From Yahoo Finance: 2025-04-11 16:52:00

President Javier Milei of Argentina announced plans to lift strict capital and currency controls, facilitated by a new $20 billion IMF bailout package. The move aims to stabilize the economy, remove exchange rate controls, and transition to a new foreign currency exchange regime, marking a major step in Milei’s economic normalization program.

The lifting of capital controls, known as “el cepo,” aims to stabilize the peso and encourage foreign investment in Argentina. The restrictions, in place since 2019, limited access to dollars, leading to a thriving black market. The removal of these controls is set to take effect on Monday.

The IMF’s $20 billion loan reflects confidence in Milei’s reforms, including a new policy allowing the Argentine peso to trade within a currency band, breaking from the previous crawling peg system. This move follows Milei’s tough austerity measures and zero-deficit fiscal policy to stabilize the economy.

Despite concerns about potential devaluation, Economy Minister Luis Caputo emphasized that the removal of exchange controls is not a devaluation, aiming to prevent a spike in inflation. Analysts predict an initial peso devaluation of 20-25%, with the official rate likely to align closer to the black-market rate.

Milei’s administration has faced backlash for harsh spending cuts and layoffs, but has managed to deliver Argentina’s first fiscal surplus in nearly two decades. The removal of capital controls aims to attract foreign investment and stabilize the economy, crucial for long-term growth and access to international markets.

The decision to lift capital controls has sparked uncertainty and market volatility, with concerns about potential capital flight and a currency run. The move is seen as a high-risk endeavor that could lead to significant changes in the economic landscape of Argentina.

As the country prepares for midterm elections, the success of this bold economic move could determine the future of Milei’s libertarian party. The announcement to lift capital controls has been met with cautious optimism, as investors and analysts closely monitor the impact on the Argentine economy.

Read more: In key milestones for President Milei, Argentina secures IMF deal and ends most capital controls