The link between re-monetization and reserve accumulation—the two will only happen if the exchange rate is allowed to float

ARGENTINA - Report 11 Dec 2025 by Joaquin Cottani

The government now agrees that accumulating FX reserves is important but, for this, the economy must re-monetize—and not just in US dollars, as it thought before, but primarily in pesos. While this is obviously true, members of the economic team also believe (or so it seems) that re-monetization requires that no inflation disruption ever occur, even if it is necessary to realign relative prices that are clearly distorted. In their minds, an increase in inflation triggered, for example, by nominal depreciation would de-monetize the economy instead of re-monetizing it, hence their resistance to abandon the FX band. This reasoning is wrong and, if it does not change, it will cost Argentina the loss of another great opportunity to fix the macro before the economy can grow. In this report, I explain why.

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