Daniel Garro on Argentina: ‘The Only Price Is the Free Market Price’

A Two-Speed Economy: Winners and Losers Under Milei

Argentina’s headline economic activity remains near record highs, but a deeper look reveals a sharp sectoral divide. Agriculture, energy and mining are powering ahead, while manufacturing and domestic commerce lag. In an interview with Infobae, economist and Value International Group CEO Daniel Garro says the pre-2023 expansion was artificially inflated by monetary stimulus, subsidised credit and utility rates frozen well below cost. Now, as those props disappear, the economy is shifting to what he calls a “real” structure built on genuine market signals.

Garro argues that the Milei administration’s push away from demand‑side stimulus and toward supply‑side investment is the right one, even if it produces month‑on‑month statistical declines. He points to the RIGI investment promotion regime as a central driver: from the second half of 2026, a significant wave of hard‑currency inflows from approved projects will break Argentina’s traditional seasonal pattern of dollar abundance in the first half of the year. At the same time, he warns that the fiscal gains made at the national level are being steadily undermined by provinces and municipalities that continue to lift spending and tax rates, putting the government’s hard‑won fiscal superávit at risk.

Behind the Aggregates: Garro's Critique of Orthodox Indicators

The ‘Real’ vs ‘Artificial’ Economy

Garro illustrates his thesis with a simple analogy: “If before December 2023 there were three pizzerias and today there are two, you don’t need a university degree to know that two minus three is minus one.” The difference, he explains, is that the three old pizzerias survived on emission‑fueled consumption, credit subsidies and artificially cheap utilities — an illusion that has now ended. Today’s two pizzerias trade in a freer market, without those distortions. Extending the logic to the whole economy, Garro believes capital is moving away from “inferior goods” (those close to final consumption) toward “superior goods” — the capital equipment and structures that lie behind the visible economy. It is, he says, a shift from Keynes to Say, from demand management to value creation.

Fiscal Discipline Under Siege from Within

The national government has cut spending and taxes, but Garro sees that progress being eroded elsewhere. “The exhaustion of the adjustment plan,” he charges, “is the responsibility of Congress, the judiciary, the provinces and the municipalities.” While the central administration has reduced its outlays, many provinces and local governments ended 2025 with higher spending and are on track to do the same in 2026. Combined with court injunctions that block labour reforms and public‑sector audits, this prevents the rapid fiscal consolidation that the market needs to trust the debt’s long‑term sustainability. With Argentina having racked up 11 defaults — nine of them since 1950, far more than any peer in recent history — Garro says investors are already looking past 2027 and wondering what comes next.

Inflation: Why the CPI Tells a Partial Story

Garro contends that the official consumer price index overstates inflation because it ignores deep promotional discounts and fails to adjust for changes in consumption patterns, such as the collapse in beef intake. More fundamentally, he identifies two structural brakes on disinflation: a persistently low demand for pesos and the fractional‑reserve banking system, which creates a “secondary monetary emission.” He notes that a shift to 100% reserves on sight deposits — a proposal associated with Jesús Huerta de Soto — would squeeze the banking system and could spike short‑term rates, because banks hold large stocks of peso‑denominated government debt. Still, he observes that real interest rates are now edging closer to the “natural rate,” and if the central bank refrains from interfering, this could accelerate the disinflation trend.

The Exchange Rate as a Market Phenomenon, Not a Model

Rejecting equilibrium models, Garro insists that “the only price of anything is the free market price at each moment — be it the exchange rate or a bag of flour.” Rather than looking for a theoretical “equilibrium” rate, he monitors the growth of real international trade (exports plus imports), which is rising, suggesting the peso is not far from where it should be. He expects the RIGI to be transformational: the regime requires 40% of approved investment to be deployed within two years, meaning a dollar supply surge is likely in late 2026 and especially in 2027. Exporters’ current hesitation to liquidate grain, in his view, owes less to expectations of a nominal devaluation than to a belief that export taxes and other levies will keep falling on schedule.

Investment: RIGI Works, But Labor Reform Is Missing

Firms inside the RIGI umbrella are already investing heavily, Garro says, confirming that lower tax pressure is the critical lever. On the labour market, however, he is less sanguine. High non‑wage costs push workers into informality whenever the total cost of formal employment exceeds an individual’s marginal productivity. Even if regulations were liberalised, real wages would not rise meaningfully without a sustained investment boom. That, Garro argues, requires a credible 25‑year horizon of pro‑market deepening — something that remains in doubt beyond the current administration’s term.

For Investors and Businesses: Where to Focus in 2026–2027

For global and domestic investors, executives and policy watchers, Garro’s diagnosis points to several concrete signals to track in the months ahead:

• RIGI deployment speed: With 40% of approved capital due to be executed within two years, watch for dollar inflows and sectoral investment data from energy, mining and infrastructure in the second half of 2026 and especially 2027. A surge would break the usual seasonal dollar flow and materially change Argentina’s external accounts.
• Fiscal superávit trend: The national primary surplus is being eroded by provincial and judicial obstacles. Any further narrowing — or a quarterly deficit — would stall the decline in the country’s risk premium, which Garro believes cannot sustainably fall to 100–150 basis points unless the market sees a robust, long‑term fiscal path.
• Monetary and banking signals: Monitor the BCRA’s open‑market operations and short‑term real rates. If the central bank keeps rates near what Garro calls the “natural rate,” disinflation may accelerate; if it loosens, expect a stall. A sudden shift toward higher reserve requirements would create acute liquidity stress for banks holding large peso debt holdings.
• Political risk from 2027 onward: The steepness of Argentina’s interest rate curve — with long‑term yields far above short‑term yields — reflects deep uncertainty about the post‑2027 political landscape. Any concrete steps (constitutional debt limits, binding fiscal rules) that outlast the current administration would directly compress that term premium.
• Labour market indicators: The gap between formal and informal employment will be a real‑time gauge of whether labour costs are falling relative to productivity. Until formal hiring picks up across non‑RIGI sectors, sustained real wage growth remains unlikely.