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Will the Anchors Stay Alive in 2025?
The crawling peg kicks off this Monday at a new pace, January’s financial surplus won’t be there, and every tax cut raises the question of how the revenue shortfall will be compensated. The peso curve restructuring remains a priority and, although still inverted, looks healthier by the day.
The crawling peg kicks off this Monday at a new pace, January’s financial surplus won’t be there, and every tax cut raises the question of how the revenue shortfall will be compensated. The peso curve restructuring remains a priority and, although still inverted, looks healthier by the day.
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 -
Brief Reflection
January passed with plenty of news but without major changes. The Argentine government maintained its economic course, doubling down on fiscal policy while moving more cautiously than last year. Unlike previous all-or-nothing strategies, the 300-basis-point rate cut reflects a more measured approach.
Taxes are being lowered, but businesses still feel like they are playing catch-up. Argentine entrepreneurs, accustomed to high risks and returns, now face a new reality: lower risks mean lower profitability. Some business owners already say, “If I can’t get at least a 40% annual return in USD, I’d rather close shop and live stress-free.” Could we be seeing the beginning of a business turnover?
January felt like a pause in Argentina’s economic transformation. Decades of stagnation mean the road to a prosperous economy will take time. While public finances have started to improve, this is a marathon, not a sprint.
Will Argentina become a business-friendly economy, proving to the world that it has changed? Are we getting closer to economic stability? The current outlook suggests a cautious yes.
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Is Argentina's Economic Shift Positive or Negative?
Spoiler alert: It's a bit of both. Despite a week of significant external volatility, Argentina has been holding up well. The capital controls remain in place, helping Brazil’s economy recover. Extending duration still seems to be the winning trade.
Understanding What’s Happening in Detail: Argentina’s Economic Landscape
Dollar and the Strong Peso: A New Phase
The USD/ARS exchange rate remained stable in January, with minimal volatility. Government monetary interventions, the removal of export duties, and a stronger Brazilian real helped prevent any major movements.
The Central Bank (BCRA) continues to make strong foreign currency purchases and despite concerns about exchange rate misalignment, the FX market has yet to react. Starting this Monday, the crawling peg will move to 1%, making carry trades attractive again.
The policy rate cut to 29% TNA still leaves enough of a spread for carry trade strategies, offering returns not seen since May 2023. This should continue boosting exporters' foreign currency liquidation, which, combined with export duty reductions, will likely help contain the exchange rate gap.
Public Finance & Fiscal Policy
New fiscal measures were introduced in January that could impact Argentina’s economic rebalancing. Last year, the government improved public finances, regained market confidence, and returned to growth. The challenge this year will be maintaining that momentum.
The three key fiscal pillars remain: fiscal surplus, crawling peg (now 1%), and zero monetary issuance. Additionally, public sector employment continues to decline, with a 0.7% drop in December and an 11.5% YoY reduction—a trend expected to continue through 2025.
Central Bank & Interest Rate Cuts
The Monetary Policy Rate (MPR) was cut from 32% to 29%, a 300 bps reduction, while the active repo rate dropped from 36% to 33%. Instead of last year’s aggressive rate cuts, the government is taking a more gradual approach. Trade opportunities remain attractive, and exporters are better positioned for foreign currency liquidations.
Public Debt & Bond Market
The new dual bonds (TF/TAMAR) launched are expected to yield slightly below Boncap with a 1% market premium. In last week’s debt auction, the government raised $6.6B with a 75% rollover rate, while the T2X5 swap had only a 20% acceptance rate. Despite this, the peso yield curve continues expanding, providing longer maturity options.
Economic Growth & Credit Expansion
GDP is expected to grow over 7% year over year by Q2 2025, supported by broad sectoral recovery. The construction sector remains weak due to historically high costs, but credit expansion is booming.
Last year saw a record 53% increase in lending, the highest in 32 years. Peso- and dollar-denominated loans surged by 22 trillion pesos, and January’s data suggests the trend is still going strong.
Deregulations & Market Reforms
Tax cuts continue, with this week’s focus on automobiles and motorcycles. Comparing car prices in Argentina to other countries highlights the extreme tax burden—now slightly reduced but still high. The deregulation extends to auto parts as well. Some key points:
Imports under $3,000 per shipment are now allowed.
Packages must not exceed 50 kg.
Individuals can import up to three units of the same item.
Shipments under $400 FOB are tax-free, with only VAT and internal taxes applicable when necessary.
There is a limit of five shipments per person per year.
This offers some relief to consumers looking to buy cars, with the number of salaries required for a purchase significantly decreasing:
Dec 2023: 28 salaries
Dec 2024: 19 salaries
Argentina (1990s): 12 salaries
Developed countries: 6 salaries
Other changes include the removal of the National Registry for Electric and Hybrid Vehicle Charging Infrastructure, a bureaucratic hurdle that did not benefit the sector in any meaningful way.
Meanwhile, the government introduced self-service fuel stations across the country.
Energy deregulation took a surprising turn, with electricity price hikes capped at 10% annually. However, the government is also advancing the liberalization of the Wholesale Electricity Market to promote competition.
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Actionable: Opportunities for Investors and Stakeholders
Argentina is in pause mode. After a hectic 2024, 2025 has started calmly. The dollar is stable, bonds aren’t moving much, and the Merval remains indecisive. Meanwhile, Brazil’s currency and stock market are returning after a forgettable 2024. Those who sold Argentina and bought Brazil have had a strong start to the year.
Holding pesos and earning interest remains attractive for those who still believe in the government’s economic program. However, this strategy carries a high exchange rate risk—not for the faint of heart.
Peso-denominated bonds continue to show value, while hard-dollar bonds remain a solid choice. We continue to buy at a discount as sovereign yields stay above 10%. Argentina's risk remains high—invest at your discretion.
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