Argentina Peso Weakening Debate Hits Growth
Argentina’s government should allow the peso to weaken modestly now, economist Martín Rapetti argues, because the disinflation drive has run into a wall and further currency strength is starting to hurt activity, jobs and the political durability of the stabilization plan.
That matters because Argentina’s inflation fight is no longer delivering the same payoff it did in the first phase of the Javier Milei administration. Rapetti says core inflation has been stuck near 2% a month since last year, a sign that the easy gains are over and that pushing the peso lower in real terms is becoming the main way to squeeze out more disinflation. In his view, that is a bad tradeoff: the country is already paying for an overvalued currency through weaker industry, construction and commerce, while energy, mining and agriculture keep pulling away from the rest of the economy.
For investors, that makes the next policy move far more important than the last round of inflation prints. If the government keeps defending an expensive peso, the market is likely to keep favoring exporters, commodity earners and hard-currency assets over domestic cyclicals tied to wages and local demand. If it allows a controlled adjustment, the near-term inflation path could get a little noisier, but the payoff would be better growth, less strain on employment and a lower risk of a more abrupt devaluation later.
Rapetti’s warning lands at a sensitive moment. Argentina has already shown that stabilization can work: monthly inflation has been reduced from crisis levels, and the government has also started to build reserves after earlier criticism that it was moving too slowly on the external front. But he argues the program’s first phase effectively ended in April 2025 and that since then the economy has settled into a slower, stickier regime. He says that once inflation reaches this kind of plateau, the path to a much lower rate becomes longer and more politically costly.
The investment case here is not that Argentina is about to abandon stabilization. It is that the market may be underestimating how quickly policy has to adapt if growth is to survive the anti-inflation program. A slightly weaker peso would support the sectors that can actually generate jobs outside the commodity boom, and it would reduce the odds that the government is forced into a harsher correction later. For a country trying to sell a multi-year reform story to global capital, that is the difference between a soft landing and another stop-start cycle.
The key takeaway for investors is clear: watch the exchange rate. If Buenos Aires allows the dollar to rise in a controlled way, the beneficiaries are likely to be exporters, reserves accumulation and the credibility of the broader reform package. If it doesn’t, the winners stay concentrated in energy and mining while the domestic economy keeps lagging, and the eventual adjustment could be much more painful.
| Entity | Gains | Losses |
|---|---|---|
| Exporters and commodity producers | ▲Better FX competitiveness | ▼ |
| Energy and mining sectors | ▲Continued dollar revenues | ▼ |
| Domestic industry, construction, commerce | ▲ | ▼Tighter margins, weaker demand |
| Government’s stabilization plan | ▲Better growth balance if peso adjusts gradually | ▼Higher short-term inflation if it delays the move |