Argentina is one of the world’s serial defaulters, having failed to meet its international debt obligations nine times. This time, insists economy minister Luis Caputo, will be different.
Mired in recession and short of dollars, the South American nation is due to pay more than $14bn to bondholders and multilateral lenders in 2025. Could there be another default?
“Of course not, never,” the former Wall Street trader tells the Financial Times in a joint interview at the presidential palace with President Javier Milei. “Our commitment to pay our creditors is absolute, total.”
Milei, the libertarian economist who became Argentina’s president last December, is more than 10 months into a free market reform drive to remake the notoriously crisis-prone economy.
However, while he has slashed inflation and balanced the government’s books, Milei has been unable to rebuild the country’s scarce foreign exchange reserves or restore access to international capital markets, raising questions about how Argentina will make next year’s repayments.
But Caputo claims both will soon be achieved as the government’s programme improves the economy and boosts market confidence.
Economists estimate that the central bank’s hard currency reserves are still roughly $4.5bn in the red, after discounting a loan from China, private deposits and other liabilities.
The build-up of reserves has been slowed as the government spends dollars on maintaining the peso’s official exchange rate, in order to prevent a spike in inflation. Low global prices for soyabeans and corn, Argentina’s main exports, have also contributed.
Caputo says future reserve growth will “depend largely on decisions by the private sector” but that there will be “no problems”.
A tax amnesty launched by the government helped boost private deposits in dollars in Argentina by about $15bn this year, central bank data shows, and banks will use that money to offer loans, the minister says.
“When banks need to convert those dollars into pesos to invest them, the central bank buys them . . . so the central bank has a way to easily grow its reserves,” Caputo says. “As long as we respect our zero deficit and zero money-printing target, the accumulation of reserves will surprise us.”
Market confidence in Argentina has soared under Milei, with the country’s sovereign dollar bond prices roughly tripling over the past 12 months.
Argentina’s country risk — the interest premium over US Treasuries which investors demand to hold the country’s debt — has fallen from more than 2,500 basis points this time last year to about 1,100, although it remains well above levels that would allow a return to bond markets.
The government “has no need” to borrow fresh cash from foreign lenders because its 2025 budget proposal forecasts a primary fiscal surplus of 1.3 per cent of GDP, says Caputo, whom Milei refers to as a “rock star”. Argentina will only seek access to markets to “refinance existing debt, like any other country”, he adds.
The bulk of Argentina’s 2025 debt obligations fall in January and June, with almost $5bn of interest and principal repayments due to bondholders in both months. For January, Caputo says the government has already deposited cash in the Bank of New York to pay the interest, and secured a near three-year repurchase agreement with banks to pay the principal.
“In June, if the interest rates allow, we will refinance the principal and pay the interest using our primary surplus,” Caputo says. “If the conditions aren’t there, we will make the payments in another way.”
One thing that would help, economists say, is a fresh agreement with the IMF. Argentina owes the fund about $44bn from a bailout dating back to 2018 and a new deal to roll over the debt would ease pressure on Argentina’s scarce reserves of dollars.
$5bnArgentina’s debt obligations in January and June 2025
Caputo says the government is still deciding on its negotiating strategy and could condense the ninth and 10th reviews of the current IMF programme, due in August and November, into one. “We’re between going to the ninth and 10th [reviews] together or asking straight for a new deal to speed up timescales,” he says.
The objective of another IMF accord, Caputo adds, would be “net new money and to be able to recapitalise the central bank more quickly”.
So far, relations have been awkward, with the head of the fund’s western hemisphere department, Rodrigo Valdés, stepping back from negotiations with Buenos Aires after Milei accused him of ill-will. (The Chilean official had upset the president by publicly calling for the quality of Argentina’s fiscal adjustment to be improved.)
It is unclear whether the Milei government will reach a new IMF deal and, if so, how big the fund’s appetite would be to lend more to a nation that is already by far its biggest debtor.
Nonetheless, the president and his economy minister insist that relations with the Washington-based lender are “good” and that investors interested in Argentina should not wait for a vote of confidence from the fund to buy assets.
“Today is the big opportunity,” Milei says. “The more time passes, the lower our country risk will be, the more our assets will be worth, and the smaller your returns.”
Despite the challenges his programme faces, Argentina’s leader is sticking to his guns. “The greatest risk is that the president gives up on his convictions, which is impossible,” he says. “I’m not bothered by noise from those who want to make this country worse. I’ve come here to lead the best government in history.”
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