Economist Gustavo Neffa stated that next year inflation may return to a path below 2%. Below are the main excerpts from the interview.
Noticias Argentinas: What is the assessment of the economic management in terms of the government's macroeconomic objectives?
Gustavo Neffa: What Milei did was to bring order to a true macroeconomic disaster. This did not prevent him from having a second consecutive year of recession, but already on a firmer basis to grow this year to 4.4% according to the REM and 3.4% for the year 2026, and with a major battle won in terms of inflation. Beyond the fact that (inflation) accelerated from 2% to 2.5% in the latest measurement and that perhaps these new monetary policies will cause the inflation target to be pushed aside a bit, obviously this is in order to accumulate reserves, which was the great debt of the economic plan with the Central Bank, which is now beginning to become a reality.
Buenos Aires, December 21 (NA) -- Economist Gustavo Neffa affirmed that the drop in inflation was "a major battle won" by the government in the first stage of its management and analyzed the future challenges in terms of reserve accumulation and microeconomics.
In statements to the Noticias Argentinas Agency, the director of Research for Traders stated that "the debt in pesos is moving very well, based on renewals." Somewhat a consequence of the release of a completely fictional exchange rate, trying to maintain it so that it does not cause more inflation in Argentina, with tariffs tied with wire and a huge debt with importers, which had to be covered with Bopre bonds. All that scenario gradually fell apart. I think we should be content with the government accelerating the accumulation of reserves, which today is in the area of approximately 42.5 billion dollars. The food sector, I believe, is a big winner, the knowledge and services sector, I think, has a lot to offer, but this trade agreement focuses on products, so between processed foods and some other specific industries, the benefit is for Argentina. Losers, with the opening of some items included in that trade agreement, perhaps we will see a bit more exchange and quantitative pressure on the import of different products, but it is not focused on a single sector but on several, so Argentina today celebrates an agreement with the United States that is unique internationally.
NA: What can we expect from the microeconomy in 2026?
GN: The microeconomy is the weak leg of the economic model. Argentina was on the verge of hyperinflation with net negative reserves exceeding 11 billion dollars, with a completely broken Central Bank, with an inflation rate that accelerated to 280%. There are maturities of the L30, both under Argentine law, more than 1 billion dollars, and under foreign law, more than 1 billion dollars in capital, which is a very important burden. This reduces Argentina's debt with bondholders, but if it fails to reopen the issuance of the AN29 to reduce possible borrowing to cover that payment, it will have to turn to REPOs with foreign banks to cover that gap. I personally saw a weak AN29 auction, little demand and a rate that the government would have been happy with if it had been done with a lower financing rate, but it is a reason to celebrate that Argentina has returned to the voluntary debt market. It was under Argentine law, with the strong support of insurance companies, which leaves a somewhat bitter taste regarding the quantity and quality of the debt obtained. The desire to see an issuance of larger amounts with the participation of foreign investors obviously remains a pending issue.
NA: Based on the support of the United States and the prospects of greater trade openness, is Argentina's productive profile reorganizing?
GN: The impact on relative prices was very strong and there was a recession in the first quarter, which in the second had a relatively benign impact. As a surprise, in the second half of the year Argentina began to grow again. It was necessary to order the macro, I think it were two very tough years, where tariffs, the exchange rate, and imports in many segments were liberalized to lower prices. This obviously has as a consequence, in the income-expenditure equation, lower profitability and lower profit for many sectors, many entrepreneurs. There are sectors that were very resentful due to the opening of imports, but this forces them to compete. There was also a significantly lower gain, and they even worked at a loss in the third quarter due to other factors, in the banking sector, which stopped lending to the government, which was a great "bicycle scheme" for banks, which now have to act as banks. Argentina is not used to this type of planning. The two pillars of the model, the twin surpluses, both primary and financial, and the trade surplus, also represent an important challenge in terms of current account deficit. It must be taken into account that Argentina was protected, subsidized for a long time. The reduction of subsidies and protection, and the elimination of tariffs on imports of many products, obviously leaves many sectors battered, but also makes them more competitive, and this has a favorable impact on the consumer. The consumer also had rising tariffs and a decrease in their real income from that strong inflation that occurred at the beginning, but the drop in the inflation rate is now its positive side, it is recovering purchasing power and real wages. The desire is for them to continue to increase. Only in the second half of 2026, we can aspire to have a monthly inflation index month by month at those values.
NA: How do you evaluate the strategy of debt auctions and refinancing?
GN: And this is also happening in other segments of the economy, which are the most competitive, where they have to start competing, where the state is no longer going to feed a "contractual homeland", but will create the rules for producing more and better.
We have a productive sector that, obviously, was still hit by the different measures taken. Obviously, it continues in full normality for the payment of debts and for imports.
NA: What dynamics do you project for inflation in 2026?
GN: The dynamics of inflation are downward, but perhaps we start from a slightly higher value. The model requires dollars, I am convinced that it will get them, but it also implies a current account deficit that will be compensated in the balance of payments with capital inflows.
NA: Do you think inflation can be below 2% monthly?
GN: Yes, of course, I think it can be located again below 2%, but let's not be anxious.
NA: Does the government achieve confidence in the payment of the next maturities?
GN: Clearly after the agreement made at the financial and commercial level, because we must also say that it is a fairly important agreement in both senses, there is a free trade agreement in many products and obviously a staggered convergence program, I think there is a greater trade openness that occurred through imports and now that the United States is opening to Argentine exports specifically to that destination. There are winners, yes. This is what the market wanted to hear, it is what the IMF demanded, it is what any analyst would have wished to see from July of this year on, that the accumulation of reserves continued.
NA: Releasing the exchange rate and accumulating reserves are challenges for 2026?
GN: The first one will have to wait. The CEPO for individuals has already been released, the CEPO for companies is scheduled to be released as of January 1 so that they can pay dividends abroad, but the restriction for companies will still be in force. In pursuit of the goal of accumulating reserves and being consistent, the economic team will continue to maintain that CEPO for companies, at least for hoarding.
NA: What does the placement of the Bonar 2029 represent?
GN: The debt in pesos is moving very well, based on zero-coupon renewals, that is, they do not pay interest and the capital accumulates, with which, obviously, the debt in pesos increases proportionally in the government's debt structure. The previous REM had already shown a slightly higher figure, with the latest political and monetary and exchange rate policies we knew this week, obviously this gives an additional boost to inflation. We will perhaps see above 30 percent again in expectation for this year, above 21 percent, perhaps for next year, and perhaps an inflation for 2027 in the area of 12 percent. And I see no problem there. Now, if we look in dollars, the scenario is a mountain of debt to be paid in the month of January, on January 9. They are 4.22 billion, between Argentine and foreign legislation, including euro-denominated bonds, that it will have to face. This is a more than benign trajectory.
