Brokerage XTB has analyzed the path of the Argentine economy since Javier Milei’s victory: the country’s economy seems to have improved significantly but the investment has not arrived as expected and economic growth has slowed down. Read the analysis of XTB analysts.
After receiving $ 30 billion from the IMF and the World Bank, Argentina finds
If again on the brink of bankruptcy – this would be the fourth non -compliance or restructuring of the country in the last 25 years.
Analyzing the Argentine economy of Javier Milei’s victory in the December 2023 general elections, we realized that at an early stage, the country’s economy seems to have improved significantly, and foreign investors welcomed the changes well.
As the economy improved, Milei also allowed the free movement of capital within
and outside Argentina, increasing investors’ confidence in their economy.
The country’s – Merval – was the most profitable for 2024, rising 130% in terms of dollars, while investment funds considered to incorporate Argentine obligations into their products.
Milei has achieved significant tax and regulatory progress since inherited the economic chaos of Peronism in December 2023. He balanced the budget and freed thousands of bureaucracy entrepreneurs:
• Inflation reduction: price growth in recent years has remained close to 100%. When its electoral victory, inflation reached 211% and, in April, 294%. However, since then, it has been able to stabilize in 30%, and it is expected to confirm the descendant trend in October, with a “only” growth of 25%.
• Economic growth: The Argentine economy grew 6.3% in the second quarter of this year compared to the same period last year, surpassing the first quarter record. This is the fastest expansion rate since the second trimester of 2022, driven by a strong recovery in the agricultural sector, as the effects of a historical drought that had severely reached cereal production began to disappear.
• Poverty rate: Argentina’s poverty rate fell dramatically in the second half of 2024, after austerity measures and cuts in public spending initially pushed millions of people into misery. The rate fell from 52.9% in the first half of last year to 38.1%.
• Business Balance: Argentina’s trade balance has been one of Milei’s main concerns. The results have been positive, showing signs of improvement by 2025 compared to previous years. Argentina accumulated a commercial surplus of US $ 5.071 billion, a positive dynamic, although less than the previous year, when the country closed 2024 with a historical surplus of US $ 18.928 billion. Foreign trade maintains a sustained surplus, driven by agribusiness and energy exports, even in a relatively stable international price context, while increasing imports reflects more dynamic internal economy. Still, the picture is not perfect: with China, Argentina maintains a structural deficit close to $ 100 billion in the last five governments.
• Fiscal deficit: The flagship of Milei’s policy is the fiscal surplus. To achieve it, he applied the “chainsaw”: cuts in education, public works and subsidies; discharges in the state sector; and mergers of ministries. It also launched a tax reform eliminating 19 taxes, lowering tariffs on equipment goods and creating the incentive regime for large investments (Rigi), with rapid exemptions and amortizations. He vetoed laws that increased pensions or social benefits, defending as a priority the “zero deficit.”
• The result: In August 2025, the accumulated primary surplus was 1.3% of GDP. An unprecedented turnaround for a country used to spend.
But the investment did not arrive as expected and economic growth has slowed down. The fault has essentially based on doubts about the Central Bank and the instability of the weight.
For over a year, Argentina maintained the capital controls of the previous government and the Central Bank used a fixed exchange rate with the dollar below the inflation rate to support weight. Too much weight -looking weights at an overvalued exchange rate made Argentines feel richer than they really were, encouraging imports in foreign currency.
The government decided to let the market find the true value of the weight. In April, the Central Bank announced that it would keep the currency inside a fluctuation band, which worked for a while. But when the treasure no longer issued short -term notes with high coupons to banks, customers began to replace weights with dollars.
When Milei performed poorly in the provincial elections of Buenos Aires – where almost 40% of the population lives – the fear of the return of Peronism increased. The Argentines launched another round of weight sales. The weight fell almost 10% in 15 days, reaching the bottom of the fluctuation band adopted in April, when Milei loosened Argentina’s strict controls of capital, after obtaining a $ 20 billion -billion loan from the IMF.
In a normal case, a central bank would increase interest rates to contain credit and strengthen the currency, attracting capital in weights and discouraging dolarization. But increasing rates in Argentina too much means stifling families and companies already overloaded at high costs.
Local investors were afraid that the government had to abandon the fluctuation band and devalue the weight, further feeding the search for dollars. The Central Bank spent $ 1.1 billion in three days, and these dollars sales, in turn, unnerved the holders of obligations, who feared that the government was spending their scarce reserves – estimated at less than $ 5 billion – causing obligations to collapse.
Javier Milei’s salvation resides in the US?
Bleeding only stopped after the US treasure announced on Monday that
would extend financial aid and Milei’s government announced a temporary suspension of
export taxes.
Scott Bessent, US Treasury Secretary, said Washington would consider the purchase of Argentine currency or sovereign debt through a US Treasury -controlled fund, adding that “all options” were on the table. Evoking the words of Mario Draghi, former president of the ECB during the eurozone crisis, said the US would do “whatever needed” to support Argentina’s financial markets.
The weight recovered after Bessent’s promise of support, valuing 6%. The Merval Index registered a strong recovery and the income of the Argentine obligations in dollars fell to about 15%. Still, they are still far from providing investors security. The riskiest obligations of emerging markets, such as Ecuador or Angola, are traded “only” at about 11%.
Prior to Buenos Aires disaster, Milei planned to reach one -digit yields next year, low enough to issue new obligations. This will depend on Milei’s recovery in the interchange national elections, whose key date is October 26.
Is the solution the solution?
On the one hand, it would eliminate the risk of weight devaluation and the political temptation to print money to cover deficits, and inflation could be stabilized quickly.
But, on the other hand, Argentina would lose monetary sovereignty and be dependent on the federal reserve policy. If the dollar values, internal prices become more expensive globally, exports fall, trade balance worsens and Argentina loses competitiveness-just the opposite of what it needs.
In addition, to dolarize, Argentina needs real net reserves in dollars to exchange for weights in circulation – something they don’t have today (their liquid reserves are extremely low). Although dollars dollars in reserves, such includes credit lines and other liabilities that cannot be easily settled. Current calculations suggest about $ 5 billion, against a total monetary offer of about $ 40 billion – insufficient to dolarize the economy.
Therefore, at this moment, the only viable option seems to be the weight of gaining stability and confidence of investors, both local and international, which can be achieved with a permanent tax surplus. The question is if Milei will be able to do so and have enough time.
