For companies and investment funds following the Argentinean economy, it can be difficult to make sense of the flood of data available. In this post, we look at the underlying issues of budgeting and inflation in the domestic economy and then the external payments question internationally.
Argentina is a country that has experienced decades of mostly double-digit inflation, which has served to undermine investment and encourages Argentinians to move their assets into safe currencies and assets so that they hold their value. The underlying cause of inflation is essentially institutional/political where successive governments have resorted to Central Bank monetary emission (i.e. printing money) rather than addressing the fundamental issues in the economy and balancing budgets.
Late 2023, Argentinians elected Javier Milei President who, though unorthodox in many ways, had a plan to restore confidence in the economy.
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Milei’s proposal is to reduce the rate of inflation by balancing the public finances.
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As can be seen, this has largely been achieved through a combination of spending cuts and tax increases, and inflation is trending downwards, though it will be another year or so before it is squeezed out of the system due to the lag in inflationary expectations.
Note that State Revenue & Expenditure in 2025 are projected at 16.5% of GDP, which is quite a low figure even in a Latin American context.
It will be noted that the largest single item in government expenditure is Social Security at 52% of the total. Of this, about 60% is for pensions and the remainder is for other social benefits. Spending cuts to balance the budget in 2024 largely came from pension increases less than the full inflation rate, but going forward the state pledges to match inflation.
A major change in the state pension regime came into effect in March 2025. Generally, individuals had to have made 30 years of contributions in order to qualify for the State Earnings Related Pension, but successive governments allowed amnesties (moratorios) such that those with a lower number of years contributions could qualify (see chart):
73% of new beneficiaries in 2024 were via amnesties (moratorios). As of March 2025, the amnesties have been abolished, and retirees are henceforth only eligible for the means tested State Minimum Pension (PUAM) if they don’t have 30 years contributions made. Note that the typical rates of labour informality in Argentina are around 40-45%, but an individual may work alternatively in the formal and informal economy depending on circumstances and may, therefore, have difficulty making the 30-year contribution cut-off.
So just to summarize, the budgetary situation has been restored to balance through reductions in the real value of pensions, and since pensions make up such a large share of expenditure, the ending of the contributions amnesty will lead to significantly lower outgo going forward, which will allow the government more room to divert to investment projects.
External Accounts
The internal budgetary situation is but one part of the Argentinean economic conundrum. The other concerns its external accounts. The following is the composition of government debts.
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It can be seen that end 2023 Argentina had foreign currency debt of US$267 billion. In order to service this debt, the country is required to earn a surplus on its exports to meet the interest outflow. It is the paucity of export surpluses that leaves Argentina in continuous difficulty with its international creditors and in the hands of the IMF. The IMF, having approved Milei’s budgetary reforms, just this month (April 2025) agreed to roll over its credit in return for free foreign currency convertibility.
However, the international situation is not as bad as it looks. The National Statistics Institute (INDEC) estimates that Argentina had a positive Net International Investment Position end 2024 (see table below) mostly due to large holdings in foreign currency outside of the formal financial system. This money is held in cash, crypto currency, undeclared overseas bank accounts, shares and securities, overseas real estate, and gold, etc. That such a vast amount has accumulated is due to decades of mistrust in the local currency and financial system.
In response, President Javier Milei's administration introduced a tax amnesty program that successfully attracted approximately $18 billion back into the banking system by late 2024. This initiative allowed individuals to repatriate up to US$100,000 tax-free, with higher amounts subject to a modest tax rate. Consequently, foreign currency deposits in Argentine banks increased by about $8 billion, reaching over $24 billion by September 2024.
The key going forward is for Argentina to coopt its foreign currency assets to boost the local economy. As these are spent or invested domestically the foreign currency will, via the banking system, make its way to the Central Bank, which will then be in a position to meet its external debt payment obligations.
Beyond the financial situation, Argentina could start to export oil and gas from its vast shale deposits. It could also increase its exports to China, especially of food.
Argentina is relatively little affected by recent US tariffs.
Read our full report Economy of Argentina 2024 for more information.
About the Author: Paul Dixon is the founder of Latin Report. His economics articles on a wide variety of topics are very widely read and are often found ranking in search results for months and even years after first being posted.
Latin Report tries to make sense of the vast volume of information available to understand country economies. Our reports are written from a long-term perspective and track a country's evolution over a number of decades. We mostly let the data tell the story with commentary on political events to illuminate features of the data. Latin Report aims to express views that hold their value over time and should therefore assist companies making long term decisions. This compares to competitors' reports based on current analysis which are subject to continual revision.
