Argentina is experiencing a very special economic moment, in our book The music changes, we must change the step, we reflect on how we moved from a closed economy to an open economy, from fiscal deficit to fiscal surplus, from multiple exchange rates with outrageous gaps to a single exchange rate, from a total clamp to only a clamp for legal entities, and we could continue the list of many changes that have made the way of doing business diametrically opposed to the past.
In the Argentina of the past, inflation was in the triple digits, devaluation was horrifically high, and financing was at negative rates; currently, inflation is decreasing towards a single digit in the next 24 months, there is a stable exchange rate, and financing is at positive interest rates. All this correlates to the fact that it is no longer profitable to maintain high stocks, to work with other people's money, and the path ahead is to compete, therefore we must work on reducing costs, invest in capital goods, be efficient, productive, and have the business measured.
It is interesting to analyze the foreign exchange market of the Central Bank to gauge the change our economy has undergone. In the first 29 months of Javier Milei's government, the current account surplus was U$S 2.705 billion, while in the 29 months prior to December 2023, the deficit was U$S 3.258 billion. Argentina has a fiscal surplus, a current account surplus, and financing needs; there is no reason to think about a devaluation of the peso.
The difference between the collection and payment of imports is brutal; currently, we have a positive balance of U$S 49.976 billion, while in the previous 29 months, the positive balance was U$S 35.647 billion, a difference of U$S 14.329 billion.
The financing needs in the 29 months prior to Javier Milei's assumption were negative at U$S 16.227 billion, while now the balance is positive at U$S 14.146 billion, an improvement of U$S 30.373 billion.
Private Reports Salvador Di Stefano
Financial loans, debt securities, and lines of credit from private companies through ON and provinces with bonds have a positive balance of U$S 28.094 billion under Javier Milei's government, while the balance 29 months earlier was negative at U$S 12.407 billion, giving us a difference of U$S 40.501 billion.
The support from the IMF and international financial organizations has been explicit under the current government, as the balances of disbursements total U$S 19.465 billion, while 29 months earlier they totaled U$S 6.343 billion.
Clearly, Javier Milei's government has managed to increase the balance of trade in 29 months, indicating that there is no exchange rate lag, as there is a brutal change in the economic structure. In 29 months, agriculture contributed U$S 89.721 billion, oil U$S 18.890 billion, and mining U$S 14.000 billion. Individuals in the same period purchased U$S 59.262 billion, indicating that many have not yet changed their step.
Conclusion
Historically, Argentina was an airplane flying with 4 engines: agriculture, industry, commerce, and services; of these, only one generated dollars, which was agriculture. If any president in their third term suffered a drought, it was very likely they would lose the elections.
Argentina exported around U$S 60.000 billion, and a drought would take away between U$S 10.000 and U$S 15.000 billion, the outcome was predictable. The politician who reached the presidency had to know what the weather would be like during their term; thus ended the mandates of Cristina, Mauricio, and Alberto (the latter could have lost even if the weather was favorable).
Currently, Argentina has changes in the growth engines; today they are agriculture, oil and gas, mining, and the knowledge industry, all four engines generate dollars. Additionally, in the last campaign, we had a record harvest of 170 million tons, which means the weather played in our favor this time. Expected exports for the year 2026 would total U$S 100.000 billion, a considerable increase compared to previous years. If in 2027 the VMOS pipeline (Vaca Muerta Oil Sur) is put into operation, exports would exceed U$S 110.000 billion and could surpass U$S 130.000 billion by 2030.
Private Reports Salvador Di Stefano
The secret of this change is that the current government has given legal security to investments; Argentina has a fiscal surplus, an incentive regime for large investments (RIGI) that equalizes the tax treatment of local investments with international ones when more than U$S 200 million is invested. This regime is the guide to follow to reduce taxes for local economic agents.
Additionally, the Central Bank cleaned its liabilities of peso instruments that weakened its balance sheet, such as Lefis, Leliqs, Pases, Puts, Franchises, and the enormous amount of pesos that existed in the system. On the other hand, reserves amounted to U$S 21.209 billion when Javier Milei's government took office, with a debt to importers of U$S 40.000 billion that was not registered in the BCRA. Currently, it has reserves of U$S 48.369 billion, and the debt with importers has already been settled.
With macroeconomic imbalance, companies had a micro equilibrium that took advantage of the economic policy errors made by past governments; this made inflation, devaluation, negative interest rates, and a closed economy disguise the errors of economic agents.
With macroeconomic balance, companies must change the way they manage their business to achieve a different microeconomic equilibrium than they had with another government. Now nothing disguises your errors; inflation is low, which means a greater capital endowment is needed to make money, given the decrease in profit rates. The dollar is stable, and interest rates are positive against inflation. The most important thing is that you have an open economy, therefore, local products compete with imports, which puts a ceiling on prices.
Argentina, a different country that changed its economic regime, will grow steadily by more than 3.0% annually, and where business management has changed radically. As the host of a television program in the 90s used to say, this is the survival of the fittest. The music has changed, we must change the step, and if you do not want to change the step, the market changes the dancers.
The analysis does not end here. Subscribers to Salvador Di Stefano's PRIVATE REPORTS have access to recommendations, projections, and data that we do not publish openly. Join by contacting +549 341 643 0555.
