Argentina builds export engine while domestic economy crumbles into recession.

Argentina is on track to export more than USD 100 billion for the first time in its history, Catamarca is inaugurating four lithium plants in a single month with USD 2 billion in combined investment, and the government has just approved a USD 6.4 billion Tecpetrol project in Vaca Muerta under the RIGI framework. The contrast between that export momentum and the domestic deterioration revealed by this week's data defines the central tension in Argentina's economy today: the country is building a new external foreign-exchange architecture while eroding from within.

Argentina's export matrix is changing structurally and at a pace that surprises even those who follow it closely. According to analysis by Marcelo Elizondo, chairman of the Argentine Chapter of the ICC and director of DNI Consultores, exports could reach USD 180 billion by 2035, starting from a 2023 floor that represented just 0.29% of world trade, the lowest reading since comparable data have been available. The combination of Vaca Muerta, lithium and copper mining, agribusiness, and the knowledge economy is replacing the historical reliance on farming with a four-engine model. The Knowledge Economy already exports USD 10.493 billion annually, according to an EY Global Delivery Services report, with professional services accounting for 64% of those sales. At the same time, the Central Bank has accumulated nearly USD 15 billion in FX purchases so far in 2026, comfortably exceeding the target agreed with the IMF, and it does not rule out closing the year near USD 20 billion.

What is happening in Catamarca illustrates the magnitude of this shift better than any aggregate figure. During October, four projects are inaugurating plants and productive expansions with a combined investment of close to USD 2 billion, including two Rio Tinto developments at the Salar del Hombre Muerto. Governor Raúl Jalil explicitly linked the progress to the Large Investment Incentive Regime (RIGI). In parallel, the RIGI has just incorporated Tecpetrol's Los Toldos II Este project, part of the Techint Group, with a USD 6.4 billion investment and a target of 70,000 barrels per day in the Neuquén Basin. Neuquén, in turn, collected a historic monthly record of 746.396 billion pesos in hydrocarbon royalties in September, equivalent to USD 484.7 million at the official exchange rate, up 48.6% from the same month in 2025 in nominal terms and 11.3% in real terms. The three Patagonian districts are, in fact, the only ones in the country that increased industrial employment over the past two years.

But that export dynamism and investment in strategic sectors coexists with a domestic economy showing signs of sustained deterioration. GDP fell 0.6% in the second quarter, the EMAE activity index for July retreated 2.9% month-on-month — the largest drop since the 2020 lockdown — and analysts expect the third quarter to close in negative territory for a second consecutive quarter, which would configure a technical recession. The Banco Provincia PulsoPBA indicator already anticipates that the economy of Buenos Aires province, which concentrates 40% of national GDP, contracted 1.6% in the third quarter versus the second. Bank delinquency is climbing toward 7.7% in the private-sector loan portfolio, up from 3.2% a year earlier, and in consumer credit — personal loans and credit cards — it has jumped to 14.7%. In non-bank credit, 26.5% of the portfolio shows arrears, compared with 16% a year ago. Since November 2023, SMEs have lost 181,542 jobs, an average of 193 jobs per day, while 32,290 companies with formal employees have disappeared from the registry since Milei took office. The textile industry has accumulated a 22.6% drop in the first seven months of the year, and its leading voice, Ricardo Kuchikian, CEO of Cocot Dufour, describes it as the worst crisis in more than four decades — worse than the pandemic, worse than 2001.

The BCRA's multilateral real exchange rate in September stood 24% below its historical average, and that FX lag acts as a silent tax on sectors that sell to the domestic market or compete with Brazil and China. The president of Stellantis South America, Herlander Zola, said this week in São Paulo that the free market in Argentina "has left us out of the game" and left open the possibility of closing one or both of the group's industrial plants in the country. President Milei himself opened the debate on the exchange rate in Cabinet with a presentation by economist Alberto Ades, formerly of Goldman Sachs, who indicated he would like "a higher exchange rate" and warned that there are economic players who will not survive the transition underway. The chief economist at Citi Argentina, Ricardo Dessy, agrees in recommending greater reserve accumulation and some dollar appreciation to relieve the hardest-hit sectors. Deputy Minister Daza, by contrast, insists that no determinable equilibrium exchange rate exists.

In markets, the week closed with JP Morgan's country risk index at 589 basis points, after recovering from a high of 655 in early October. The decline was partly driven by the impact of the first-round election result in Brazil, where Flávio Bolsonaro led President Lula with 47.03% of the vote, sending the Bovespa to a historic record of 209,066 points and appreciating the real by nearly 5%. Argentine assets followed moderately: the S&P Merval gained 2.2% on the week and sovereign dollar-denominated bonds averaged a 3% improvement. However, the global context remains adverse: the US 10-year Treasury yield is hovering around 5.24%, at highs since 2003, and European sovereign bonds are under severe pressure, with French debt yielding almost 5% ahead of a rating review by Moody's. In that environment, the peso carry trade has been the most profitable strategy of the year: Boncer bonds returned 23.2% in CCL dollars between January and September, according to GMA Capital, far outperforming hard-currency sovereign bonds and equities. BBVA Research projects that 2026 will close with the lowest primary surplus of Milei's presidency, around 1.3% of GDP, reflecting a fiscal adjustment that has become more demanding as activity weakens.

Economy Minister Luis Caputo will travel to Bangkok for the Annual Meetings of the IMF and World Bank, where he will seek to unlock a disbursement of close to USD 1 billion corresponding to the third review of the agreement. The meeting with Kristalina Georgieva comes at a time when external financing has become more costly and the original financial program already looks tighter than expected. Meanwhile, the government has issued regulations for the Fiscal Innocence Law II in an attempt to mobilize dollars from the informal sector into the system, and advanced the privatization of AySA, awarded for USD 340.2 million — below expectations of USD 500 million — to a consortium led by Rowing S.A. What comes next in the coming weeks is central: the September inflation print that INDEC will publish on Tuesday — estimates point to 1.9% — the legislative session on October 15 that could seek to reject DNU 70/2023, and the evolution of country risk amid a week loaded with external data in a world where high rates, expensive oil, and the European fiscal crisis continue to redefine the rules for emerging markets.