What changes have occurred in Argentina’s business environment, particularly in the financial sector, since the abrupt fiscal shift in December 2023?
Argentina’s business environment has undergone significant transformation. While the new government’s fiscal and monetary adjustments were immediate and forceful, the changes in the exchange rate policy are moving slower. The government beat expectations in the former and failed to meet expectations in the latter. However, there is something unprecedented in the administration’s commitment to its fiscal program and that signals a more stable and reliable path. In this transition, an exchange regime with multiple rates has allowed businesses in sectors like that of brokers to continue operating with good margins. The new policies have also been positive for sectors linked to asset revaluation.
Starting Q1 2025, the market has faced reduced volumes and margins, and expectations shifted toward a new agreement with the IMF and further reform, which the consensus indicates should sooner rather than later normalize the exchange regime. In our view, this should be the starting point for what should be the ultimate goal of the government’s strategy, which is to return the country to voluntary international debt markets.
How has Argentina’s political landscape shaped the country’s economic reforms, and what challenges remain in the coming years?
The political landscape was crucial for the implementation of economic reforms. Despite having a thin minority in Congress and not a single provincial government, the government was bold in pushing for reform legislation in Congress and introducing reform by decree. Its main virtue was to understand and carry out its electoral mandate: restore macroeconomic stability and reduce inflation.
Against most expectations, its first steps were successful. But the real challenge lies ahead. The country’s needs to increase its productivity and reduce taxes to move from stabilization to sustained growth. The reform process also needs to consolidate socially and politically and the midterm elections this year will be an important test for that.
More broadly, it is important to grow a consensus about the path forward. Many key players in the political establishment seem willing to to respect economic adjustments, but there is no certainty that these commitments will hold in the long term. As the government moves forward, the focus should shift towards ensuring that reforms implemented are sustainable and that they can withstand political and social pressure, which will exist.
What are the key obstacles to Argentina's long-term economic recovery, and how should the government proceed to address them?
Argentina needs to improve productivity and show the world that a certain policy direction will stick through time. The government has managed a first batch of reform even in a minority, but more profound sustainable change requires political compromise and wider social consensus.
Argentina faces a challenge in attracting foreign investment. The country’s long-standing issues with debt repayment and inflation have made foreign investors cautious. For Argentina to unlock the full potential of our economy, it will need to regain international trust by demonstrating its commitment to long-term fiscal responsibility and by developing a more competitive and transparent financial system. President Milei has been very successful in placing Argentina back in the international radar, given his charisma and his global personality. Now the challenge is to turn that personal popularity into trust in the country in the medium and long term.
What role does credit availability play in Argentina’s economic recovery, and what steps need to be taken to improve the credit market?
The country has for decades faced an acute shortage of credit, which limits the growth of both businesses and individuals. Our financial system is very small and cannot provide the necessary credit to meet the demands of the economy, especially given that deposits are short-term and the government’s ability to offer long-term financing is limited.
The obvious step forward on this agenda is to improve the country’s sovereign credit rating and reduce the country's risk, which currently hovers around 600 points as a base. The real Rubicon for Argentina’s economy will be access to international debt markets, which will be an enormous boost for growth prospects. This should be the top financial priority for the administration for the second half of the Milei term. Without significant improvements in credit availability, Argentina’s recovery will remain uneven and fragile.
How is Allaria positioning itself in Argentina’s evolving financial market, and what services does the company offer to its clients?
We work to be the financial partner of our clients. We do that through a comprehensive tool kit of financial services and solutions. We have more than 50 years of experience in the country, and over the last three decades we have grown significantly and expanded our operations across Latin America and across every sector of the economy. We have a very sophisticated client base and we are the contrary of one-size-fits-all: our approach is to provide tailored financial services that meet the specific needs of clients, something crucial in a market as volatile and uncertain as ours. Our value is in being solid, trustworthy but also innovative and flexible.
How does Allaria approach risk management, and what is its strategy for managing uncertainty in the Argentine market?
Risk management is at the core our operations, particularly in a market as volatile and unpredictable as Argentina as historically been. Our approach to managing risk is based on a deep understanding of the local market and a commitment to offering tailored solutions to clients. The company’s ability to adapt to market fluctuations and provide stability in uncertain times has been key to our success.
In terms of strategy, Allaria focuses on understanding its clients’ needs and providing them with the tools and guidance to make informed decisions. This includes advising clients on the risks associated with specific investments and offering a wide range of financial products that can help mitigate those risks.
The company also emphasizes the importance of financial education, helping clients understand the complexities of the market and how to protect their assets in times of uncertainty. The one thing our clients most value of our work is that we help get more financial visibility that helps them in their activity. Our history is Argentina makes us fit to compete in any market in the world – financial expertise is something our country can be world champions at.
