Four months into office, Argentine President Javier Milei has pulled off a critical feat in a country long ravaged by runaway inflation: He stabilized the currency

The peso has not only halted its continuous decline but has also experienced a significant surge in one crucial foreign-exchange market — Argentina has several, a result of its complex set of rules. In the market known as the blue-chip swap, which is utilized by many investors and companies, the peso has skyrocketed by 25% against the dollar over the last three months. This performance surpasses the gains of all 148 currencies that Bloomberg tracks against the dollar.

This development is quite surprising in a country where the currency appears to be in a perpetual state of depreciation. (The smallest yearly decline in the past ten years was 15%.) It highlights the extensive measures that Milei has implemented to curb excessive government spending, reduce demand for all goods and services in the economy, including dollars, and control inflation, which has surged to an annual rate of nearly 300%.

"The remarkable aspect in Argentina is that the person in charge is not afraid of bearing the political consequences associated with austerity — that's uncommon," stated Javier Casabal, head of research at AdCap Grupo Financiero in Buenos Aires. "The government's primary objective will remain to curb inflation."

However, this brings us to the next significant risk: the possibility that inflation may not decrease as rapidly as Milei's team anticipates. Not only would this disappoint Argentine consumers, but it would also further increase the currency's value in real terms. Since the peso began to stabilize in January, it has appreciated by about 72% after adjusting for inflation, a metric closely monitored by Argentine investors as it reflects changes in the currency's actual buying power.

While these gains are advantageous for a country, they can become problematic if they discourage companies from exporting goods and deter foreign tourists. There are already indications that this is starting to occur in certain sectors.

"When exporters reduce their sales," explained Melina Eidner, an economist at PPI, a brokerage in Buenos Aires, "the parallel peso weakens."