Argentina · Macroeconomics
How to free the FX market right now
Miguel Braun · Mar 11, 2025 · 4 min read
How to free the FX market right now without depending on the IMF:
The current FX scheme doesn't let the government accumulate reserves, since the USD it buys in the official market it then has to sell to importers and other agents who access the official USD, plus then sell the surplus at the MEP/CCL to keep the zero-emission promise. That is, the pesos they issue when they buy USD at the official rate, they re-absorb when they sell those USD at the official rate and at the MEP/CCL, receiving pesos from the market in exchange. This on top of paying debts.
Apart from the robbery of making exporters liquidate their USD at the official exchange rate, thus violating private property, they keep selling USD at a subsidized price to importers and other agents who access the official rate, to the detriment of all the rest of Argentines. For this, they have to make exporters sell their USD at a price below market, so the FX scheme disincentivizes exports while incentivizing imports. The opposite of what one would want to happen.
Basically the proposal consists of the following:
- Exporters keep the USD they generate, minus export taxes. This ends the great robbery of forcing exporters to liquidate their foreign currency at the official USD and lets the State have USD income through export taxes, which in turn would help lower its credit risk.
- Importers and all other agents (provinces, for example) will buy their USD at the MEP/CCL USD. No one else can access the official USD anymore and no new USD-linked securities are issued. The official rate keeps devaluing at the pace of the crawling peg, and the day it converges with the MEP it is fully freed. If that never happens, the official USD simply falls into disuse until all its existing debts are paid.
- This eliminates the demand for USD from the BCRA, and lets it successfully begin the process of cleaning up its balance sheet through:
- USD income from export taxes.
- Treasury contributions obtained from fiscal surplus or from rolling over or issuing new USD debt.
- A possible agreement with the IMF that injects fresh funds, once the Treasury cancels the existing debt it holds.
The BCRA is bankrupt. As if it were a private bank, it must go through a process of restructuring its liabilities. Keeping it alive at the cost of exporters' USD is a robbery for exporters and an anchor on the economy that has to end right now.
The Treasury will have to handle the Central's liability-restructuring process and gradually pay its creditors with the funds it obtains through the aforementioned means. If the BCRA was able to issue BOPREALES to kick its debt down the road a bit, why couldn't it issue a similar instrument in the future and thus gradually pay its debt with the Treasury's help?
By freeing the FX market, Milei's government loses the FX anchor to control inflation, but still keeps the fiscal anchor (fiscal surplus – hugely important) and the monetary anchor (zero emission). These two anchors should keep inflation and the dollar from spiking, and in fact let them continue their downward path. A peso without controls is much more attractive than a peso with controls. Let the peso become the scarce currency, as the government says.
In addition, you can always use the tool of raising the peso rate to contain the dollar's rise, increasing the premium for being in pesos. This way, sooner or later, the dollar will reach its equilibrium level and the discussions about whether it is lagging or not will be over.
Argentina has a surplus of USD; we are an exporting country par excellence. We have agriculture, we have Vaca Muerta, we have mining, lithium, uranium, human capital to export services, etc. Argentines have billions of USD abroad. What is missing is confidence. It is like the chicken-and-egg story: USD don't come in because we have FX restrictions, but we don't dare remove the FX restrictions for fear the dollar will rise! https://www.ambito.com/finanzas/dolar-cuantas-divisas-tienen-los-argentinos-el-exterior-n5971508 If the IMF agreement arrives, fantastic. The Treasury will be able to use those USD to cancel debt with the BCRA, which will help hugely accelerate the cleanup of its balance sheet.
But in the meantime, people can't keep waiting. Young people keep leaving and salaries are still very low. The FX market must be freed right now. If they do that, instead of talking about what happens with the IMF, the topic of conversation will be the real economic growth Argentina can have. It is not internationally viable to invest in a country with FX restrictions.
As a lifelong Milei voter, nothing would give me more pleasure than seeing him free the FX market. It is a robbery to keep demanding that exporters liquidate their USD.
We don't need to have reserves or an agreement with the IMF to free the FX market. We just need to eliminate the Central Bank's intermediation. If they have no dollars to sell, let them get out of the way. The market has a surplus of dollars; let agents go buy them elsewhere. The BCRA is bankrupt and has no more dollars to sell; its obligation now must be to think about how to pay its debts.
Financial Advisor · Author · Columnist