Don’t cry for Argentina just yet. La Albiceleste’s new $20 billion loan package from the International Monetary Fund might seem the dreary continuation of decades of interventions that failed to put the South American nation on stable economic footing. But by dismantling tight controls on the official value of its currency, President Javier Milei is opening the door to international trade just as crushing U.S. tariffs scramble global relationships.

The larger-than-expected IMF package will backstop Argentina’s efforts to remove a peg on the peso in place since 2019. It was always a shaky effort: on Friday, the currency’s official price closed at 1,074 per U.S. dollar, but parallel rates in common use locally stood at 1,355. By allowing the peso to float freely within a band that widens over time, Milei is pushing easier access to global markets. Investors are responding. The gap between the two rates snapped to 5% on Monday, from 26% last week. Argentina’s international bonds rallied, and the local S&P Merval Index jumped 5%.

It’s a sharp turnaround for a country so often at odds with international financiers. A 2002 debt default led to years of fighting with investors led by Paul Singer’s Elliott Management, while a dispute over the 2012 seizure of an oil and gas company resulted in a $16 billion U.S. court judgement in favor of fund Burford Capital, which is still being litigated. The IMF dryly notes that the 2022 program “did not achieve” its goals.

Meanwhile, though inflation and poverty rates have dropped, they remain at 56% and 38%, respectively. Yet Milei has timing on his side. As markets across the world reel from President Donald Trump’s sweeping tariffs, Argentina is relatively insulated, with U.S. trade accounting for less than 3% of GDP. The country’s large stock of commodities could tempt trading partners looking to reorient their supply chains. With the world’s third-largest reserves of lithium – a crucial ingredient for batteries used in everything from cars to stabilizing electric grids – it can benefit from rising infrastructure spending. Some 85% of its $19 billion in soybean exports last year went to China, an advantage if the People’s Republic decouples from U.S. supplies.

And some international investors are already supportive. Hedge fund manager Stanley Druckenmiller told CNBC in 2024 that he was snapping up Argentine stocks. Jay Newman, a former Elliott portfolio manager, has argued against Burford’s court award. And Milei enjoys a close relationship with the Trump administration. This time, at long last, really might be different.

Context News

On April 11, the International Monetary Fund approved a $20 billion loan for Argentina to help the central bank’s efforts to undo large parts of its currency and capital controls, while the World Bank announced its own $12 billion support package. Under announced changes, the Argentinian peso will now trade within a gradually expanding band between 1,000 to 1,400 pesos to the U.S. dollar, moving away from the previous peg that allowed only a 1% monthly depreciation. The peso slid 10% on April 14.

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