Argentina’s debt swap, CLP, rate cuts

The Argentine government’s successful local currency debt swap this week has reduced roll-over risks and, together with the softer-than-expected February inflation figure, appears to be giving policymakers confidence that they can move towards a more flexible exchange rate. But a weaker peso is only one of the ingredients for economic stabilisation. And the senate’s decision to overturn Milei’s ‘mega decree’ of economic reforms underscores the political opposition his plans face. Elsewhere, the Chilean peso started to recover lost ground and we think it will be the one Latin American currency that appreciates against the dollar over the rest of this year. Finally, we think Mexico’s central bank will start an easing cycle next week while Brazil’s may hint that smaller interest rate cuts are on the cards.