Debt maturities and fiscal stress
The first quarter of 2025 concentrates 40% of the year’s dollar obligations and 25% of the peso liabilities. According to data, total debt maturities in hard currency amount to around US$20,000 million, while maturities in pesos transferred into dollars exceed US$128,000 million.
The Ministry of Economy has already begun to take measures, such as requesting a new agreement with the IMF to refinance the debt and offer attractive rates in pesos. However, the last Treasury tender reflected warning signs: only 87% of the maturities were renewed, with rates of up to 2.93%, above monthly inflation of 2.4%. It had not happened until now that the interest rates offered by the Treasury were “positive real rates.” The carry trade, which gave significant returns for 12 months, thanks to the combination of currency appreciation and succulent rates, there would be abundant profits that could generate an “allow”.
DNU 846 and legal uncertainty
The Decree of Necessity and Urgency (DNU) 846 introduces significant changes in debt management. It expanded the capacity of the Sustainability Guarantee Fund (FGS) to 70% to invest in public securities, eliminated the obligation for debt exchanges to offer improvements in terms, amounts or interests, and allowed bonds to be renegotiated in any currency. Although these measures provide flexibility to the government, they also generate legal uncertainty and doubts about the sustainability of the exchange scheme, not to mention strong resistance from those who, as the 2019-2023 ruling party, opportunely established limits on the excesses recorded between 2016 and 2019.
Public spending, IMF, activity, exchange rate and reforms
In the fiscal area, a significant adjustment is not expected in 2025; In fact, public spending could increase slightly in real terms. However, the debt continues to grow due to the appreciation of the peso and the capitalization of interest, especially if it is necessary to start offering better returns to obtain money in tenders. The absence of structural reforms that would be consistent with the government’s ideology, combined with political management that operates at the limit of the institutional framework, generate uncertainty and would be holding back potential investments. Investments are needed to drive growth.
On the other hand, in 2024 several multinationals left Argentina; such as Clorox, Prudential, ENAP, Fresenius Medical Care, HSBC, Xerox, Nutrien, and Procter & Gamble. Textilcom and AlpaCladd also suffer. These are the companies that produce clothing for brands such as Mimo, Yagmour, Cheeky, and Penguin, which laid off 309 workers in Catamarca and La Rioja, due to a drop in sales and financial problems.
Friendly interview
In a fraternal interview, Caputo naturalized that Argentina is expensive in dollars, he gave an example of a clothing company that in Chile sells the same jacket at half the price as in Argentina, but did not respond for the price of having a coffee.
The question to the silence should have been: Why is a coffee more expensive on a corner in Buenos Aires than at John F. Kennedy Airport? The minister argued that, in the future, an economy with fiscal balance, deregulated markets and structural reforms, including a more competitive, less distortionary tax structure and a more efficient and smaller State, everything will be possible. He expressed that as soon as collection grows, withholdings will go down… instead of increasing pensions.
Who is the minister speaking to? He whispers to the countryside, because in reality the promises are delayed and the real multilateral exchange rate has fallen 7% since September, losing all the exchange rate improvement obtained with the 118% devaluation of December 2023, plus the crawling peg of 2% monthly. This retrocession is significant, considering that the current multilateral real exchange rate is 35% below the value that the IMF suggested in August 2023, when it determined the viability of a disbursement of US$6.4 billion at a devaluation of 20% at the ex Minister Massa. Furthermore, in relation to Brazil, the bilateral real exchange rate has reached minimum levels since the explosion of the Convertibility plan. Understanding this context is crucial why in the theoretical framework of the government (investments and exports), an artificially delayed exchange rate could be an anchor for the aggregate growth of the economy. The exchange rate policy, designed to restrain inflation, is generating an unfavorable environment for the national productive sectors, since, with the strong peso, Argentina’s competitiveness in international markets is eroded.
For the official doctrinal approach, although it is not admitted, the Argentine economy is already in a disadvantageous position compared to its competitors. This loss of competitiveness is particularly serious, as it threatens to discourage exports and investments in key sectors. Furthermore, the exchange rate delay prevents the BCRA from accumulating the necessary reserves to stabilize the economy and meet the goal agreed upon with the IMF.
We can decode from the interview that we should not talk about new IMF funds, at least until April or May 2025. Although in recent months there have been extraordinary capital flows, such as laundering (US$6 thousand have already left million from banks) and inflows of new private debt for more than 4,500 million in the third quarter, these are very volatile and cannot replace the flow of foreign currency from the genuine resources that exports represent.
It emerged from the conversation with the journalist, unintentionally, that the exchange rate is appreciated and that creates additional pressure on fiscal policy. In order to maintain the crawling peg Taxes and withholdings should be lowered. However, if taxes are reduced and growth is not vigorous, it would be necessary to reduce more expenses proportionally, which seems very difficult, given the context of poverty and indigence in an election year. Here the only asset supposedly reached “surplus (+0.1%)” is at risk.
The cost of maintaining an appreciated exchange rate could put the “creative” fiscal balance at risk, and would be: deficit of (-0.8%) if interest capitalization is taken at the end of the period and, deficit of (-1.9%) , if interest capitalization is taken on a monthly basis. The government has decided to calculate the fiscal balance on a “cash basis” and gives it a surplus (+0.1%). The “accrued deficit”, depending on how you look at it, is negative (0.8%) or (-1.9%), that is, deferring the payment of interest with Treasury debt (let’s call it “post-dating deficit”), loading more debt into Argentine banks. , who already have enough and are trying to go out and lend properly (to the private sector).
The policy of eliminating the PAIS tax, and private projections of tax revenue, show the difficulties in maintaining fiscal objectives while trying to contain inflation through an exchange rate policy that is not consistent with a liberal ideological vision of the economy.
In a protectionist global economy, opening markets with an appreciated currency can trigger an extraordinary loss of competitiveness in the industrial sector, especially in local small and medium-sized companies. Sectors such as textiles and other local consumption sectors are already showing signs of exhaustion, with drops in production and job losses. If this scheme is maintained, there is a risk of accelerated deindustrialization that will affect countless families.
Furthermore, the interaction with the IMF puts Argentina in a delicate situation. Although debt renegotiation through a new agreement is possible, it is not certain; The country must demonstrate the ability to pay over time (intertemporal fiscal solvency) in addition to making expressions of desire and good will to comply with the commitments, which could become a high challenge under an exchange rate scheme that continues to exert upward pressure, especially , the purchases that were postponed, after removing the COUNTRY Tax.
Conclusion
The “post-campaign” that lasted successfully for another year ends, and the moment of truth arrives. The 2025 challenge lies in balancing debt maturities with sustainable growth, while avoiding crises of confidence that could accelerate capital outflows and put pressure on the exchange rate. The government’s strategy will require a mix of creativity in bidding, international renegotiations and measures that return stability to the local market. Time will tell if these actions are enough to overcome a year that promises to be critical for the Argentine economy.
Director of Esperanza Foundation. https://fundacionesperanza.com.ar/ UBA Postgraduate Professor and Master’s Degrees at private universities. Master in International Economic Policy, Doctor in Political Science, author of 6 books
Source: Ambito
I am Pierce Boyd, a driven and ambitious professional working in the news industry. I have been writing for 24 Hours Worlds for over five years, specializing in sports section coverage. During my tenure at the publication, I have built an impressive portfolio of articles that has earned me a reputation as an experienced journalist and content creator.
