Argentina’s peso fell 10% on Monday to near 1,200 per dollar after the government rolled back major currency and capital controls last week, part of its agreement to secure a $20 billion loan package from the International Monetary Fund.
The shift, which ends key restrictions that had been in place since 2019, marks a significant step in President Javier Milei’s economic reform strategy aimed at stabilizing the economy and attracting investment.
Despite the currency volatility, the move was welcomed by investors who view it as crucial to normalizing financial conditions in a country struggling with triple-digit inflation, shrinking reserves, and stagnant growth. The central bank scrapped its managed exchange rate policy and widened the currency’s trading band to 1,000–1,400 pesos per dollar, allowing the peso to float more freely.
The currency, which closed at 1,074 per dollar on Friday, depreciated sharply, though the gap with parallel market rates narrowed to around 5% from 28% a week earlier. The parallel rate, commonly used by locals and businesses, had hovered near 1,350 per dollar.
Argentina’s international bonds rallied in response, with some maturities rising over four cents on the dollar, while the Merval stock index closed up 4.7%. The country’s local bonds showed mixed performance.
The IMF agreement will immediately release $12 billion, with an additional $3 billion expected later this year. Argentina also secured nearly $6 billion in loans from other multinational lenders and banks, which will support its depleted foreign currency reserves.
President Milei’s administration, which took office in late 2023, has introduced sweeping reforms centered on austerity, fiscal discipline, and deregulation. The lifting of capital controls is designed to unlock investment in key sectors such as energy and mining, particularly in the development of the Vaca Muerta shale formation and lithium reserves vital for electric vehicle production.
U.S. Treasury Secretary Scott Bessent’s visit to Buenos Aires on Monday signaled Washington’s backing of Argentina’s policy direction. The government is also seeking to avoid entanglement in potential trade tensions driven by U.S. tariffs, with Milei’s administration emphasizing strong ties with the U.S.
