Argentina's government is resisting investor pressure to accelerate foreign exchange liberalisation and allow the peso to float, despite growing concerns about the currency's overvaluation and its impact on economic recovery.

Last week, it was reported that Argentina's government is facing mounting pressure from investors and major energy companies to introduce greater flexibility in its foreign exchange regime, despite Economy Minister Luis Caputo ruling out lifting exchange rate controls in the near term.

Economy Minister Luis Caputo has ruled out lifting exchange rate controls in the near term, even as central bank officials signal that restrictions will eventually be eliminated. The government plans to continue repurchasing sovereign bonds and building reserves within the peso's established trading bands.

"I'm not going to rush out and buy dollars like a madman and trigger a jump in the exchange rate," President Javier Milei stated in an interview with Neura Media. "As the economy expands, we will buy dollars. But we're going to keep a close eye on the inflation rate every day."

Investors and major energy companies argue that the tightly controlled peso is constraining economic growth, which had slumped before last month's midterm elections, before regaining momentum. Economists warn that the strong peso, combined with low Central Bank reserves, creates significant risks.

"There's an exchange-rate level we shouldn't cross – and we're quite close to it," Alberto Ades, director at NWI Management LP, told Bloomberg. "If you see people flying to Miami and coming back with suitcases full of goods, and construction, which has always been the engine of post-devaluation recoveries in Argentina, still isn't picking up, that tells you the exchange rate is wrong."

This policy standoff highlights the delicate balancing act facing the libertarian administration as it attempts to maintain macroeconomic stability while addressing structural distortions in Argentina's economy. The government's cautious approach reflects fears of resurgent inflation, though prolonged overvaluation could undermine export competitiveness and hinder the sustained economic recovery necessary for Milei's broader reform agenda.