The surprising victory of libertarian Javier Milei in Argentina’s presidential elections has injected fresh optimism into the fintech sector. Industry leaders are hopeful for a tailwind as they anticipate a more favorable regulatory environment and improved economic prospects, driven by a market-oriented approach.
Despite the 53-year-old outsider and right-wing economist not yet revealing detailed economic policies, fintech leaders have expressed optimism. Marcos Galperin, the renowned founder of Mercado Libre and Argentina’s leading tech entrepreneur, celebrated the election results. “Now there is a new Argentina possible,” he tweeted. Pierpaolo Barbieri, CEO of Uala, echoed this sentiment on social media. “The future inspires us and fills up with hope,” he said.
Insiders in the fintech sector are anticipating better conditions, especially in the aftermath of recent clashes between the outgoing government and industry leaders.
In recent years, the regulator has prohibited both fintechs and banks from offering crypto brokerage services—a lucrative product in Brazil, enabling neobanks to generate substantial profits. More recently, the central bank was involved in a ferocious dispute with Mercado Pago, the largest digital bank in the country. It mandated that all transfers to its virtual account should require an ID verification first, adding friction and, according to the company, discouraging the use of this highly popular product.
“The current administration wasn’t necessarily anti-fintech, but the demands of the banks were the ones being primarily heard,” said Ignacio Carballo, head of Alternative Finance at Americas Market Intelligence. “We can expect change in this regard, with winds blowing in a different direction.”
Golden years
The industry recalls the glorious days of its inception back in 2015, under the presidency of Mauricio Macri. The centre-right former president is now a staunch ally of Milei, leading many in the industry to believe that good times may be coming back.
Economist Javier Milei, president-elect of Argentina.
The period spanning 2015 to 2019 witnessed a robust alignment between the central bank and the then-nascent fintech sector, which effectively took root and flourished under its guidance. The then central bank’s vice president, a fervent supporter of new technologies, played a pivotal role in fostering the sector’s growth through regulation that was conducive to its development.
Despite changes in government over the years, the sector has exhibited consistent growth. Fintechs have played a key role in achieving near-universal financial inclusion in the country, with nearly every adult now holding some form of virtual or banking account. This year, Finnovista identified a total of 343 fintechs, more than double the 158 registered in 2019. According to the firm, the sector boasts an impressive annual compound growth rate of close to 10%.
However, the growth potential could have been even greater. Since the last study, nearly one in three registered fintech companies for 2021 has ceased operations, primarily due to the challenging economic environment in the country and inflation nearing 150% annually.
“Despite the sector’s operating logic largely independent of the political and economic cycle, there’s a perception that its growth has yet to reach its true potential,” noted Carballo. “Observing Argentine companies in other regional countries makes it clear—they have more room and incentives to thrive beyond their borders.”
Milei and fintech: “Massive deregulation”?
Adding to the sector’s high hopes of change were remarks from Milei’s Foreign Affairs secretary.
In a recent fintech event presentation, economist Diana Mondino advocated for a state that “has to start trusting in entrepreneurs,” while highlighting that the libertarian’s proposal includes “massive deregulation” at all levels.
She underscored that there were regulations in place that hindered the sector’s growth, and the emergence of new players. The fintech industry in Latin America plays a fundamental role in disintermediating the financial offer in a region with a broad dominance of traditional banks.
Mondino said that the government intended to create a sandbox for new business models to encourage startups further. This structure is present in countries such as Brazil, as it is seen as a testing ground for innovative models before they reach the market.
While Argentina’s fintech scene has grown in recent years, the regulator’s stance was in stark contrast with Brazil’s central bank, which published a slew of regulations that contributed to advancing digital payments and financial competition in the past few years.
The Argentine Fintech Chamber looked forward to working closely with Milei to develop a “better financial system that contributes to competitiveness and promotes economic growth and the inclusion of Argentinians.”
Shutting down the central bank?
Yet, a cloud of uncertainty looms over one of Milei’s pivotal proposals. The libertarian has championed the idea of transitioning the currency to the U.S. dollar. Ultimately, dismantling the central bank by the end of his term.
While stringent regulations can undoubtedly pose challenges for the fintech sector, an active central bank engaged in modernizing frameworks is a crucial catalyst. The success story of Brazilian governor Roberto Campos Neto serves as a testament to the positive outcomes that can arise from a harmonious relationship between regulators and fintechs, as demonstrated by initiatives like Pix and Open Finance.
The Argentine central bank shoulders the blame for its primary objective—safeguarding the value of the peso, the local currency. Its track record has been notably unsuccessful thus far. Inflation has soared well into the triple digits, and the peso’s depreciation continues unabated as the financial crisis worsens daily.
Yet, central banks in many Latin American nations wear dual hats—regulating and supervising the financial industry. This dual role raises questions about whether it could eventually pose challenges for the fintech sector. The industry is heavily reliant on a regulator’s openness for its flourishing.
Attempting to ease concerns, Mondino reassured fintech leaders at the event. “We are not going to set the central bank on fire,” she declared. She emphasized that its role as a custodian and supervisor of the system would persist.
Milei fintech and Crypto
An anarcho-capitalist who vows a limited government, Milei has been naturally aligned with the crypto sector. Some of the values, such as deregulation, disintermediation and financial liberty, appear to be shared in common. However, crypto will likely be far from being a priority under the Milei presidency.
The Argentine economy is in dire straits, with inflation accelerating and now perilously close to hyperinflation. Four in every ten Argentines are poor, and the economy has failed to sustain growth in the past decade. While fintech and financing could be a significant driver for GDP growth down the line, it is unlikely that pressing matters would allow the government to focus on tailor-made regulation, such as elsewhere in Latin America.
By Nermeen Nabil 
Nermeen Nabil Khear