According to Bank for International Settlements data analyzed by consultancy GMA Capital, the Argentine peso has strengthened in real terms more than any other global currency in 2024. Over 11 months, it has gained 44.2% against a basket of trading partner currencies, taking into account Argentina’s triple-digit inflation, the Financial Times reports. This is more than double the result of the second-placed Turkish lira, which has grown by 21.2%.

The strengthening of the official rate has affected both the legal and illegal parallel market, where Argentines are forced to buy dollars due to restrictions on access to the official exchange rate. This has led to the fact that between December 2023 and October 2024, the average salary in Argentina in dollar terms at the parallel rate (known in the country as dollar-blue – FM) almost doubled to $990. Before that, the peso had only depreciated for seven years in a row. The difference between the official and unofficial rates has narrowed to less than 20%, compared to 200% in December 2023.

The sharp strengthening of the Argentine currency was a consequence of the economic policies of the new president, Javier Milei, who was elected to his post about a year ago. The focus on austerity and maintaining strict currency controls introduced by the previous government allowed the peso to remain stable after the devaluation in December 2023, the publication notes. Since the beginning of the year, the peso has depreciated by only 18%, despite inflation of 112% over the same period. An additional factor is the measures that allowed exporters to convert part of their dollar revenue at more favorable rates on parallel markets, the FT adds.

At the same time, the strengthening of the national currency is costing the country dearly and raises concerns among experts about the competitiveness of the Argentine economy. Argentina’s Central Bank is struggling to restore its virtually empty foreign exchange reserves, spending dollars to support the peso. The stronger peso has also pushed up Argentina’s labor costs by 60% compared to Brazil, which is already raising concerns among business leaders. Analysts warn that the peso’s strength also poses the risk of a sudden devaluation, especially in the face of external shocks such as the possible imposition of new U.S. tariffs under President Donald Trump. That could trigger widespread devaluations in emerging markets, adding to the pressure on Argentina’s currency.

“The Milei’s program is working, but the strengthening of the peso is the biggest risk going forward,” said Ramiro Blazquez, head of research at investment bank BancTrust. “If the peso continues to strengthen or there is an external shock, demand for cheap dollars could surge, increasing the risk of devaluation.”

Experts believe that Milei’s policy of supporting the peso will be successful in the short term. However, maintaining such a strong exchange rate for a long time is unlikely due to the central bank’s low reserves and the historical inability to maintain a trade surplus with a strong peso, they note.

In 2025, Milei is expected to make good on his promise to remove currency restrictions and float the peso, which could pose a serious test for the Argentine economy.