Argentina’s peso has defied many economists’ expectations, avoiding a sharp decline after the government relaxed its fixed exchange rate earlier this month. Following the move to a partial float on April 14, the currency has remained significantly above the lower limit of 1,400 pesos to the dollar set by the central bank, currently trading around 1,175. This performance prompted libertarian President Javier Milei to mock economists who had predicted a more dramatic devaluation of the peso.
Milei, who has been vocal in defending his economic policies, took to social media on Monday to criticize Martin Rapetti, director of the economic think-tank Equilibra, who had forecasted a sharp drop in the currency. Calling Rapetti an “econo-swindler,” Milei accused him of “poisoning the population’s blood.” Rapetti, in response, told Financial Times that Milei’s comments were an attempt to intimidate economists and described them as “inappropriate for the president of a serious, democratic country.”
The peso’s performance has surprised many analysts, especially as the central bank is not intervening to prop up the currency, in line with Milei’s $20 billion loan agreement with the International Monetary Fund (IMF). Under the terms of the deal, the IMF has instructed the central bank not to use its foreign reserves to strengthen the peso unless it falls to the 1,400 level, encouraging the bank to focus on accumulating dollars instead. Milei has indicated that the central bank will not buy dollars “until the peso reaches 1,000.”
Despite recent fluctuations, analysts now believe that the peso is likely to remain in the lower half of its designated range for the near future, buoyed by several factors, including Argentina’s large soya harvest from April to June. Additionally, the country’s high benchmark interest rate of 29% remains attractive to investors, encouraging carry trades in which foreign investors borrow dollars and exchange them for pesos to invest in local assets.
In response to economic pressures, Milei has reduced the central bank’s reliance on money printing and reiterated his goal of achieving a budget surplus in 2025. These moves have helped bolster investor confidence, and many analysts believe that the combination of these policies, along with the expectation of a stable peso, will keep the currency within its current band for the coming months.
However, the peso’s volatility is expected to continue as the market adjusts to the new exchange rate system. As Fernando Marull, head of Buenos Aires-based consultancy FMyA, explained, the market will continue to test the balance of supply and demand for a currency that had been tightly controlled by the government for over five years.
A critical factor will be the behavior of agricultural exporters, who traditionally control the supply of dollars through their export sales. A stronger peso may encourage them to withhold crops in order to avoid receiving fewer pesos for their dollar-denominated exports. Milei has attempted to address this by announcing a temporary cut in export taxes, which is set to expire in June, urging exporters to sell their goods sooner rather than later.
As the year progresses, pressure on the peso could intensify, particularly after the expiration of the export tax reduction and with Argentina’s midterm elections in October. Historically, investors tend to convert their peso assets to dollars ahead of elections, which could further destabilize the currency.
Despite the peso’s stronger-than-expected performance, economists such as Rapetti caution that it is too early for Milei to declare victory in maintaining a strong peso. While the currency has appreciated dramatically over the past year, Rapetti argues that Argentina still requires a weaker exchange rate to support long-term economic growth and build central bank reserves.
“I still believe that to put the country on a path that allows both a growing economy and growing central bank reserves… Argentina needs a weaker exchange rate,” Rapetti said. “The government has very cleverly managed to postpone that.”
