The Country Grows, Inflation Hides, and We Keep an Eye... on the Dollar

The country is experiencing strong growth, and the dollar is stabilizing. Inflation seems to have lost its way, and the new rules of the game demand adaptation. Prices are no longer fully passed on, and the Argentine cost is now more than ever in the eye of the storm. Economic growth is the mother of all answers.

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

Calm. A relative calm that helps lower the already high tension levels among Argentines. Recently, the dollar appears to have found an initial equilibrium range between $1,160 and $1,190, and reduced volatility brings relief to many, allowing companies to project their finances more accurately and preventing extreme price dislocations. All the necessary ingredients to sustain the growth path we are on.

Beyond the market’s current verdict, the Executive's desire is different. Remember, the government’s economic plan aims for peso appreciation, and betting against the financial team has historically proven costly. An orderly macroeconomic framework has already demonstrated its effectiveness — could it achieve the ultimate miracle and bring the dollar to $ 1,000? Without price reductions, this would seem very difficult, but this is Argentina — if history has taught us anything, it’s that anything is possible. Skeptics of this scenario, better hedge your positions; the self-fulfilling prophecy may not be so far-fetched.

High expectations are riding on the country and what lies ahead. So far, the government has effectively managed to channel these expectations in its favor. As a result, it continues to enjoy significant local and global support. The statement by the U.S. Treasury Secretary Bessent, affirming that the U.S. is willing to financially back Argentina in the event of external shocks, is a major endorsement—a strong one. We hope it won't be necessary.

Will expectations alone be enough to move Argentina forward? Probably not. Both the market and global stakeholders will demand concrete actions. Will an election victory be the turning point? Will Argentina become a business-friendly hub? Will it prove to the world that it has the right answers for sustainable growth? Are we getting closer? Today, with robust economic growth, the answer is yes.

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

#data.

Is Argentina's Economic Shift Positive or Negative?

Spoiler alert: Positive. Strong rise in bonds and a collapse in country risk set the week's agenda. The Central Bank continues to refrain from intervening, and the Treasury auction has made waves. The important thing is that the country is growing in every aspect, and if economic activity increases, everything becomes easier. Everything becomes easier.

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The dollar and the Strong Peso

We closed a week with reduced volatility, which is good news for everyone. Still far from a normalized foreign exchange market. Exporters and importers are trying to understand the dollar’s value for their business projections while hedging through the futures market to lock in some prices.
This has led to peculiarities, such as April’s future dollar trading below the official (spot) rate.

With a floating exchange rate regime, hedging and sophistication related to currency volatility are increasingly relevant for businesses whose operations are sensitive to exchange rate movements.
Especially for the agricultural sector, where the liquidation of the main harvest is already underway. Although liquidation has begun, it has not yet driven the dollar price downward.

There is considerable discussion about the concept of “exchange rate lag.” A key point to watch is the dynamic between wages and inflation.
This so-called exchange rate lag is it tied to improved purchasing power for Argentines?
Is it sustainable across external accounts (trade balance, goods, services, capital account, financial account)?
Does it enable the country to remain productive and continue to grow?
Many questions arise before we can answer. The reality is not simple nor linear, and we shouldn’t jump to easy conclusions.
Let’s close with one fact: today, the inflation-adjusted MEP dollar is 20% higher than it was in 2017/2018.
Could the dollar fall to 1,000? According to the chart shown, yes.
That would mean returning to levels we already know, not too far back in time (2017/2018; note that the exchange rate bands were set with 2% inflation in the bottom right corner of the chart).
Caution: These are not the same dollars or pesos.
A pandemic, defaults, and shifts in relative prices (including wages) happened in between.

This is Argentina — nothing moves in a straight line.
Don’t expect the exchange rate to drop to 1,000 or rise to 1,400 overnight.
The dollar's path will be full of ups and downs, whether ascending or descending, and that’s precisely what floating means.
Still, the less volatility, the better it will be for the country.

What are the government's goals regarding this?
To make the peso the transactional currency and avoid price pass-through from currency fluctuations.
How is the first half going? The Executive is leading 2-1 in a very tight match.
The lifting of currency controls appears to have been a success, with almost no pass-through to prices. On the other hand, the dollar is slightly higher than it was a few weeks ago, and the government has yet to achieve its plan for a lower dollar.

Restoration of Public Accounts

The economic team and the Executive have been committed to restoring public finances since day one.
After lifting the currency controls and reaching a new agreement with the IMF and other International Organizations, nothing has changed in this regard.

Allow me a piece of advice, given the amount of misinformation circulating. Read and listen carefully.
At no time has the government weakened its commitment to reserve accumulation or taken any action suggesting otherwise.
Especially because the IMF reserve targets are currently achievable without purchasing dollars in the market.
Yes, we said it last week, and we’ll say it again: they don’t need to buy dollars to meet the IMF goal.

In other words, it doesn’t matter if the dollar hits 1,000 or 1,400 — the government has alternative means to meet the target.
Said differently: if the dollar never touches any exchange bands and the government doesn't intervene all year, the economic team will still accumulate reserves through other mechanisms, should they choose to.
Sorry for repeating this so much, but it seems not everyone is grasping it.

Strengthening the Central Bank’s balance sheet has been and remains one of the program’s central pillars.
Even entertaining the idea that they might relax this aspect would be absurd.

Adding to this point:
It was announced this week that the Central Bank’s profits will be transferred to the Treasury's account. This boosts the Treasury’s cushion by ARS 11.7 trillion, funds that will be used exclusively for eventual Treasury debt repayment, consolidating the declining public debt-to-GDP ratio (intertemporal fiscal solvency).

One last point worth repeating:
Why hasn’t the Central Bank accumulated more reserves despite all the market purchases?
Because it used them to pay off debt.Simple. Restoring public finances also means meeting the country's obligations.

Central Bank of the Argentine Republic

After a 2023 marked by losses of ARS 9.4 trillion, the Central Bank reported a profit of ARS 19.4 trillion for the 2024 fiscal year.
Regarding the allocation of these profits, the Central Bank made ARS 11.7 trillion available to the National Government. It allocated the remaining ARS 7.7 trillion to rebuild capital and reserve levels affected by the 2023 losses.

In case there was any doubt, Federico Furiase, a member of the economic team, stated this week:

"Recapitalizing the Central Bank is a necessary condition to reduce inflation and poverty. The pesos in circulation are a debt of the Central Bank, and the backing for that debt is the Bank’s liquid reserves. The more dollars the Central Bank has to back the pesos, the stronger its balance sheet, the stronger the currency, and the faster inflation and poverty will decline."

The Broad Monetary Base no longer has a formal target and is even below its pre-lifting-of-controls level, currently at ARS 45.9 trillion.
The ratio between the Monetary Base and the Broad Monetary Base continues to converge towards one, now standing at 68.7%.

We remind that the new monetary policy anchor is now the private sector’s transactional M2, which has been growing strongly.
The demand for pesos continues to rise, and as we have highlighted for months, much of this demand is linked to the substantial recovery of private sector credit.

National Public Sector

The Executive authorized the process for the full privatization of the state-owned energy company ENARSA.
The restructuring of the public sector has several facets, and privatizations are expected to play a major role, not only to eliminate the financial burden of state-owned companies but also to generate potential cash inflows from their sale. The fiscal surplus has arrived to stay. Let's put it into perspective: in previous years, the fiscal deficit was the norm.

Debt and Auctions

This week, another auction took place, drawing attention.
With a 70% rollover, the "anchor point" has returned to the conversation.

Beyond the technicalities of whether the anchor point exists or not, let’s focus on the facts.
What does a 70% rollover mean?
It means the government didn’t refinance all its maturities — for every ARS 100 maturing, ARS 30 were paid in cash, and the remaining ARS 70 were paid with new debt.

Is this positive or negative?
I would say neither — a single auction doesn’t provide enough information.
When we observe a sequence of similar events, we will have a better sense of the situation.

The key point:
There is no problem if the government does not refinance 100% of its debt, because it has pesos available at the Central Bank precisely for this type of situation.
As we saw in the Public Accounts Restoration section, now it has ARS 11.7 trillion more, bringing the Treasury's cash cushion above ARS 20 trillion.

Why does the Treasury have such a large cushion?
To refinance the economy as growth demands it.
As money demand rises and credit expands, banks require more pesos, and the economy demands more liquidity — the government provides it progressively, unless it fully refinances maturing debt.

Rollover < 100% = Treasury injects pesos into the market.

Although upcoming maturities will be challenging, the Treasury’s cash cushion is sufficient for the foreseeable future.

The Secretariat of Finance closed the auction, awarding ARS 5.233 trillion across the following instruments:

✅ LECAPs:

➡️ 15/08/25 (S15G5) ARS 2.122 trillion at 2.73% TEM / 38.12% TIREA
➡️ 12/09/25 (S12S5) ARS 0.637 trillion at 2.65% TEM / 36.87% TIREA

✅ BONCAPs:

➡️ 17/10/25 (T17O5) ARS 1.059 trillion at 2.71% TEM / 37.85% TIREA
➡️ 30/01/26 (T30E6) ARS 0.906 trillion at 2.66% TEM / 37.03% TIREA
➡️ 15/01/27 (T15E7) ARS 0.004 trillion at 2.28% TEM / 31.13% TIREA

✅ ZERO COUPON BONCERs:

➡️ 31/10/25 (TZXO5) ARS 0.160 trillion at +3.79% TIREA
➡️ 31/03/27 (TZXM7) ARS 0.112 trillion at +9.98% TIREA

✅ DOLLAR LINKED:

➡️ 16/01/26 (D16E6) ARS 0.233 trillion at +9.83% TIREA

Economic Activity

The Monthly Economic Activity Estimator (EMAE) figures are in, and the economy is booming. 0.8% growth compared to the previous month and +5.7% year-over-year, signaling that last year’s crisis was overcome quickly and robustly. Financial intermediation and fishing led the growth.

The surge in credit is also evident here, and it's worth remembering that Argentina still has very low credit penetration compared to peer countries and developed economies. If Argentina stays on the growth path, the financial industry has vast room to expand. The gap is deep and took years to create.

The seasonally adjusted EMAE index currently stands at 152, matching its all-time high (since the series began in 2004) of 152.5, also reached in November 2017. Are we climbing out of decades of stagnation?

Caution, though: the market and dollar volatility observed in March seems to have impacted activity — preliminary figures show a 1% decline in March compared to February.
As we have said before, the path to recovery is not linear.
However, the trend-cycle component of the EMAE has been growing for eleven consecutive months.

The RIGI framework will be key to boosting national activity.
There is already talk of a mega-logistics plan tied to Vaca Muerta that could reduce oil companies’ costs by 40%.
A USD 3 billion investment for a railway to the oil field, a logistics corridor, a multimodal hub, and an international airport in Añelo.
Strong moves.

Also, progress was made toward securing a USD 1.7 billion loan to finance the Vaca Muerta Sur oil pipeline, with JP Morgan and Citi reportedly selected as the financing banks.

Meanwhile, with a stronger peso and a less “cheap” Argentina in dollar terms, inbound tourism has slowed, dropping 24% year-over-year.
Conversely, outbound tourism from Argentina surged by +99%, as locals return to traveling abroad after many years.

This significantly impacts foreign currency flows during the peak summer months but should become less relevant afterward.

Inflation

Consider this: What if we exited currency controls without inflation?
High-frequency data indicate that inflation is remaining low, and April’s inflation reading could surprise on the downside.
CER instruments have already factored this data shift into their pricing.

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Actionables

We welcome a quieter week.
Frenzy eased, market volatility decreased, and it was a chance to catch a breath.

A week with the dollar slightly up, the Merval index rising, bonds turning green, and country risk falling sharply.

Even peso-denominated interest rates stabilized around 2.5%-2.6% TEM — a considerable drop from pre-lifting-of-controls levels.
The break-even points relative to the upper band move in line with market volatility. Currently, some longer-term bonds are trading outside the upper band, presenting opportunities for those who trust the government’s course.

Remember: you're investing in pesos in Argentina,ot for everyone.

The CER-linked peso curve is also attractive.
Inflation risk is no longer as significant as it once was, and real interest rates are positive.
Thus, if you seek returns above inflation, several instruments offer not just protection but also real profits.

We repeat:
All indications suggest that country risk is expected to decline in the coming months.
The economic team's roadmap is clear, and if fulfilled, risk premiums are expected to adjust downward.
An “if” that doesn’t seem too large and carries high probabilities.

That’s why we remain highly positive on medium- and long-term Argentine sovereign fixed income, with opportunities still offering annual returns above 10% in dollars.

The U.S.-China trade war seems to have calmed, bringing fresh air globally.
Without external headwinds, Argentina has everything it needs to finish the year strongly.

Still, remember: we will continue to dance to the rhythm of politics in an election year.

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