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The New Argentina Faces Fresh Challenges in 2025
As 2025 begins, the wave of enthusiasm for all things blue and white persists, positioning Argentina as a promising investment destination for the coming year. Despite operating under the outdated 2023 Budget, the country continues to defy expectations.
As 2025 begins, the wave of enthusiasm for all things blue and white persists, positioning Argentina as a promising investment destination for the coming year. Despite operating under the outdated 2023 Budget, the country continues to defy expectations.
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:
Brief Reflection
Data
Understanding What's Happening in Detail
Actionable Items
- Sponsor of the week -
Reflection and Outlook
As 2024 ends, it’s clear this was an exceptional year, given Argentina's starting point. Yet, caution remains essential—Argentina is still far from economic normalcy. The government is expected to maintain its economic anchors and send positive market signals. However, external challenges like Brazil's currency devaluation and falling soybean prices could complicate matters.
Could 2024 be remembered as the year of macroeconomic progress, paving the way for 2025 to focus on microeconomic improvements? Argentina's costs remain unsustainable, and addressing these challenges will be critical. Tax pressure is still suffocating, and while transformative investments trickle in, lifting capital controls may finally mark the end of "old" Argentina.
Will Argentina become a global hub for business and demonstrate real change? Are we getting closer? We begin 2025 with a hopeful “yes.”
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Is Argentina's Economic Shift Positive or Negative?
Spoiler alert: Emerald green. The year has kicked off with strong momentum. The Merval index is soaring, bonds are climbing, and country risk continues to plummet. Meanwhile, the Central Bank has resumed its foreign currency purchases, reinforcing confidence in economic stability.
Understanding in Detail: Dollar and the Strong Peso
2025 began with a stronger peso. Following a high-demand December for the dollar, a slight weekly appreciation of the peso signals a more stable start to the year.
How is the dollar performing? Adjusted for inflation, the peso’s 2024 performance was remarkable—a 45.8% drop. The peso now stands 60% below its peak during Alberto Fernández’s presidency. Compared to mid-2024 spikes, it remains 31.2% lower.
Can the peso be appreciated further? Considering its valuation during Mauricio Macri’s presidency, there’s significant room for improvement. With potential capital inflows on the horizon, last year’s prevailing sentiment continues: convergence between the MEP and official exchange rates is highly likely.
Public Finance Recovery
2024 marked the best year for Central Bank foreign currency purchases in the MULC since 2003, totaling USD 18.654 billion—a historic achievement. Despite heavy selling in the final days, December alone saw USD 903 million in net purchases
Looking ahead to 2025, removing the PAIS tax reduces the cost of imports, leaving behind 1.2% of GDP in tax revenue. This shift will play a pivotal role in economic adjustments.
National Budget Challenges
Argentina lacks an approved budget for yet another year. The government will continue using the 2023 Budget, which grants it significant discretion while relying on inflation to adjust spending.
This situation highlights ongoing governance challenges and the government’s limited legislative power—a hurdle that could be addressed after this year’s midterm elections.
Actionable Takeaways
The year starts with promising news. The Merval index is off to a strong start, sovereign bonds are performing well, and country risk is nearing 600 basis points—a level that seems likely to drop further.
Comparisons? With similar markets around 400 basis points, there’s room for compression and potential for extraordinary returns on Argentina’s sovereign debt curve. As always, investing in Argentina carries inherent risks and isn’t suitable for everyone.
For peso-denominated investments, expect frequent activity. The Treasury’s 2025 auction schedule is already available, and the CER curve remains attractive for those seeking a positive real rate of return.
If you’ve enjoyed this analysis, please share your thoughts, comments, and feedback. Let’s keep the conversation about Argentina’s transformation alive.
Nau Bernués
Founder, ArgenGrowth