ARGENTINA: The Dual-currency System & more – 23rd Jan 2025

¡Buenos días from Greenway Parks! This is the Rorshok Argentina Update from the 23rd of January twenty twenty-five. A quick summary of what's going down in Argentina.

The year has just begun but the government is off to the races trying to embrace a dual-currency system. On Friday the 17th, the Economy Ministry introduced a resolution allowing businesses to display prices in US dollars using any exchange rate they choose. This new rule replaces a two thousand two regulation that required foreign currency-based prices to be lower than their peso equivalent.

Additionally, the Central Bank has announced that, starting on the 28th of February, local debit cards will soon enable payments in either dollars or pesos, without converting through the peso first. This dual-currency payment system, set to include QR codes but exclude credit cards, aims to streamline transactions for account holders. Experts believe this move won’t lead to widespread pricing changes right away, though industries like travel and electronics will likely switch first.

Looking ahead, analysts are making their bets on Argentina’s economy in twenty twenty-five. After two years of recession, the World Bank predicts a 5% GDP growth in twenty twenty-five and 4.7% in twenty twenty-six. While the global outlook remains flat and Latin America is forecasted to grow by 2.5%, Argentina stands out. However, risks like fiscal instability and persistent core inflation could challenge these projections.

Similarly, a report from LatinFocus Economics suggests the gap between the official and parallel exchange rates will narrow, with the official rate reaching 1,350 pesos per dollar and the parallel rate at 1,330 by year-end.

Turning to deregulation, the government introduced reforms on Monday the 20th to make it simpler to import and export food. Officials say these changes will lower domestic food prices while boosting Argentina’s global exports. The new decree eliminates many headaches for producers, including requirements to register products, facilities, and packaging. Importers will skip additional compliance steps if the product already meets strict international health standards, and exporters will only need certificates if their destination country demands them.

Speaking of trade, in twenty twenty-four, Argentina achieved its highest-ever trade surplus of 18.8 billion dollars, bouncing back from a 6.9 billion deficit the year before. This turnaround was fueled by a recovery in agricultural exports, which had been hit hard by a drought in twenty twenty-three, and a peso devaluation under President Milei.

Exports grew by nearly 20%, led by primary products and agricultural goods, while imports plummeted due to the recession and Milei’s fiscal policies.

On the diplomatic stage, Milei attended Donald Trump’s inauguration on Monday the 20th. Their shared ideological alignment has sparked speculation about how US-Argentina relations might evolve under their overlapping terms. Trump praised Milei’s policies, even citing Argentina’s deregulation efforts as inspiration for his own administration’s new Department of Government Efficiency, led by Elon Musk.

Meanwhile, Milei used the visit to strengthen ties, attending high-profile events and meeting with officials from the International Monetary Fund about a potential new financial program for Argentina. Despite their camaraderie, tensions could arise from Trump’s protectionist trade agenda, which clashes with Milei’s libertarian focus on deregulation.

During Milei’s U.S. trip, he also met with Marco Rubio, the incoming U.S. Secretary of State. Though official details were sparse, the meeting signaled alignment on shared opposition to authoritarian regimes in Latin America.

The Washington Post had some things to say about Trump’s praise for Milei. The outlet published a piece titled In Milei’s Argentina, Trump sees a road map. What does it show? - which explores how Milei's economic reforms have drawn admiration from Trump and his team. The article explains that while Milei’s free-market ideas resonate with Trump’s rhetoric, their economic realities differ significantly, and there are critical differences in their approaches to issues like trade and government spending.

To read the article, follow the link in the show notes.

Back in Argentina, the first major heatwave of twenty twenty-five caused widespread power outages, hitting cities like Rosario, in southern Santa Fe, and parts of Buenos Aires, exposing the strain on the national energy grid. Local officials struggled to contain the fallout as key transformers failed, and a fire in a cable tunnel worsened the already dire situation, leaving thousands without electricity or water. While demand has been lower than predicted, temperatures nearing 40°C (or 104 Fahrenheit) are pushing the system’s limits.

The Energy Secretariat has promised a faster recovery process and has leaned on imported electricity to stabilize the grid. Yet, energy experts remain critical, pointing out that distribution bottlenecks—not generation capacity—represent the grid’s biggest weakness.

The heatwave also created challenges for farmers. Dry weather continues to impact key agricultural zones, and While some areas within the key agricultural zone saw limited rainfall, it was irregular and insufficient to significantly improve the situation. Farmers are already seeing reduced yield potential due to the ongoing drought.

Meteorologists predict that the end of January and early February may bring more widespread rainfall, potentially offering relief for crops, but the overall outlook remains uncertain.

While farmers grapple with reduced crop yields, consumers face changing diets. In twenty twenty-four, beef consumption dropped to a historic low, with Argentines eating an average of forty-eight kg of beef per person. This marks the lowest beef consumption in twenty-eight years. In twenty twenty-three, the average was fifty-three kg, which was already low. Meanwhile, chicken consumption grew to fifty kg per person in twenty twenty-four, overtaking beef for the first time ever. Analysts say the recession has forced households to prioritize cheaper protein options, contributing to this shift in eating habits.

On the business front, the Milei administration has announced its first privatization of a state-owned company, with the government and the Mendoza provincial authorities selling their 85% stake in metallurgic firm IMPSA to the U.S. company Arc Energy. IMPSA, which produces equipment for various industries, had been struggling financially, and the Mendoza government took over in twenty twenty-one to prevent its collapse. Arc Energy’s bid includes a 27 million-dollar capital injection and a commitment to refinance IMPSA’s 576 millio- dollar debt.

In retail news, the French sports brand Decathlon is making its comeback to Argentina after a twenty-year absence. Decathlon plans to open twenty stores across major cities by twenty twenty-six, with the first two set to open in December twenty twenty-five. The company previously operated in Argentina until it closed its store in the San Isidro neighborhood in the province of Buenos Aires during the two thousand one-two thousand two economic downturn.

On that note about sports, on Friday the 17th, the Argentine duo Nicolás Cavigliasso and Valentina Pertegarini clinched victory in the Challenger class of the twenty twenty-five Dakar Rally, driving a Taurus T3 Max. This marks their first title together and the second for Cavigliasso, who previously won in the Quads category in twenty nineteen.

The pair, both hailing from the Córdoba province, dominated the early stages of the race, building a commanding lead despite facing strong competition. Their triumph adds to the country’s impressive Dakar legacy, now totaling eleven titles across various categories.

Football fans may have received good news too. Well, kind of. After scoring for Inter Miami in a pre-season match against Club América, superstar Lionel Messi expressed optimism about staying in shape and performing well under Javier Mascherano, the team’s new coach. While he emphasized focusing on his current fitness and busy season ahead, fans read his words as a hint at a possible twenty twenty-six World Cup appearance.

Sadly, Rufino Laulhé, a fifteen-year-old rising star in Argentine polo, tragically died in a highway accident near Trenque Lauquen, in the Buenos Aires province, while traveling with his brother. The car they were in collided with a parked truck on the highway shoulder. While the brother sustained a hand injury and is expected to recover, Rufino lost his life just as they were preparing to compete in Florida’s prestigious Palm Beach International Polo Season.

Before we go: The Guardian published an article titled Off your high horse: Argentina’s new sport of e-wheel polo – in pictures, which showcases the rising popularity of roda polo among Argentine youth. This modern adaptation of traditional polo replaces horses with electric unicycles, offering a dynamic and accessible alternative.

Link in the show notes!

Aaand that’s it for this week! Thank you for joining us!

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¡Nos vemos la próxima semana!