Currency Lag Debate Intensifies as Argentina’s Trade Surplus Disappears

The debate over Argentina’s exchange rate lag is heating up. The Central Bank’s (BCRA) current account has turned negative, posing a serious challenge to President Javier Milei’s economic strategy. The peso’s appreciation, rising costs, and tax burdens are squeezing exports in several key industries, especially those that add value to raw materials. With shrinking profit margins, the fishing industry is even questioning whether the upcoming shrimp season will be viable under current macroeconomic conditions.

What Is a Currency Lag?

A currency lag occurs when a country’s exchange rate fails to adjust in line with inflation or economic shifts, making local goods and services more expensive relative to those from other countries. In Argentina’s case, the peso has been strengthening in real terms—meaning that while the official exchange rate is controlled, local costs keep rising. This erodes exporters’ competitiveness, as their goods become pricier in dollar terms, reducing foreign demand.

Trade Surplus Wiped Out

Argentina’s trade surplus all but vanished in January, reaching just $182 million—its lowest level since December 2023. When factoring in the tourism balance, the BCRA’s current account deficit becomes even more pronounced.

This happened despite favorable prices, which prevented an even steeper decline. “Had January 2024 prices remained in place, the trade balance would have posted a $249 million deficit,” Argentina’s statistics agency INDEC highlighted in its trade report.

In real terms, this means Argentina received more goods per unit of exports due to a relative improvement in export prices compared to import prices.

The loss of the trade surplus threatens to increase pressure on what many economists view as the economy’s biggest weak spot: the exchange rate. With negative net reserves and a widening current account deficit, the Central Bank remains reliant on dollar inflows from borrowers converting foreign currency loans into pesos.

Exporters Face Growing Challenges

“Any producers of value-added goods are struggling right now,” an industrial sector consultant told Ámbito. The food and beverage industry, in particular, is under pressure not only from exchange rate issues but also from rising import competition. The metallurgical sector is facing similar difficulties.

Manufactured goods of industrial origin (MOI) have seen the weakest growth among export categories, increasing by just 2.7%, compared to 17.5% for agricultural-based products and 33.7% for the energy and mining sector, according to INDEC.

Despite these setbacks, monetary policy—where peso interest rates outpace the pace of devaluation—has encouraged exporters to accelerate shipments while delaying imports to capitalize on the carry trade within the official exchange rate corridor.

Fishing Industry at Risk

Currency appreciation is an undeniable reality, but the key question is whether it’s sustainable—and at what cost. Argentina’s fishing industry warns that current conditions are making exports increasingly unviable.

“The problem is rising local costs, inflation in dollar terms, low international prices, high operating expenses, and increased taxes on resource extraction,” Eduardo Boiero, president of the Argentine Chamber of Fishing Vessel Owners and Freezer Operators, told Ámbito.

“If the current structure doesn’t change, we run the risk of not setting sail because we’d be operating at a loss. Meanwhile, we’re still paying export duties,” he added.

Shrimp, the industry’s most critical export, is particularly at risk. The season, set to begin in April, accounts for 50% of total fishing exports and sustains a workforce of approximately 45,000 people across the sector.

Source: Ámbito

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