Argentina's IMF-supported new measures look good on paper, but the devil is in the details

ARGENTINA - In Brief 13 Apr 2025 by Joaquin Cottani
On Friday, Argentina and the IMF released the full content of the economic program that will be implemented under the auspices of the $20 billion, four-year EFF Agreement that the Fund's board has just approved. For the details of the program, see https://www.imf.org/en/News/Ar... and https://www.bcra.gob.ar/Notici.... The purpose of this in-brief is to offer a quick reactive assessment of the new exchange rate regime embedded in the program that is to take effect immediately. A more complete analysis of the full agreement will soon follow. The government is presenting the new measures as the continuation (Phase 3) of an ongoing plan when, in fact, they constitute a new plan or, more exactly, an attempt to correct, under pressure from the Fund, the roadmap that existed earlier to prevent the government's plan from derailing. It is apparent from the language of both the Central Bank's press release and summary of the new policies and the IMF's staff report that the government has finally embraced solidifying Argentina's bi-monetary system through "currency competition" rather than continuing to push "endogenous dollarization." The peso will now fluctuate within a band of between 1,000 and 1,400 pesos per dollar, which will widen monthly at rates of -1% and +1%, respectively. However, even within the band, the nominal exchange rate will not float freely, as the BCRA will be free to intervene whenever it deems it necessary. In essence, what the Central Bank is saying is that it will not let the peso depreciate above ARS/USD 1,400 for the foreseeable future. Regarding the cepo, while several restrictions have been eliminated, especially for private individuals, many still ...

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