposition's attacks and doesn’t alter its financial strategy. However, despite increasingly solid public accounts, the market demands increasingly higher rates to renew pesos and still refuses to buy bonds. In this context, what are the keys to what’s coming?

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

Once again, we have a Congress full of obstacles that brings back bad memories. However, the streets are not the same. Today, the streets are asking for something else, something novel, unseen anywhere else. They supported the experiment and gave the executive an approval rating unprecedented in recent Argentine history. Hopefully, we can move towards a country where violence is neither the answer nor the solution. The world is watching us; let’s rise to the occasion.

There are rumors of fresh funds, but the funds are not. The catalyst needed has yet to be confirmed, and given the country’s track record, everyone wants to see it before paying. The market is impatient and anxious.

Thus, all eyes are on the agreement with the IMF and the dollar movements. Futures are rising, the Central Bank sold over 450 million, as it hadn’t done since 2019, 1.2 billion were traded, the dollar is practically being given away, and the multilateral real exchange rate is at levels from who-knows-what year. Should I go on?

If we want to know what will happen with the dollar, we need to listen to what the Minister of Economy, Luis Caputo, says. If you did that last year, it worked out spectacularly for you. We must adapt, and today adaptation means believing in the Executive. Yes, we’re in Argentina, and the past, our beliefs have let us down multiple times, but—and this is a big but—Argentina has changed. I think no one doubts this anymore, and if the country has changed and you haven’t, you’re losing. Adapt, listen, and act accordingly.

Consolidating confidence comes through numbers. This is what the government sees, unfazed by anything else. It’s the long-term game that’s just starting and they’re winning by a landslide (for now). We see the fiscal surplus as a key pillar of the official strategy, but it’s still only one part of the equation. Without a robust recovery in investment and consumption, growth remains constrained by financing restrictions and high taxes. The real economy needs a clear signal of takeoff, and businesses are waiting for definitions on the medium-term regulatory and fiscal framework. Will we have to wait until after the elections for major updates?

The market shows signs of confidence but not without demanding a higher premium. How long can this scheme hold before the focus shifts to the growing pile of peso debt? The strong peso, as a scarce asset, works against the rate. Who wins? Will Argentina become a highway for business and show the world it has the answers for the growth path? Are we closer? Today, not yet.

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#data.

Is Argentina's Economic Shift Positive or Negative?

Spoiler alert: Negative. Yes, the inflation data didn’t help, neither did the country risk, and the peso market leaves us with many doubts. On top of that, the Central Bank’s buying streak has been cut. Even though the dollar is in its new calm (and rising), there’s no peace.

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Dollar and the Strong Peso

Another week of the dollar gaining ground, those shouting for exchange rate appreciation are celebrating. This is because the strong peso is somewhat weak and the dollar is weak globally. What does this mean? We’re gaining double competitiveness: while comparable currencies appreciate against the dollar, the strong peso depreciates. Let’s not forget that with the peg to the dollar, DXY movements affect us.

On Friday, the Central Bank had a very strong foreign currency sale, not seen at that volume since 2019. Despite this, the MULC balance for March remains net buyer, and the week ended with just USD 40M in sales. Summary: the buying streak is broken, dollar futures are rising, firepower is reduced, and questions arise over an unusual MULC movement.

Recomposition of Public Accounts

We’ll continue to dance to the rhythm of the agreement with the IMF and politics for a while longer. This week’s DNU shows that the Executive continues its economic program and leaves politics aside. The market will watch closely to ensure Congress doesn’t reject the DNU.

National Public Sector

Bids

Another failed dollar-linked bid and another rate hike in short-term Lecaps. 4.458trillionwasawardedoutofanofferof4.458trillionwasawardedoutofanofferof5.520 trillion, with a 97% rollover, mainly distributed towards the shortest Lecap. The instruments awarded are:

✅ DOLLAR-LINKED: ➡️16/01/26 FAILED

✅ LECAP at:
➡️16/04/25 $2.581 trillion at 2.69% TEM

➡30/05/25 $0.912 trillion at 2.55% TEM

➡️31/07/25 $0.616 trillion at 2.50% TEM

✅ BONCAP at:
➡️30/01/26 $0.146 trillion at 2.53% TEM

✅ BONCER ZERO COUPON at:
➡️31/10/25 $0.060 trillion at +9.07% TIREA

➡31/03/27 $0.143 trillion at +10.66% TIREA

Central Bank of the Argentine Republic (BCRA)

The Monetary Base shrank after a year—yes, it also did so in February of last year. The exit from the exchange controls seems a bit further if we consider BM = BMA as a condition.

Economic Activity

Mining could have a bright future in Argentina, and the government knows it. This week, General Resolution 5663/2025 was issued, simplifying and reducing bureaucracy in the sector. In January, the mining sector exported USD 394M, +68.9% YoY. The industry still has much room to increase its use of installed capacity, which stood at 55% in January.

Neuquén, with Vaca Muerta, takes all the oil, while other mining provinces like Chubut, Santa Cruz, and Mendoza face sustained production declines. The crown jewel tripled its crude production in just five years. With the second RIGI project approved, the Vaca Muerta Sur pipeline will bring USD 2.9 billion in investment and the potential to facilitate USD 15 billion in exports.

Loans to the private sector continue to grow, and this is just the beginning. Let’s not forget that Argentina lives alone. Comparable countries have much higher shares of economic activity. In February, loans increased by +7.8% monthly and +240.9% yearly.

The Streets

Approval of the Executive remains intact and above 50%, according to the UTDT Government Confidence Index, which marked 51.2%, a new milestone, as no government had reached the 15th month of management with such high confidence levels. This is despite retirees continuing to lose purchasing power. A retiree with the minimum pension takes home 350,000, with a 350,000 a  70,000 bonus frozen for a year. Sad but true, their income lost to inflation in 2024, but this has been the case since 2017. In between, three governments of different colors, but with the same results here. A pending issue for the country with its elderly.

Inflation

Bad data? Yes, but the disinflation process isn’t linear. While the core at 2.9% is high compared to expectations, the government remains unfazed. The anchors remain, the pesos are no longer there, and the lag from the brutal peso issuance of 2023 will end. This is what the market, investors, and the government itself, which sees inflation as the mother of all battles, are discounting. In March, a seasonally complicated month, we’ll likely see another inflation figure above 2%. April will be the litmus test to see if inflation continues downward.

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Actionables

Political uncertainty isn’t liked. Country risk and bonds didn’t recover this week and are waiting attentively for the agreement with the fund. The Merval managed to regain some of its losses.

Another different bid for the government, better than the last but far from the spectacular bids of the previous year. Validating these “high” short-term rates means paying interest above the crawling peg, which is uncomfortable. A word not previously associated with the government, the economic program continues its course, the team leading it is more convinced than ever, but this doesn’t remove the questions about the dollar interest rate on the pile of pesos. Many questions for the scarce asset, the peso, which has an interest rate working against it. Is there room for a rate cut? How is the pile of pesos resolved? Meanwhile, we continue taking the rate in short-term Lecaps and taking advantage of the positive real rates of CERs around +10%.

Sovereign debt is struggling to recover, but when we look at the week-to-week country and fiscal numbers, we can only reaffirm that country risk has very little time left at these levels. Thus, we continue accumulating bonds because we’re healthy at heart, and this isn’t for the faint-hearted.

We remain attentive to developments with the Fund, and what happens there could be a catalyst for positive news for the country and its assets.

If yFunde 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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