Argentina's Two-Speed Economy: Fiscal Triumph Masks Deepening Street Discontent
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Argentina closes the first half of the year with its sovereign finances in the strongest shape of the Milei administration, yet with a two-speed economy fueling mounting tension between top-line macro indicators and the discontent visible on the street.
The Central Bank reached mid-year having bought more than USD 11 billion in the FX market, surpassing ahead of schedule the annual target of USD 10 billion agreed with the IMF. June, however, marked a turning point: liquidations from the Pampas agricultural sector slowed, private dollar demand rose—partly driven by half-year bonus payments—and peso time-deposit rates at leading banks fell below 20% annualized. The result was the first month of the year in which the carry trade turned negative, with the peso depreciating nearly 5% against the dollar in the wholesale market, where the exchange rate touched $1,481.50 on Monday—its highest level since November 2025—even as the upper band of the currency regime sits at $1,805.38, some 22% away. Gross reserves slipped to USD 46.666 billion. BCRA Vice President Vladimir Werning, speaking at Fundación Mediterránea, presented a defensive arsenal of more than USD 20 billion in FX liquidity instruments for 2027, while President Javier Milei argued on the Neura channel that the economy is "hyper-shielded" against potential pre-electoral speculative attacks.
In parallel, the Ministry of Economy completed the placement of the Bonar 2028 (AO28) for USD 2 billion—the second round drew bids of USD 691 million, nearly seven times the available size—at a 7.56% nominal annual rate, breaking through the 8% threshold and securing the most favorable terms since the instrument's launch. The Treasury thereby locks in most of the resources needed for the USD 4.3 billion bondholder payment on July 9. Wall Street provided a tailwind: the Dow Jones broke above 52,000 points for the first time, lifted by the Supreme Court's decision to protect the Federal Reserve's independence, and Argentine assets rebounded in line with global markets. JP Morgan's country risk index traded near 430 basis points, an administration low, although Milei claimed that the "intrinsic" risk of his government—stripping out the country's "historical burden"—is just 60 points.
Where financial optimism collides with reality is in activity and credit. The Indec's EMAE indicator for April showed a seasonally adjusted 1.5% decline versus March, confirming the "sawtooth effect" that alternates between gains and losses without consolidating a trend. The 1.6% year-on-year growth is almost entirely explained by mining—up 17.1%—and agriculture—up 10.9%—while manufacturing fell 2.9% and commerce 3.2%. Economist Lorenzo Sigaut Gravina, of Equilibra, sums up the paradox: the winning sectors do not generate enough quality employment to offset the destruction in traditional industries. Tenaris SIAT, part of the Techint Group, this week dismissed 150 contract workers at its ValentĂn Alsina plant after being shut out of key tenders linked to liquefied gas exports. Textile maker Amesud, a supplier to Nike and Adidas, filed for creditor protection with liabilities of $12.156 billion. Battery manufacturer Unionbat shuttered its plant in GualeguaychĂş with up to 120 layoffs.
Banking delinquency compounds the microeconomic picture. According to data processed by consultancy 1816 from the BCRA's Debtors Registry, non-performing household loans climbed to 12.7% in May—the highest reading since the end of Convertibility—with four out of every ten people under 35 carrying at least one overdue obligation. It marks the nineteenth consecutive monthly increase. A Zentrix survey confirms that 53% of pro-government voters cite personal indebtedness as their main economic concern. In response, Banco Nación launched a debt regularization program, and the Ciudad and Nación banks are offering refinancing lines. Fundación Capital warns that utilities now absorb close to 20% of income for lower-income households—versus 4.3% in December 2023—and that a new round of increases in electricity, gas, transport and prepaid healthcare takes effect on July 1.
The export sector provides the strongest counterpoint. Beef exports to the United States grew 369% year-on-year in the first five months of the year, and May alone saw 11,000 tons shipped—the same volume as in the first eight months of 2025. Karina Milei confirmed a second edition of Argentine Beef Week in September, to be held in Miami, Atlanta and Houston. YPF signed agreements with Eni and XRG to bring them into the upstream of the Argentina LNG project, ceding 32% to each in the Vaca Muerta blocks earmarked for liquefied natural gas exports. The government also approved the San MatĂas Pipeline's entry into the RIGI regime, a USD 1.3 billion project that will supply LNG exports worth USD 2.5 billion annually. According to the Financial Times, the government is preparing a citizenship-by-investment program—a non-refundable payment of USD 500,000 or the purchase of USD 1 million in zero-coupon bonds—as an alternative mechanism for attracting foreign currency. Multinational companies, for their part, remitted USD 2.6 billion in dividends abroad in the first half, the largest flow in more than a decade, according to Werning.
On the wage-bargaining front, the oilseed-processing industry and its unions—SOEA and FTCIODyARA—closed, after weeks of negotiation, a 29.5% agreement indexed to CPI, covering all of 2026. Foreign direct investment from the European Union in Argentina exceeded USD 73 billion in 2025, with Spain leading the ranking at USD 25.715 billion, followed by the Netherlands. MSCI, meanwhile, kept Argentina in the standalone category—the bottom rung of its classification—without even opening a formal consultation, blocking the potential USD 4.5 billion in passive flows that an eventual return to the emerging-markets index would imply.
In the weeks ahead, attention will focus on the July 9 bondholder payment, the June inflation reading—private consensus places it near 1.8%, below May's 2%—the trajectory of the exchange rate as the second half begins with reduced seasonal supply from agriculture, and the signals coming from the new Cabinet Chief, Diego Santilli, on the economic agenda heading into the 2027 presidential elections.
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