Argentina’s imports are rising rapidly as libertarian President Javier Milei bets on a strong peso and cheap foreign goods to help fight inflation, even as they put pressure on the country’s scarce hard currency reserves.
As Argentina recovered from a recession that depressed imports and Milei began opening up the protectionist economy, the country’s inbound trade surged 30 per cent in the past six months compared with the previous period on a seasonally-adjusted basis, according to the national statistics agency.
Italian pasta, Brazilian bread and Uruguayan butter have become increasingly visible on supermarket shelves, as retailers almost doubled food imports in the first two months of 2025 from a year earlier. Solar cell imports have grown tenfold, while farmers quadrupled overseas tractor purchases.
The strategy of strengthening the peso while loosening import restrictions has helped tame spiralling inflation, but is not without risk. As the country spends more dollars abroad and fails to build up reserves, it becomes more vulnerable to an external market shock or a big devaluation that would undo Milei’s progress on inflation.
The situation has piled pressure on the president to secure an IMF loan to replenish reserves, which he says will be delivered in April.
The peso’s strength has become a politically fraught subject in Argentina, with Milei repeatedly attacking economists who describe risks in its appreciation as “econo-swindlers”. Several retailers declined to speak on the record about the peso’s role in rising imports, citing fear of angering the president and local manufacturers.
Chinese imports are growing fastest, more than doubling in February compared to the same month last year, as business leaders visit the country to shop for suppliers. Previously restricted overseas purchases via ecommerce services such as Alibaba have skyrocketed.
“People are filling the cargo stores of Buenos Aires airports with boxes,” said Ruben Minond, owner of cycling retailer Tienda Bike, who has stepped up purchases of Chinese bike lights and bags, and plans to start shipping bicycles by container.
“I’m buying more overseas than locally now, because it costs less and it’s much, much easier than it used to be,” he added.
Current import levels, of $5.9bn in February, are not unprecedented in Argentina, where trade flows have swung dramatically over the past decade.
But the rapid growth reflects the tricky balancing act Milei must perform to deliver lasting stability.
To tackle the normally conflicting goals of slashing Argentina’s severe inflation while at the same time restarting economic growth, the president has turned to the country’s strict currency controls.
Following a big initial devaluation when he took office in December 2023, Milei let the peso slide only 2 per cent a month last year, despite inflation well above that rate. That has strengthened the currency 47 per cent in real terms, according to consultancy GMA capital.
The peso’s appreciation has dragged down price pressures but made domestic goods much more expensive in dollar terms compared to other countries, while increasing Argentines’ purchasing power abroad.
Alongside rising imports, Argentines are holidaying abroad in near-record numbers, as the strong peso makes Brazilian beaches and Chilean shopping malls affordable. The country recorded its second-highest monthly tourism dollar spend in January, at $1.5bn.
As a result, Argentina has been running a current account deficit since June, while its trade surplus for goods narrowed to $224mn in February, down from well over $1bn a month for most of 2024.
“This is the collateral damage of the strict exchange rate policy,” said Ramiro Blazquez Giomi, Latin America and Caribbean strategist at financial services group StoneX. “In the short term, the growing current account deficit puts pressure on the availability of dollars that the government needs to keep the currency stable [and avoid spikes in inflation].”
Many healthy developing economies run current account deficits, mostly financing them with inflows of foreign investment, Blazquez noted. But crisis-stricken Argentina is receiving very little foreign investment and cannot borrow on capital markets.
Therefore, without a current account surplus, Milei cannot build up the negligible central bank reserves he inherited, which remain about $6bn in the red excluding liabilities.
But the government is undeterred and is slashing tariffs and cumbersome customs regulations on hundreds of goods.
“We are continuing to cut taxes and tariffs to stimulate competition and keep lowering inflation,” economy minister Luis Caputo said this month as he chopped duties on textiles, one of Argentina’s most protected industries.
Manufacturing leaders say the imports surge will force lay-offs in a sector that employs almost a fifth of the nation’s workers.
Government officials say manufacturers are benefiting from cheaper imports of parts, and that businesses must become more competitive.
With crucial midterm elections looming in October, Milei has pledged to avoid a big devaluation of the peso.
If Milei keeps that promise, “we are going to see a very strong growth in goods imports, and a deepening of the current account deficit this year”, said Martín Rapetti, executive director of think-tank Equilibra.
“This is a historically high real exchange rate . . . and that, in my view, is the fundamental [driver] of increased imports,” he added.
But Dante Sica, a former production minister in a centre-right government, disagreed, arguing the growth in imports would stabilise soon, as it primarily reflects the “normalisation” of consumer demand and Milei’s scrapping of cumbersome import restrictions.
Sica predicted rapid growth in oil and gas exports would compensate for rising imports to keep the trade balance positive. Oil and gas exports are on track for a $8bn surplus this year compared to $4bn last year as production increases at a vast Patagonian shale patch.
“As long as you have a positive trade balance, you have sources of financing,” he added. “I still don’t see a current account finance problem.”
Data visualisation by Keith Fray
https://www.ft.com/content/09616cdf-3aef-4061-984b-bd7d4e11df67
