Latin America Advisor 2024-10-30 – Inter-American Dialogue

LATIN AMERICA ADVISOR

A daily publication Of the dialogue

October 30, 2024

Would a ‘Flexible’ Exchange Rate Benefit Argentina?

Argentina’s president, Javier Milei, plans to eventually lift the country’s capital controls. // Photo: Argentine Government.

Q

Argentine President Javier Milei on Oct. 15 announced that his government would put in place a “flexible” exchange rate policy for the country’s currency after it eventually lifts capital controls. A lack of foreign reserves, which are net negative, has long prevented Argentina from lifting capital controls due to fears of capital flight, Bloomberg News reported. What would a “flexible” exchange rate mean for Argentina and the peso? What would lifting capital controls mean for Argentina’s economy, and what would have to happen before the government can make that move? Which industries would be most affected by such policy changes?

A

Macarena Michienzi, chief specialist at Cefeidas Group: “The removal of foreign exchange controls is a critical issue for foreign investors in Argentina, as it prevents them from sending dividends abroad or repatriating cash. It is a key measure for economic growth, especially in capital—and foreign direct investment—intensive sectors such as energy, mining and technology. Once controls are lifted, a flexible foreign exchange rate would eliminate government intervention in the exchange rate, ensuring Argentina’s international competitiveness and promoting exports. However, it could also have inflationary effects, as many domestic prices are linked to the foreign exchange rate. Foreign exchange controls, in place in Argentina since 2019, were implemented due to Argentina’s…”

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The Inter-American Dialogue publishes the Latin America Advisor every business day for a distinguished membership of informed corporate leaders, scholars, and government officials invested in Latin America’s development and future. The Advisor‘s highly regarded Q&A section covers questions submitted by subscribers themselves. Commentators regularly include heads of state, business leaders, diplomats, economists, analysts, and thought leaders from around the world. Many of the world’s largest and fastest-growing companies subscribe to the Advisor. To subscribe, click here. For terms and conditions, click here. For more information, contact Gene Kuleta, editor of the Advisor, at gkuleta@thedialogue.org.

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Thomas F. McLarty III
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Ernesto Revilla
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