Dec 16, 2024

Argentina Considers Managed Exchange Rate After Exchange Controls Lifted

Argentina is contemplating the introduction of a managed exchange rate regime, known as a "dirty float," once it removes its current foreign exchange controls in 2025, according to policymakers. More details on this plan can be viewed at Yahoo Finance.

For the past five years, Argentina has imposed restrictions on foreign exchange and capital market operations, compelling exporters to sell their dollars while preventing companies from sending dividends abroad and curbing individuals from acquiring foreign currency. President Javier Milei and Economy Minister Luis Caputo have pledged to abolish these controls next year but have yet to disclose the currency regime that will follow.

At a recent presentation at Torcuato Di Tella University in Buenos Aires, central bank director Federico Furiase and Caputo's adviser Martin Vauthier hinted at the strategy. "We already designed it but we can't disclose many details," stated Furiase regarding the currency policy. He emphasized that "Argentina has to have limited currency volatility" and noted other nations have reduced inflation with "a managed float that controls currency volatility."

The success of Argentina implementing such a system remains uncertain. Argentina's previous attempts with managed floating exchange rates have yielded mixed results. Caputo's prior intervention as central bank chief in 2018 became unsustainable, and subsequent similar measures also failed to stabilize the peso.

According to Furiase, a prerequisite for lifting currency controls is strengthening the central bank. Additionally, reducing the surplus of pesos held in Treasury debt is crucial to avoid economic strain during the transition.

Martin Vauthier pointed out that most trade restrictions have been relaxed, although Argentine exporters are still required to sell 80% of their foreign earnings in the official spot market. Financial regulations are expected to be phased out gradually. During the transition, the government plans to continue limiting the money supply, encouraging dollar holders to convert their holdings into domestic currency. As a result, the peso has gained strength, allowing the central bank to purchase more dollars, according to the officials.

Source: IndexBox Market Intelligence Platform

  1. 1. INTRODUCTION

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  2. 2. EXECUTIVE SUMMARY

    A Quick Overview of Market Performance

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  3. 3. MARKET OVERVIEW

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    1. EXPORTS FROM 2012–2024
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  12. LIST OF TABLES

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    2. Market Volume, In Physical Terms, 2012–2024
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    4. Per Capita Consumption, By Country, 2018–2024
    5. Production, In Physical Terms, By Country, 2012–2024
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    8. Import Prices, By Country Of Destination, 2012–2024
    9. Exports, In Physical Terms, By Country, 2012–2024
    10. Exports, In Value Terms, By Country, 2012–2024
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  13. LIST OF FIGURES

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    6. Products: Market Size And Growth, By Type
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    10. Production Volume And Growth
    11. Exports And Growth
    12. Export Prices And Growth
    13. Market Size And Growth
    14. Per Capita Consumption
    15. Imports And Growth
    16. Import Prices
    17. Production, In Physical Terms, 2012–2024
    18. Production, In Value Terms, 2012–2024
    19. Production, By Country, 2024
    20. Production, In Physical Terms, By Country, 2012–2024
    21. Imports, In Physical Terms, 2012–2024
    22. Imports, In Value Terms, 2012–2024
    23. Imports, In Physical Terms, By Country, 2024
    24. Imports, In Physical Terms, By Country, 2012–2024
    25. Imports, In Value Terms, By Country, 2012–2024
    26. Import Prices, By Country, 2012–2024
    27. Exports, In Physical Terms, 2012–2024
    28. Exports, In Value Terms, 2012–2024
    29. Exports, In Physical Terms, By Country, 2024
    30. Exports, In Physical Terms, By Country, 2012–2024
    31. Exports, In Value Terms, By Country, 2012–2024
    32. Export Prices, 2012–2024

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