Former IMF economist urged Javier Milei to liberalize the exchange rate

Former International Monetary Fund ( IMF ) economist Robin Brooks urged the government of Javier Milei to fully float the exchange rate , arguing that maintaining an overvalued peso "only postpones an inevitable crisis." In an analysis released after the legislative elections, he maintained that Argentina has "a historic opportunity" to change its economic course, according to the Brookings Institution.

Robin Brooks, a senior fellow at the Brookings Institution and a former IMF official, stated that the victory of La Libertad Avanza should mark a turning point in exchange rate policy. “Argentina must break with its history and allow the peso to float freely,” he said. In his view, attempts to maintain a fixed exchange rate “only deepen the crisis.”

The economist explained that Javier Milei's government is facing "a serious crisis with capital flight," which he attributed to the overvaluation of the peso. According to Brooks, proponents of rigid exchange rate systems "ignore the fact that the risk premium only appears when there is a fundamental misalignment." Therefore, he asserted that "this is the ideal moment to correct the situation."

In his analysis, he highlighted that Argentinians “voted with their stocks,” withdrawing capital and spending abroad, while flows to emerging markets remained strong, “except in Argentina.” Brooks recommended moving toward a fully floating exchange rate for the peso and complete independence for the Central Bank, following the path of other Latin American countries.

Brooks maintained that the international market agrees the Argentine peso is overvalued. “In recent months, capital flows to emerging economies have been strong, but not to Argentina,” he warned.

The economist also refuted the idea that the peso's depreciation was due to fears of a potential political change. "The risk premium only arises in response to a catalyst if there is a fundamental misalignment, and in this case, the peso's fall before the elections confirms that overvaluation," he explained.

In his conclusion, Brooks insisted that freeing the exchange rate would prevent further financial tensions. “Argentina should follow the path of the rest of Latin America. If it doesn't do so now, it is doomed to repeat the same mistake,” he said.

This isn't the first time Robin Brooks has clashed with Economy Minister Luis Caputo . In 2024, after the analyst predicted that a devaluation was "inevitable," the official responded ironically: "If I were a guru, I'd be working on Wall Street, not at the IIF giving opinions."

Brooks, with an extensive career in international markets, was a currency strategist at Goldman Sachs and Brevan Howard, and chief economist at the Institute of International Finance (IIF). Today, from his position at the Brookings Institution, he maintains his critical stance toward exchange controls in Argentina.