In October 2024, at the start of the dollar flood triggered by the Amnesty, we used the same headline for an article in La Nación. The piece generated major controversy within the economic team, to the point that we were pejoratively branded as “astrologers” (and even “monkeys”). At that time, we stated: “Today Argentina pays interest rates in pesos only slightly above inflation at the margin, propped up by carry trades against the official and financial dollar. For this financial dynamic to hold, country risk must continue to fall to levels compatible with a reopening to the credit market. The accumulation of peso-denominated debt maturities measured in dollars, a byproduct of the carry trade itself, together with a Central Bank devoid of reserves, prolongs the scenario of capital controls. The exit door is not obvious—at least not without answering what the equilibrium between the dollar and interest rates should be in an economy that has not built an alternative anchor to the exchange rate, and where much of the change in relative prices relies on a dollar that has once again fallen behind.”
Back then, the market focused on the government’s commitment to fiscal consolidation; it wasn’t asking about accrued but unrecorded interest. But it was also watching dollar purchases, reserves, and above all, the polls.
Ten months later, fifty days before the election, it is clear that the government either asked the wrong question or was overly optimistic about the dollar/interest rate required to keep using the dollar as an anchor—without capital controls, without reserves, without access to credit to refinance dollar maturities, and with a large concentration of peso maturities in the Treasury, part of which had been remonetized while celebrating the ANKER point. In the meantime, it is paying a high price for having forced the IMF program by not buying dollars during the months of high seasonal supply, in an attempt to push the dollar down to the bottom of the band and thus suppress inflation.
The decline in the dollar’s price and in May/June futures further fueled dollar demand (foreign asset formation), which by July had reached USD 14.7 billion since mid-April, of which only USD 3.2 billion remained in the banks. In July alone, foreign asset formation amounted to USD 5.4 billion
Since April, without capital controls, all corporate demand for financial dollars (CCL/Mep) has been met with dollars purchased in the official market by individuals. In reality, the business is only profitable for those with access to the wholesale dollar to perform the “rulo”—an arbitrage trade that in July is estimated to have accounted for 40% of foreign asset formation. With the days of high seasonal dollar supply over, the government is now trying to contain its price through a brutal monetary squeeze. In the process, it is attempting to swap Lefis for reserve requirements in order to reduce the fiscal cost of higher interest rates—though at the expense of exacerbating the dynamics (both the levels and the volatility of rates) and clashing with the banks. On top of this, there has been an increasingly blatant intervention in the futures market, with the Treasury selling USD 354 million outside the MULC last week (reportedly to a province to service debt). And, as this report was being finalized, they announced that the Treasury will begin selling dollars directly in the MULC, while flooding the screens with “offers.”
The interest rate on the shortest-term debt is trading above 60% annual effective rate, more than twice the marginal inflation rate, while inflation-indexed debt (CER-linked) is yielding over 22%, against a country risk that has climbed to 855 basis points. The futures position in A3 (Rofex/MAE) before the IMF agreement stood at USD 3.541 billion; by Monday (after month-end) it had reached USD 7.039 billion, with positions of USD 1.336 billion in December and USD 1.418 billion in May 2026, with the Central Bank as the main seller. On top of this, regulatory changes introduced last Friday limited banks’ dollar holdings on the last day of the month, in an attempt to contain the cost of the futures sold by the Central Bank.
Once again, anything goes in an election year—but without capital controls, the risks of negative feedback loops between politics, finance, and the economy are greater. Especially if black swans also emerge, such as the bribery scandal over the purchase of medicines for people with disabilities, right in the week when Congress overturned the veto on the disability financing law.
We have moved from a heterodox program that, with capital controls and an exchange-rate anchor, celebrated the remonetization of the economy and the resulting expansion of credit and activity—which, without dollars, was already showing diminishing returns—to an orthodox program that seeks to contain the dollar through an overreaction in interest rates and higher reserve requirements to ensure the rollover of debt. The government’s only strategy is to grit its teeth until the national election on October 26, with an earlier test in the Province of Buenos Aires next Sunday, September 7. The logic is that if the government loses the province by a small margin (less than 5 percentage points) and wins the national vote with more than 40 points, country risk will ease and domestic interest rates will normalize.
Once again, we are facing binary scenarios. Even assuming a favorable result to the government, the chances of sustaining the deflationary adjustment under the current scheme are really quite low. We assume the government will try to recalibrate the program by adjusting the exchange-rate bands and signaling a credible path of reserve accumulation at a higher dollar level, within the framework of a new IMF agreement consistent with more normal interest rates.
If the government does recalibrate, the relevant questions are: can it anchor expectations by buying dollars without reinstating capital controls and by lowering country risk enough to roll over foreign-currency maturities and extend the duration of peso debt without further damaging bank balance sheets? Or does the recalibration end badly—as it did in 2017, after Macri’s midterm victory? Internally, we only model scenarios in which the government wins the election, recalibrates, and does not break contracts.
