Argentina's Export Boom Masks Stubborn Domestic Demand Collapse

Argentina closes the first half of the year with a macroeconomy gradually falling into order, but a real economy still split between sectors posting record production and export figures, and a domestic demand that has yet to gain traction.

The most emblematic data point of the period came from the energy sector: oil production reached 903,700 barrels per day in May, a 19.6% year-on-year increase driven by Vaca Muerta, which now accounts for 69% of national output, as confirmed by Economy Minister Luis Caputo. The Neuquén formation continues to attract large-scale capital: the government approved the entry of Pampa Energía's Rincón de Aranda project into the RIGI regime, with a planned investment of USD 4.5 billion and projected exports of USD 17 billion over 30 years. With this approval, the regime now counts 20 authorized projects totaling USD 46 billion in committed investment. YPF, for its part, formalized agreements with Italy's Eni and the UAE's XRG to bring them into the upstream of the Argentina LNG megaproject, taking a concrete step toward positioning the country as a global exporter of liquefied natural gas.

Agriculture also showed solid numbers. Agroindustrial exports totaled 53 million tons between January and May, a historic record for the period with an 18% increase in volume and a 17% increase in value, reaching USD 22.383 billion. Sunflower led the jump with a 142% surge in volume, followed by wheat with a 64% increase. In June, the Cámara de la Industria Aceitera and the Centro de Exportadores de Cereales settled USD 3.007 billion, 12% more than in May, though 18% below the same month last year — partly reflecting less favorable international prices and a comparison base distorted by last October's exceptional FX program. Gustavo Idígoras, president of CIARA-CEC, projected a "stable and fairly standardized" year in terms of foreign currency inflows.

In financial markets, the close of the first half was marked by the dollar's awakening. The currency climbed 5.3% in June, outpacing inflation for the first time since October 2025 and closing at $1,500 at Banco Nación, its highest level in eight months. The wholesale dollar closed at $1,482, with the upper band of the currency corridor set at $1,806.92, leaving a 21.9% margin. The MEP traded at $1,521 and the contado con liquidación at $1,558. The rise responded to a combination of factors: greater seasonal hedging demand ahead of the second half, the payment of the mid-year bonus, a reduction in fixed-term deposit rates below 20% annually at major banks, and the global strengthening of the dollar, whose DXY index reached its highest level in 19 months. The Central Bank sharply decelerated its purchases in June, accumulating USD 1.418 billion versus USD 2.601 billion in May, though the year-to-date total surpassed USD 11.165 billion. JP Morgan's country risk closed at 426 basis points, near administration lows, partly reflecting the impact of higher yields on 10-year US Treasuries, which sit around 4.5%.

Finance Secretary Federico Furiase acknowledged that the improvement in sovereign risk is not, in itself, enough to enable a return to international debt markets — precisely because the global risk-free rate raises the total cost of dollar financing. Meanwhile, the government completed the placement of the Bonar 2028 for USD 2 billion — with demand reaching USD 691 million in the final round for a cap of just USD 100 million — securing nearly all the resources needed for the USD 4.2 billion payment to bondholders on July 9.

The picture of the real economy remains uneven. The EMAE fell 1.5% month-on-month in April, accumulating just 0.3% growth in the first four months of the year, with agriculture and mining expanding at double-digit rates while industry contracted 2.9% and commerce 3.2% year-on-year. Sales of 0-km cars closed the half with 294,181 registrations, 9.9% below the same period in 2025. On the consumer finance front, delinquency reached 12.7% in May, the highest level since the exit from Convertibility, with nearly 7 million people excluded from credit, according to consultancy 1816. Four out of every ten people under 35 have at least one obligation in arrears. The inflation slowdown offers some relief: leading consultancies, including Analytica and EcoGo, project inflation of between 1.8% and 1.9% in June, which would consolidate the downward trend from March's 3.4%.

Starting in July, households face a new round of increases in electricity tariffs — Edenor and Edesur will apply adjustments of around 3% — as well as gas, public transportation with hikes of between 4.1% and 8.6% depending on the mode, and private health insurance, adding pressure on incomes. A report by Fundación Capital notes that public utilities already consume 22% of income for households living on two minimum wages and 10.7% of the average formal salary, versus 4.3% and 3.8% respectively in December 2023.

Looking ahead to the second half, the government will have to show that growth is beginning to spill over into the lagging sectors. Former Central Bank president Guido Sandleris warned that macroeconomic fundamentals are solid but that the impact on everyday well-being remains "ambiguous." The political risk heading into the 2027 presidential race is already on the radar: President Milei himself declared he is "hyper-shielded" against any speculative attack, and the BCRA indicated it has FX liquidity instruments exceeding USD 20 billion. What the second half will put to the test is whether falling inflation, the gradual recovery of real wages, and the expansion of formal credit can finally reactivate industry, commerce, and construction — the three sectors that have yet to find a floor.