Big IMF Loan to Argentina Looks Imminent

Above image credit/s: Voronoi by Visual Capitalist, chart published May 2024. Argentina's debt to the IMF is equivalent to 5% of the country's GDP prior to the additional IMF loan of $20 billion now reportedly being finalized. Buenos Aires image taken from IMF.org

Argentina has been in decline since January 7, 2025. That was the ceiling after 3 1/2 years of bull market. What Caputo and Milei have done, to save themselves, is go cry to the IMF. But it's the worst sign: you get a patent of bankruptcy when you go into debt like this. And it's very serious given the lies that justify their corrupt acts: that you capitalize the Central Bank, so it's not new debt, as if you don't have to return the money you're scrounging like a bankrupt. That it's to pay off monetary liabilities, when they already made them disappear last year by hiding them in the Treasury. That they have a surplus, a fake drawing that doesn't account for the debts. They're not charging, yes, and they're defrauding us.

Journalists, deputies, senators, consultants, public opinion, everyone who jumped like horses into the government's lies will suffer like they can't imagine. Argentine liberalism must be refounded, because all but 5 or 10 liberals have proven themselves, once again, like in 1980 and 2018, to be true dirigistes, statists, socialists, and communists. -- Carlos Maslaton (Grok translation from Spanish)

-- @CarlosMaslaton 9:39 am Mar 28, 2025

This one will be a short post, as we head into autumn here in the Southern Cone.

It's clear to me that my beloved Argentina is in for a rough Southern Hemisphere winter of reduced tourist numbers, even as I head to southern Brazil to celebrate the Passover liberation of my ancestors from their ancient Egyptian bondage in April. As I wrote in my second piece for ESW, Caputonomics, that is, the dominance of the dollar-peso carry trade, is holding back what around 1900 was among the world's richest countries and could be again by the middle of this century.

And now the International Monetary Fund (IMF) is back with a $20 billion loan Argentina will receive in tranches, which could prove to be a House of the Rising Sun of misery for the Argentine people. But as I said last time, we'll always have Buenos Aires, and BA will always be ethnically European with gems of European architecture. And I repeat this to myself in the same way Rick told Elsa that they'd always have Paris, while I still have affordable rent and electric bills. Paying $16 in pesos equivalent for a burrito, however, is California pricing in BA. So if I want cheaper Mexican food in South America, perhaps I should try a Mexican place in Brazil:

Headline from Ambito Financiero about Argentina's "travel boom" to Brazil which is mostly about Argentines being able to still buy groceries and household items there

The overvalued peso has serious consequences. Tourism has dropped significantly. Down 31% in February due to the currency appreciation. It has also created a boom in shopping in neighboring countries and everyone going to Brazil for vacation. Tourism to Brazil is up 74.2% year-over-year. During the summer of 2025, Brazil was the most popular international destination for Argentine tourists, registering growth of 91% growth compared to last year. Not only do they spend money on airline tickets but on hotels, restaurants, and shopping while on holiday. That creates a significant drain on dollars by the Central Bank of Argentina.

In February alone, 2.443 million resident departures were recorded for all international routes. Of the total 86.2% went to neighboring countries. Brazil (38.6%); Chile (20.2%) and Uruguay (16.3%).

-- @BuySellBA 3:25 pm Mar 25, 2025

The "tourism boom" numbers in a chart, courtesy of our friendly acquaintance @BuySellBA:

We'll have much more to say about Brazil and especially the southern portion after spending most of April there. For now, the IMF is confirming that negotiations over the new $20 billion loan are in their final stages. And Bloomberg has reported that the Caputo Administration wants a big chunk of the loan up front. The government says this is to allow for an orderly transition to lifting currency controls, without a blowout in the exchange rate like during the 'corralito' of 2002. Here's what someone who's been investing in the property markets here since the mid-2000s, Southern California millionaire real estate investor Mr. K aka @BuySellBA, had to say about that this past week:

Bloomberg - Traders are betting on a Devaluation of the Argentine Peso in anticipation of an IMF agreement

We have posted quite a bit about how the peso is overvalued for a few months now. We are a big fan of President Milei and much of what he is doing with the exception of manipulating the peso. He went from saying it was shit and wanting to dollarize to saying the Dollar was going to fall like a piano to 600 pesos to $1 and other such nonsense.

Instead of warning of the dangers of an artificially strong peso, he went the other way. Currencies of countries aren't meant to be artificially manipulated and intervened with. There is no way to find true value when that happens.

The government is stuck because it can't say much about the IMF agreement until it's announced. With uncertainty, investors in Argentina will always move to the almighty dollar. Peso-denominated assets, such as inflation-linked bonds were liquidated causing significant losses for local investors. Argentina's Central Bank was forced to sell over $1 BILLION USD in just 6 days to support the peso.

Tomorrow, there is a debt auction as we have mentioned on Monday. Argentina faces peso-denominated debt maturities that could fuel increased demand for dollars. 9.2 trillion pesos ($8.6 BILLION USD) is one of the largest in 2 years. "The government may have to issue short-term instruments and even consider a partial cancellation of maturities," said Adrian Yarde Buller, Chief Economist at Facimex Valores.

The implied devaluation in peso futures is more than 60% annually for the shortest-term contracts. This represents a depreciation FIVE TIMES faster than the government's current pace. Investors are betting on a small, one-time depreciation between March and April, which would mark a break from the current 1% monthly crawling peg. This move would be followed by a faster pace of depreciation after the Octoer mid-term elections, according to data on Rofex futures contracts compiled by Bloomberg.

-- @BuySellBA 8:13 pm Mar 26, 202

An even more painful Argentine Peso devaluation may not be Coming in the Air Tonight, but it's an unavoidable part of breaking the unsustainable USD-ARS carry trade and bringing prices for tourists, farm to table farmers, miners, and occasional cappuccino in Palermo, BA enjoyers like me back to sanity.

I honestly hate to have been correct on this one. I really wanted Milei to succeed but I saw the writing on the wall months ago. Never put your faith in government. You will always end up disappointed.

-- @TheJerzWay 5:37 pm Mar 25, 2025

As I've said from the beginning of my regular column here at ESW, we tell hard truths about the short-to-medium term inflationary pain here in Argentina, in hopes not of scaring immigrants especially libertarian ones off, but in helping this country and those coming here live their best lives, and realize their full long-term potential. Which is immense!

David Segal is an American Jewish Russophile residing in Buenos Aires and a classically trained concert pianist. You can find him on X @DavidS_Liberdad.