Kristalina Georgieva's Concerns

"How do you see the exchange rate being at the ceiling of the band?" ($1.842) was one of the questions Kristalina Georgieva asked her interlocutors in the country during her last visit, according to those who had the opportunity to converse with the Managing Director of the International Monetary Fund (IMF).

In that conversation, Georgieva dedicated a part of her discussion to the experience of the 1 peso 1 dollar convertibility of the 1990s implemented by Carlos Menem's government. That model failed, among other reasons, due to the strong appreciation of the peso and imbalances in public accounts.

These references are not casual. The Bulgarian economist has expressed, on more than one occasion, her "conviction" that "this time it will be different" for Argentina due to President Javier Milei's firm determination to maintain fiscal balance.

The IMF's technical analyses reveal that they are concerned about the level of the exchange rate. In the latest staff report on Argentina, conducted in early May, it is noted that the official dollar recorded "an appreciation of around 13% in real terms since the end of 2025."

It is worth remembering that historically the IMF opposed a fixed exchange rate, as was in place during the convertibility, and that in its policies it recommends free floating.

This Wednesday, the official wholesale exchange rate closed at $1.496, 23% below the ceiling of the upper intervention band.

Another area of concern expressed by Georgieva was the growth of informal labor. Meanwhile, private analysts estimate that the "black economy" accounts for about 40% of GDP.

This issue is significant as it affects tax collection, complicating the fulfillment of fiscal balance. On the spending side, cuts become difficult after the adjustments already made and due to the high proportion of expenditures that are automatically updated for inflation. Last June, the Treasury did not meet the surplus target set for the first half of the year (it was $6.3 trillion, about $600 billion below the target).

In recent days, operators have noted an increase in demand for coverage from companies. However, it is reported that the Central Bank, mainly through the sale of dollar-linked bonds, tried to curb the demand.

In this regard, it is interpreted that the Ministry of Economy aims to keep the currency contained to prevent the rise of the dollar from being passed on to prices. President Javier Milei states that lowering inflation is his priority.

Georgieva's visit to Argentina had the ultimate goal of assessing the sustainability of the program agreed upon by the country with the IMF.

Georgieva's visit to Argentina had the ultimate goal of assessing the sustainability of the program agreed upon by the country with the IMF - a topic on which the organization's technicians express doubts - and making the necessary adjustments, as reported from Washington.

At the IMF, there is a very positive view of how Javier Milei's government is organizing the macroeconomy -- fiscal balance, strengthening the Central Bank, reducing inflation, among other aspects.

But at the same time, the marked division in Argentine society is not overlooked -- with a part of the population that could eventually lean towards a populist option in the upcoming elections, putting the course of policies at risk -.

The economic model has the peculiarity that the most dynamic sectors -- energy, mining, agriculture -- are foreign currency providers, but generate relatively little employment. In contrast, the most affected activities -- industry, commerce, and construction -- are dollar-demanding and labor-intensive.

From the combination of the above, it tends to resolve the -- historical - problems that the country suffered on the external front. In this regard, for this year, the consensus among economists expects a trade surplus of over $23 billion , a record that could even fall short if the forecast of $27 billion by economist Ricardo Arriazu is fulfilled.

The other side of the coin is that there is a precarization of work and a decline in formal employment -even in the sectors with the best performance -. Thus, between November 2023 and May 2026, industry, construction, and commerce show decreases in production levels of around 9% and in formal employment of 6%, according to a study by IDESA based on official data.

Financial activity grew 12% but employment fell 6%. And oil, gas, and mining expanded by an average of 37%, but employment decreased by 9%.

For the sectors that are more labor-intensive, such as industry, construction, and commerce (which represent approximately 45% of total employment), the data shows that production is falling and jobs are being destroyed. In the extractive sectors and financial intermediation, production grows strongly, but they also destroy jobs.

Except for agriculture, which is the only sector showing increases in activity levels and employment, in the rest of the dynamic sectors, reconversion and technological change lead to a decline in employment as well.

In this context, Georgieva emphasized the need to seek more balanced growth, reduce the financial burden on families, and promote employment, particularly in small and medium-sized enterprises.

This content is provided for general informational purposes only and doesn't constitute financial, investment, legal, or tax advice. Any events, rewards, online promotions, or related information mentioned herein should not be considered a recommendation, solicitation, or invitation to purchase, sell, trade, or otherwise deal in any crypto assets. Crypto assets are highly volatile and may result in loss. The availability of WEEX services, products, and related events may vary by region. You are responsible for ensuring that your participation is in accordance with applicable local laws and regulations.