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Argentina: Solid Progress Under Milei
Looking through the political noise to the structural anchor.
BY WALTER T. MOLANO
Argentina under President Javier Milei has achieved a fiscal and institutional transformation of a scale that few would have thought credible at the time of his inauguration in December 2023. The government has delivered two consecutive years of primary fiscal surplus for the first time since 2008, reduced monthly inflation from a peak of 25.5% in late 2023 to single-digit monthly rates by mid-2025, and secured a decisive mandate in the October 2025 midterm elections. That electoral validation has materially reduced political execution risk and provides Milei with sufficient congressional leverage to advance his remaining structural reform agenda through to the 2027 presidential cycle. These achievements have begun to register in the agency ratings: in May 2026, Fitch upgraded Argentina’s long-term foreign currency issuer default rating to B- from CCC+, with a stable outlook, citing structurally improved fiscal and external balances, progress on economic reforms, and improved prospects for foreign exchange reserve accumulation, a move that marks a meaningful departure from the distressed credit designation that has characterized Argentina for most of the past decade. We maintain a constructive medium-term view on Argentine sovereign paper, acknowledging that spread compression from current levels remains contingent on the resolution of the reserve adequacy question and a durable decline in annual inflation toward the single-digit trajectory the International Monetary Fund (IMF) projects by 2027. We reiterate our Buy recommendation on the Argentine 0.75% of 2030, which yields 8.6%, and provide an optimistic, yet more defensive position.
CORRUPTION SCANDALS
However, a wave of corruption has dominated the news cycle through the second half of 2025. It has become a test of the Milei administration’s political durability and anti-establishment narrative. The institutional friction stems from two distinct strands of scandal that developed in rapid succession, striking at the inner circle of the executive. First, in August 2025, leaked audio recordings purportedly implicated Karina Milei — the president’s sister and secretary general of the presidency — in a kickback scheme linked to pharmaceutical contracts at the national disability agency (ANDIS). This was compounded by Cabinet Chief Manuel Adorni becoming the subject of an illicit enrichment investigation, with prosecutors scrutinizing luxury travel and real estate acquisitions incompatible with his official salary. These scandals directly contradict the administration’s foundational “anti-caste” platform, threatening to erode the political capital Milei relies upon to enforce fiscal austerity. Furthermore, as these investigations advance in Congress, they consume legislative bandwidth, delaying the passage of critical secondary reforms and testing the cohesion of the government’s fragile legislative alliances.
WEAK OPPOSITION
Combined with an uneven economic recovery — in which agriculture and energy have boomed while the labor market absorbs the cost of transition via job losses and rising informality — these scandals have predictably weighed on the president’s approval ratings. However, the sovereign’s risk profile remains insulated by the profound structural weakness of the opposition. The Peronist movement is ideologically exhausted, highly fragmented, and critically lacking a unifying candidate capable of mounting a serious challenge ahead of the 2027 presidential election, particularly with former President Cristina Fernández de Kirchner neutralized by a corruption sentence under house arrest.
Crucially, the political landscape is not consolidating against Milei but rather fracturing further. While Dante Gebel — a California-based evangelical pastor — has emerged as an independent outsider gaining traction across Buenos Aires and provincial networks, he does not represent a unified opposition front. Traditional Peronist leadership has explicitly rejected the prospect of integrating Gebel into their internal electoral machinery for the upcoming presidential primaries. The reason Peronism does not see Gebel participating in their internal primary is fundamentally structural: Gebel lacks a traditional territorial apparatus, operating instead as a digital and spiritual influencer without organic ties to the party’s historic bases of unions, mayors, and governors. Furthermore, incorporating a California-based outsider with no prior political allegiance or defined economic dogma would signify a surrender of the party’s historical identity and leadership structure. This fragmentation in the opposition landscape reinforces our core thesis: Milei enters the presidential campaign cycle as the undisputed frontrunner by default. Ultimately, we expect the noise of executive scandals to be overshadowed by the structural investment story in energy and mining, which is poised to translate into tangible export revenues, enhanced dollar liquidity, and a derisked balance of payments.
SLOW EMPLOYMENT PROGRESS
The real economy continues to bear the immediate cost of the administration’s macroeconomic stabilization, with the labor market constrained by deep structural informality rather than a cyclical recessionary drag. The employment landscape is currently characterized by a pronounced dualism where formal job creation has effectively flatlined, pushing informal employment to a concerning 43%, encompassing nearly 8.9 million workers. While the administration successfully secured the legislative passage and enactment of its comprehensive labor reform in early 2026 — a structural pro-market achievement that deregulates historical rigidities and lowers formal hiring costs — its near-term impact on the real economy remains entirely muted. The transmission mechanism from an improved regulatory framework to actual formal job creation is currently bottlenecked by the sheer scale and entrenchment of this informal sector, which acts as a persistent structural barrier to rapid formalization. Consequently, we assess that the labor market is not currently positioned as an engine for near-term growth, remaining trapped in a prolonged holding pattern. Nevertheless, we maintain our positive structural outlook: we anticipate that the immense, ongoing capital investments in the mining sector will ultimately bridge this cyclical gap, serving as the definitive catalyst for a more robust and sustainable economic recovery in the medium to long term.
FISCAL CONSOLIDATION
The fiscal consolidation executed by the Milei administration constitutes the most significant credit-positive development in Argentine sovereign analysis in over two decades. The administration has successfully severed the historical reliance on central bank monetary financing, anchoring its stabilization program on aggressive fiscal adjustment. In 2024, Argentina recorded its first sustained fiscal surplus since 2008, closing the year with a primary surplus of 1.8% of GDP. The macroeconomic framework received a critical external anchor in April 2025 when the IMF Executive Board approved a four-year EFF providing access to $20 billion. Program implementation has proceeded broadly on track: the second review was completed on 21 May 2026, unlocking an additional disbursement of approximately $ 1 billion and bringing total disbursements under the arrangement to $15.8 billion, with the Board noting that reform momentum had strengthened through the approval of key fiscal, trade, and labor legislation and refinements to the monetary and FX framework — notwithstanding its acknowledgement that performance through late 2025 had been mixed, primarily on account of delays in reserve accumulation. The success of this fiscal contraction is now evident in the sovereign’s solvency metrics: Argentina’s national debt-to-GDP ratio compressed dramatically from 155.4% in 2023 to 91.5% in 2024. Supported by IMF projections, this downward debt trajectory is anticipated to continue, landing at approximately 70% by 2026, which materially de-risks the sovereign’s medium-term profile.
RESERVES
The reserve adequacy concern is being addressed by the pace of BCRA intervention in the foreign exchange market. As of 20 May 2026, the BCRA had completed 91 consecutive sessions with a positive result, accumulating $8.7 billion year-to date, with April registering the highest monthly total at $2.7 billion. Gross international reserves stood at $ 46.5 billion, approaching the current administration’s peak of $46.9 billion recorded in February — a level not seen since 2018. Critically, the principal agricultural harvest proceeds have not yet been fully liquidated, meaning foreign exchange supply is expected to increase further in the near term, with official projections placing net annual BCRA purchases in a range of $10 to $17 billion. This reserve build is validated by the underlying trade data: Argentina’s trade balance recorded a surplus of $2.7 billion in April, the 29th consecutive month of positive results, with exports reaching $8.9 billion — a 33.6% annual increase driven by a 20.6% surge in volumes and a 10.8% rise in prices.
POSITIVE BALANCE
Ultimately, while ongoing institutional controversies and executive branch friction inject a persistent political risk premium into the sovereign curve, the core economic agenda remains firmly insulated. The primary surplus has carried uninterrupted into 2026, reserves are accumulating at a pace not seen since the pre-crisis era, and the trade balance has delivered 29 consecutive months of positive results — a combination that speaks to a balance of payments dynamic that is structurally improving rather than cyclically flattered. Overlaid on this, the absence of a unified opposition capable of forcing a policy reversal ensures that IMF program conditionality will continue to be met, that the EFF disbursement schedule remains intact, and that the macroeconomic stabilization program will advance toward its medium-term targets. Taken together, these factors structurally underpin our constructive view on the credit.
Walter Molano is head of research at BCP Securities and the author of In the Land of Silver: 200 Years of Argentine Political-Economic Development.
