Argentina heading towards currency competition: Javier Milei’s government moves forward to eliminate the stocks

Argentina heading towards currency competition: Javier Milei’s government moves forward to eliminate the stocks

The government of Javier Milei advances with its strategy to eliminate the exchange rate during 2025. At the end of last year, the President and the Minister of Economy, Luis Caputo, announced that they would seek to dissolve the restrictions to the dollar throughout this year.

However, uncertainty remains over the exact moment when all restrictions will be dismantled, and among analysts and city ​​consultants There is still no consensus on the urgency of this measure.

Despite the doubts, Milei has already taken some key steps to move towards the bimonetary economy, one of the promises of his campaign, which could culminate in the dollarization. This proposal, which generated a lot of expectation among voters, has not yet been completely defined in its objectives.

For example, today a new provision was established that allows the display of prices of goods and services offered to the public “in dollars or other foreign currency”. Also this week, Accounts were enabled in both pesos and dollars, and banks have intensified their efforts to encourage growth in foreign currency credit.

In the future, there is the possibility of allowing the payment of taxes in foreign currency, although at the moment this measure seems distant.

Stocks: what the market analyzes

The market is questioning what the next steps will be to prepare the ground for the total elimination of the exchange rate. A report from the consultant Econviews highlights that the change in the economic regime benefits the libertarian administration: “Argentina is rapidly moving towards a market economy.”

However, analysts warn about the vulnerability of the economic situation. Miguel Ángel Kiguel’s consulting firm mentions that the Government’s main challenge are the net international reservess, which continue in a negative trend, leaving little room to face external problems. For the plan to be successful, the Government must:

  • Increase international reserves.
  • Implement effective monetary and exchange policies.
  • Achieve sustained economic growth.

dollar exchange rate

The market is questioning what the next steps will be to prepare the ground for the total elimination of the stocks.

Image created with artificial intelligence

Despite fiscal advances and the increase in dollars from laundering, concern persists about the weakness of reserves and the comfort offered by the stocks.

Some of these questions could be resolved this weekend, when Milei meets with IMF director Kristalina Georgieva, a day before participating in Donald Trump’s inauguration ceremony as president of the United States.

Milei plans to discuss directly with Georgieva the progress of the negotiations to obtain a new agreement that will allow the release of funds intended to strengthen the reserves. The prospects for the negotiations are positive, since Georgieva recently praised the Argentine economic program, calling it “impressive”, and Trump expressed that Milei is the president he admires the most, which predicts the support of the United States, the main shareholder of the IMF. for the agreement.

In this context, the market expects that the Central Bank will continue eliminating regulations in the coming weeks with the aim of ending exchange restrictions. This could include making the transfer of dividends by companies to their parent companies more flexible. However, to advance in the elimination of pending regulations, the Government must strengthen the Central Bank’s reserves, which currently remain negative at around US$5 billion.

Stock, when is the departure?

The annual survey carried out by the consulting firm Poliarquía to leaders and opinion leaders in Argentina reveals a divided view on the need to lift the exchange rate trap. 56% of those surveyed consider that “it is not imperative to lift the trap”, while 41% believe that “it should be lifted immediately”.

Among those who advocate for a prompt elimination of the stocks, there are mainly representatives from different sectors: 54% of the political and social leadership, 45% of the business and financial sector, 46% of the consulting sector, 33% from journalism and media, and 22% from academic and research fields.

Regarding the temporality of the measure, the consultation on whether the Government will lift the stocks before the legislative elections of October 2025 mshowed that 51% of those surveyed believe that it will happenwhile 41% think the opposite, and 8% do not have a defined position. The sectors most inclined to think that the lifting will be before October 2025 are the financial and business sectors, with 68%, followed by consultants with 50%. In contrast, leaders in the political and social sector are more cautious, with only 31% believing that the stocks will be eliminated before the legislative elections.

Despite a favorable economic outlook, the main obstacle facing the Government is the situation of net international reserves, which are still on a negative trajectory. The Kiguel consultant highlighted that “there is very little room to face possible problems in the external sector“, which could complicate the complete lifting of exchange restrictions in the short term.

Source: Ambito

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