Ciao Cepo

Prospects on exchange rate, inflation and carry trade, now that most of the currency restrictions are lifted

Welcome Avatar! The infamous cepo cambiario or currency restrictions were finally lifted by the Milei administration last week. Ahead of schedule, and a prerequisite to get access to the fresh $12 billion disbursement in IMF funds out of the $20b total.

The agreement with the International Monetary Fund also includes changes in exchange rate policy, which creates a new scenario for the Argentine economy — and the corresponding carry trade opportunities for non-resident investors.

In a recorded message broadcast Friday night, the President said the Argentine economy had “left behind the slow agony of the last 15 years” and celebrated having achieved the three pillars of his program: fiscal, monetary, and exchange rate balance.

He was accompanied by his entire cabinet except for Vice President Victoria Villarruel, who was once again not present.

The lifting of the currency restrictions impacts the price of the dollar and the inflation rate, variables that the government hopes to keep under control and on a downward trend.

How will these changes impact the exchange rate, foreign investment, carry trade returns and Argentina’s debt? Let’s find out.