Buenos Aires — Argentina’s tax amnesty scheme, launched amid an evolving economic landscape, has become a focal point for financial experts and investors alike over the last two weeks. The initiative, designed to boost liquidity in a country known for its abundance of under-the-table stockpiles of cash, offers an opportunity for Argentines to regularize such undeclared assets while avoiding significant tax collection.
Juan Francisco Politi, Vice President of Allaria, the leading broker in Argentina by fixed and variable income trading volume, told Bloomberg Línea that the scheme is certainly attracting the attention of individual investors and institutional clients. He expects that total amount of funds that will be whitewashed, however, will be far below the more than US$100 billion achieved by the Mauricio Macri administration in 2016-17.
The market paid to see in the 2017 tax amnesty, but now it wants to see as it pays.
Juan Francisco Politi, vice-president of Allaria
The following interview was edited for length and clarity.
How has 2024 been shaping up for Allaria, and what’s the competitive edge that’s kept you as the top broker in the country by trading volume?
Juan Francisco Politi: Our competitive edge lies in our deep connection with the Argentine economy. We’re not just focused on the capital markets; we’re also heavily involved in the real economy—agriculture, real estate, and financial trusts that drive real-world operations. Plus, we have significant capital invested in Argentina and strong support from our international affiliates in the U.S. and Uruguay. This backing is crucial for operations that demand higher liquidity, volume, or agility. Unlike typical securities intermediaries that just match buyers and sellers, we have substantial equity in Argentina and a dedicated desk that actively manages our own book. When a major client wants to sell, we can step in to buy, then figure out the best way to offload in the market later. This positions us uniquely, especially now as the market stabilizes—nobody’s pricing as if tomorrow’s the end of the world anymore. That shift allows for larger transactions and thinner margins. As for the price-time priority market (PPT), where offers are placed on screens, we’re the dominant player in fixed income and equities. Our technology, heavily integrated with algorithms, facilitates arbitrage between products. We’re essentially the go-to for many of our peers who bring their clients to us, knowing they’ll get the best price on the screen. Often, we’re the ones providing those crucial buy-and-sell points.
There’s an expectation of greater stability on the horizon, but the market is still under tight control, with a fixed exchange rate and strict currency restrictions. What are your expectations for the eventual lifting of these controls? Could we see an exodus of instruments like Argentine corporate bonds, which currently yield only a bit more than U.S. assets?
We’ve encountered challenges with the legality of exchange operations in financial markets before—back in 2005, for instance—but today, we’re dealing with government decrees and laws that mandate exporters to sell their dollars in the blue-chip swap market (CCL). We’ve prevailed in creating a relatively free market, albeit with some restrictions. It’s a market where prices are set by supply and demand. There is a crawling peg, but no one dictates what the price should be; it’s determined organically by market forces. However, there are new restrictions now that didn’t exist in 2015—those who buy spot dollars with CCL can’t access the free market for imports and exports for 90 days. This has bottled up demand, which has been restricted for quite some time. The exit from these restrictions has been gradual, in stages. And I expect it will continue that way, without a fixed timeline. Recently, instead of lifting CCL restrictions, the Central Bank accelerated the import calendar. If you’re in a hurry and willing to pay a premium for cash with liquidity, that’s your choice. But if you go through the foreign trade route, what used to take four months now takes two. This is an attempt to narrow the gap between markets before an eventual exit, avoiding additional collateral damage like a run on the exchange rate that could spike inflation. The government is clearly focused on reducing inflation and has been quite successful. They understand that opening up access to the MULC (Single Free Exchange Market) now would trigger an inflationary jump, so they prefer to wait until reserves are more robust. The economic team and the president have been clear that they aim to bring inflation down towards the 2% target or even lower. As long as the surplus of pesos is channeled into the private sector and credit, we can avoid a situation where everyone rushes to buy dollars.
How is the tax amnesty progressing for Allaria? Two major banks mentioned this week that they haven’t even reached US$50 million in deposits since the window opened. Are your clients still hesitant?
The amnesty isn’t really designed for the government to rake in revenue—the payment premium is actually quite low. There’s also a requirement that any dollars brought into the financial system, whether from abroad or over-the-counter with cash, must be invested in eligible Argentine assets. Afterward, these assets can be used for other purchases, with the stipulation that the seller in the market agrees to hold onto them until December 2025. If they don’t, they’ll face a 5% penalty—roughly equivalent to the yield on a U.S. Treasury Bill—which is a pretty modest price to pay for not waiting until 2025. The goal of the amnesty is to inject more money into the economy and aid in its recovery. While we often say there are too few pesos circulating, there are likely plenty of dollars stashed away in closets, safety deposit boxes, or even buried underground, not to mention offshore. This amnesty offers a way to increase the amount of declared capital, and from what I see, our clients are interested. There’s significant movement towards the capital market among those who are already familiar with it. These aren’t people who are overly cautious—they’ve been driven to the capital market by the instability itself. The pesos they held were losing value rapidly, so they had to find financial products to protect themselves. But with undeclared money, access to these products is limited. The only option left is the blue dollar, which is more expensive and has lost ground to inflation compared to other financial products over the past year and a half. So yes, there is strong interest from our clients in finding ways to regularize their assets and add declared dollars to their portfolios. We’ve already seen transfers coming in and clients investing in eligible assets. With over a month still left before the amnesty window closes, I’d say it’s working. No one is expecting numbers like the 2016-17 amnesty, but we do anticipate a local amnesty that can boost the operability of personal finances or SME activities, for example.
What are your expectations for both the total volume and the government’s tax revenue from this amnesty?
We don’t have a precise estimate for revenue, but we’re looking at a potential range of US$20-30 billion. However, what’s more important is how much of that will end up in the Central Bank’s reserves, whether through transfers from abroad or via the amnesty window. In the last amnesty, these figures ranged from US$10-12 billion, and today we might see over US$5 billion. This could lay the groundwork for currency coexistence. There’s been an effort to strengthen the peso, and now the government is seeking dollars to help revive the economy. The contraction of the peso has kept the economy stagnant, and perhaps with more dollars in circulation, people might be persuaded to take their money out of hiding and put it to work. This has been building market confidence, which is why a bond that was worth 18% is now valued at 55%. While concerns about the high country risk persist, Argentina is currently being assessed on its ability to settle its debts domestically. The big question is how long the pressure on prices will last. Both the economy minister and the president have outlined their plan for paying off bonds in January and July 2025. In January, it seems the interest will be paid with a surplus, while the principal might be covered through a repo agreement. We’ll be cutting it close, as usual, with some negative reserves. The government’s likely strategy is to pay the July coupons with its own fiscal surplus, which it has managed to maintain so far, except in July due to missed interest payments. This will also need to be done with a trade surplus, so that the Central Bank can buy dollars, sell them to the Treasury, and cover those payments. Of course, this can’t go on indefinitely. No one expects the country to pay off all its debt with twin surpluses. This is a transitional phase, meant to show the market that Argentina is moving away from its usual pattern of borrowing pesos from the Central Bank and dollars from abroad. Eventually, the country will need to gain the trust of the market and international organizations to secure the financing needed to return to normalcy. In the meantime, while this delay persists, Argentina is demonstrating to its creditors that it’s willing to make payments even under less-than-ideal conditions. It’s making a concerted effort to manage its fiscal and monetary situation to gather the necessary resources. There’s a tension between its past reputation, the current reality, and the outlook for the near future.
You have many institutional investors among your clients. Are they concerned about the BCRA’s current international reserves, next year’s debt repayments, country risk, and the upcoming legislative elections? I imagine you also have clients who participated in Mauricio Macri’s whitewash amnesty and have since faced increases in personal goods (Bienes Personales) taxes, the wealth tax, and a bond restructuring.
Indeed, we have clients who were part of the 2016-17 amnesty and have since felt let down by subsequent events. The large clients who regularized their assets back then are not the target for this amnesty—they’ve already gone through that process. However, today we’re offering an opportunity to pay the personal property tax for five years in advance, with some reductions. A compliant taxpayer, or someone entering this amnesty, can do so for the remaining four years with a certain degree of legal certainty that the tax rate won’t increase. I think there will be some appetite for that. The market’s perception has changed since 2016-17. Back then, it was willing to pay first and see what happens. Now, it wants to see results before committing. This shift can be seen across the board—in bond values, in country risk. The government started in December with the idea that the peso was worthless, but there now seems to be a clear policy aimed at increasing its value. During the campaign, there were claims of immediate dollarization, but that hasn’t materialized, forcing Argentina to rely on its own behavior for these months.
What are your clients’ main concerns about the amnesty? The primary concern I hear is about the potential increase in power for AFIP. There’s also some noise about the validity of income affidavits, the collection of municipal taxes, and over provinces that haven’t adhered to the regulation.
None of this is new. All amnesty programs have sparked such debates and concerns. What we’re seeing today is an invitation to regularize assets, as opposed to the more intimidating approaches of the past where non-compliance meant facing severe penalties. Today’s amnesty feels more like an incentive—if you don’t participate, you might find yourself unable to move assets as freely as before. Regarding the amnesty for individuals, whether the provinces adhere to it or not is of little relevance. There are no significant issues with respect to other taxes that provinces might impose on an activity. And as for AFIP’s powers, there have always been debates about this. Argentina has learned from its past mistakes with previous amnesties. For several years now, there have been conditions that favor those who comply. Previously, the general sentiment was that those who followed the rules were at a disadvantage. The incentive for regularization has always been a pat on the back. If we look at the recent tax moratorium, those who didn’t pay, or posponed payments, might see this as an invitation to do the same in the future. But that’s part of the reality in Argentina. We’ve always lived with a system where many try to find loopholes or bend the rules. But I don’t see any major fears suggesting that this amnesty is designed in a way that would cause concern. On the contrary, I view it as a friendly initiative that encourages participation.
Another concern I’ve noticed is about foreign bank accounts that received funds repeatedly during 2024, and that this will be a factor in individuals’ income tax calculations. Have you received inquiries about this?
That’s a good question. The 2016-17 laundering was based on the threat that if you had undeclared assets abroad, you would be ostracized, and an agreement with the United States was expected, which took a long time to materialize and wasn’t fully effective. But new factors, like crypto-assets, have since emerged, offering other avenues. Human ingenuity finds ways to adapt. However, there’s now a functioning agreement with the USA, and as it starts to take effect over the next few weeks and months, we’ll begin to see information on Argentines from as far back as 2022. This presents an opportunity to address some of the less transparent financial histories. Additionally, some Argentines have built structures abroad, using trusts or companies that allow them to keep a step removed. In some cases, this can be sustained over time, playing a game of hide-and-seek for a while longer. But for assets held in their own name, there’s now an affordable opportunity to regularize them. This is certainly influencing our clients’ analyses.
There’s been a lot of talk lately about IPOs. This week, there was a rumor about Albanesi. Do you see IPOs making a strong comeback next year?
For IPOs to return in force, equity prices need to rise significantly. Currently, the valuations of Argentine companies aren’t at levels that would entice entrepreneurial families, who have spent decades building value despite all the shocks they’ve faced, to consider selling. The exception might be those in need of significant additional capital for expansion. But many Argentine companies have relied on self-financing. Credit in Argentina is low relative to GDP, and for a long time, there were subsidized loans that stimulated the economy artificially—loans everyone took because they were essentially gifts rather than real loans. Argentine entrepreneurs have made the most of these opportunities, but to reach company valuations that are tempting for IPOs, there’s still a long way to go. Some opinions suggest that Argentina could be reclassified as an emerging market, but I think that’s still a distant prospect. For that to happen, we would need to lift currency controls—not just for foreign trade, but also for paying dividends, so that foreign shareholders can receive their dividends in dollars as they should. Today, this process still involves giving the custodian bonds to sell later, which doesn’t seem very usual in the global market. Politically, there’s a strong push to reach a fully normalized and ultra-free economy as quickly as possible. Investors want to see a reduction in country risk to levels that would allow for the issuance of new debt and make Argentine stocks eligible for global interest. For now, what we see are foreign investors enduring high risks in Argentina. We don’t see investors betting on a world-class Argentina just yet. Argentina is on a path with high chances of success, but also some risks of falling short. This uncertainty is reflected in current prices. For those optimistic about Argentina, there’s significant growth potential in bonds and stocks. Pessimists have their reasons too, because no one can guarantee that the process will end perfectly.
The government has said that country risk is no longer a leading indicator, but will the market continue to monitor whether it drops to 800 points?
It seems to me that the government isn’t dismissing country risk as an indicator. What they’re saying is that it’s a lagging indicator. Country risk is monitored by those who anticipate that, even though the economy isn’t yet recovering, a much better scenario is on the horizon. The government’s step-by-step approach—lifting restrictions gradually, addressing fiscal matters first, then monetary issues, and within foreign exchange matters, starting with trade and then moving to the capital account—requires a market that understands these steps and sees them as moves toward a better situation. The approach is consistent, but the question is whether it’s sustainable enough for the market to believe in it. The market is saying, “if you don’t have the capacity to issue debt in the next three months, you’re going to stumble.” The government responds, “I have until January, and I’ll make the payment; I’ll pay July, and I have a year to prove I’m creditworthy again.” We’re in that uncertainty, and it’s not something that will be resolved in weeks. We might see country risk improve slightly, but it could worsen at times if, for example, paying the January coupons doesn’t immediately restore confidence. The government’s strategy is to demonstrate credibility by paying coupons with negative reserves or temporary loans, hoping this will boost bond prices and improve the perception of country risk. But it might not happen, and the government is essentially saying, “I’m not drowning in a glass of water; I have temporary resources until the market believes in me, and I’m not going to force the market to believe in me.” Whether this strategy works out or not, we’ll know in six to eight months. Then comes the political battle leading to the 2025 election and the potential political consolidation of the ruling force.
So today, does the market believe Caputo that there won’t be a disruptive scenario for the debt next year, even if it’s not clear how it will be paid exactly?
On the last Thursday of November, the Bases Law was passed, which seemed like a novel process for the government and was considered a political success after a lot of time and effort. This was achieved through a conciliatory policy that finally prevailed after other approaches had failed. The next day, however, there was a press conference that many media outlets criticized as untimely and poorly received. Following that, the prices of Argentine assets dropped by 5-6%, then slightly rebounded before the Japanese yen crisis hit on a Monday, causing further concerns. By Tuesday afternoon, however, prices had returned to their previous levels. Today, bonds are closer to the highs they reached when the law passed the Lower House back in late April. In this context, it seems the market is beginning to believe, but doubts will persist. For the market to fully trust in Argentina, we’d need to see a country risk level of around 800 points, which would open the door for new debt issuance. Argentine bonds would need to rise by 15-20% to reach that point. This isn’t about the market rising euphorically—Argentina’s market is cautious and watchful, confident in its ability to resolve issues, but we’ll have to see how things unfold in the coming months. As debt due dates approach, the key will be whether payments reassure investors enough to stay in and if they start to sense that the moment to re-enter the market is approaching. Then, we’ll see if the conditions are right to seek funds or not. Meanwhile, fiscal performance is crucial. Unlike other situations where Argentina struggled to roll over debt, today it has a fiscal surplus, a differentiator that allows the market to be more patient. We’ll have to monitor the coming months closely. August should be a strong month fiscally due to income from the moratorium, but September could be more challenging. The reduction of the PAÍS tax will result in less revenue, which might help reduce inflation, but also means less fiscal intake. However, the advance payment of the Wealth Tax, which was postponed to September, will boost fiscal revenue for that month. October will be telling, as we’ll see if the economy has rebounded, and November will bring in the wheat harvest. Throughout this period, a commitment to fiscal austerity will be valuable. There’s also a concern among several economists about whether the current exchange rate allows for the accumulation of reserves, enabling the Central Bank to buy and then sell to the Treasury. The government argues that Argentina’s competitiveness lies in having a competitive exchange rate and that the country only thrives when it’s expensive in dollar terms. They suggest that competitiveness can be achieved by lowering taxes, with the rest of the economy adjusting accordingly.
