The long-awaited moment that currency controls be lifted in Argentina has (partially) arrived. On April 11, just over 16 months into Javier Milei’s presidency, his administration announced that individuals are now free to buy and sell foreign currency—a practice Argentines had been barred from for six years. It also stated that the Argentine Central Bank, which until now set an official exchange rate, will allow the peso to compete more freely against other currencies. For a public accustomed to using dollars as a safeguard against the ever-falling value of the peso, ending this cepo (currency trap) is a significant measure.
Why did it take so long for Milei to lift these restrictions? The government tied the announcement to an agreement with the IMF, approved by the organization’s board on the same day, to add $20 billion to the country’s meager reserves. This will allow Argentina to implement a “currency band” between 1,000 and 1,400 pesos per dollar. In this system, the Central Bank will buy dollars if the exchange rate drops below 1,000 and sell them if it rises above 1,400, while the peso will float freely within that range. So although there is now more flexibility, the country will continue to manage its exchange rate.
Opposition leaders, such as former President Cristina Kirchner, denounced the end of the currency control as a covert devaluation—claiming the peso would move from 1,100 pesos per dollar to 1,400 per dollar. But this has not happened. Since the announcement, the peso has fluctuated and has ultimately remained close to the price previously set by the government. This signals market confidence that the peso will stay within the currency band.
With the cepo lifted for individuals, the absence of devaluation is key to continuing the disinflation program, which has brought monthly inflation down from 25% in December 2023 to 3.7% this March. Devaluations are closely associated with price hikes, which is why the Milei administration waited until it was confident it could “defend” the exchange rate within the band. This is also crucial to sustaining Milei’s popularity, which will be tested in the October midterm elections.
However, partially ending the cepo while maintaining a strong peso poses a challenge to Argentina: the need to become more competitive through tax cuts and deregulation instead of devaluations. Indeed, there’s no clear market-based reason why Argentina should suddenly have one of the most overvalued currencies in the world, when just a few years ago, it had one of the weakest. To prevent this overvaluation, the Milei administration has begun deregulating and opening the economy to increase competition, though major tax cuts are still pending.
Is the cepo completely gone? Not yet—especially if you’re involved in foreign trade. Although foreign companies will now be able to transfer their 2025 and future earnings abroad, the government will issue a new bond to cover earnings from before that date, meaning it still controls those funds. Moreover, small and medium enterprises still face difficulties when paying for goods and services abroad. Normalizing these flows will be key to attracting the investment Argentina needs to grow.
So what’s next? The future is uncertain, but the Milei administration is optimistic that lifting the cepo will not be in vain. Unlike during Mauricio Macri’s presidency—the last time that currency controls were lifted, only to return—this time there is a balanced budget and the cepo is being removed gradually. That puts the government in a stronger position to weather turbulence, particularly in a context of international uncertainty and flight-to-quality capital flows, fueled by President Trump’s trade wars. So far, dollarization does not seem to be on the government’s agenda.
With the cepo lifted for regular Argentines, most people can now legally shield themselves from inflation and are thus freer than they were two weeks ago. That does not mean that they are truly free, but the Milei administration is continuing down its liberalizing path. Progress is being made.
