The Argentine miracle — risks behind the rising peso
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Thanks to Javier Milei's reforms, the Argentine peso shows the highest growth among all currencies in 2024, strengthening against the US dollar by 44.2%. This result is higher than the Turkish lira, which took second place with 21.2% growth, but it also entails financial risks.
This was reported by the Financial Times.
What are the financial risks for Argentina?
The strengthening of the peso resulted from economic policies aimed at stabilizing a country teetering on the brink of hyperinflation. The implementation of strict austerity measures and tight currency controls has doubled average salaries in dollar terms, reaching $990.
However, experts have raised concerns about the sustainability of this approach. Argentina's Central Bank is depleting significant foreign reserves to maintain a strong peso. Increasingly, analysts warn of potential risks, including the rapid depreciation of the Brazilian real and potential trade barriers introduced by the new U.S. administration.
Experts emphasize that the artificial strengthening of the peso could harm the competitiveness of Argentine exports. The "Big Mac" index shows a significant increase in product prices in Argentina compared to last year.
Even President Milei acknowledges that a devaluation could undermine the successful macroeconomic stabilization program. Analysts believe the Argentine peso is significantly overvalued and expect a correction in the future.
As a reminder, on January 1, 2025, the law on raising taxes for individual entrepreneurs will come into force. In particular, it means an increase in the military tax rate.
We also wrote that payments to people of retirement age may increase in 2025. They will receive additional payments for their age and the absence of those who can take care of them.
