Milei's Reelection Odds Collapse as Markets Punish Argentina Despite Fiscal Wins

Argentina's country risk closed Tuesday at 831 basis points according to JP Morgan's indicator, its highest level since the midterm elections of October last year, and that figure now encapsulates the most brutal diagnosis of the central contradiction of the Milei model: the country has a fiscal surplus, record exports and the public backing of the IMF, and yet markets punish it as if none of those things mattered.

The explanation, as is often the case in Argentina, is partly external and partly intimately political. On the external side, Luiz Inácio Lula da Silva's reelection in Brazil produced a regional shockwave that has yet to fully dissipate. The real touched 5.50 per dollar on Tuesday, accumulating a depreciation of roughly 10% since the runoff, and the São Paulo stock exchange has posted seven consecutive sessions of losses. The contagion on Argentine assets was immediate: sovereign dollar bonds lost an average of 1.8% on the day, while ADRs of local banks continue to bleed out. Grupo Galicia has accumulated a 40% loss so far in 2026 measured in dollars from its New York listing, Banco Supervielle has given up 46% and Banco Macro 33%. The selling cycle in local banks has no clear floor in sight.

But economist Fernando Marull was more precise than any correlation chart in pointing out that only half of the jump in country risk from the 400 points of four months ago can be explained by global markets. The other half, he told Infobae, is domestic politics: the implied probabilities of Javier Milei's reelection collapsed from around 90% to approximately 50%. The October 2027 presidential elections are thus already fully priced into asset values, and the market is discounting that the road to power will not be a stroll. The midterm elections in the United States added further tension: investors operated cautiously given the possibility that a Republican defeat could erode Washington's political support for Buenos Aires, although the direct impact on US foreign policy toward Argentina would be more nuanced than the alarms suggest.

It was against that backdrop of tension that Minister Luis Caputo appeared at the 32nd UIA Industrial Conference at the Golden Center and announced a package of measures aimed at small and medium-sized enterprises: suspension of embargoes by the Customs Collection and Control Agency until May 2027, extension of the 18-installment payment plan for debts with ARCA maturing through October 31, the possibility of using 100% of export tax credits to cancel customs debts, and a Banco Nación credit line for the purchase of domestically manufactured vehicles with a fixed rate of 25% over 72 months. He also proposed to the governors to advance the elimination of the Stamp Tax, an initiative that caught the attending officials off guard because they had not been consulted beforehand. The economists consulted by Infobae applauded the gesture, though they agreed that the impact on activity will be moderate.

The reception inside the hall was lukewarm. UIA president Martín Rappallini thanked the government for the announcements while simultaneously warning that macroeconomic stabilization "is fundamental, but it is only the beginning," while flagging the loss of nearly 95,000 industrial jobs since the start of the administration and the risk of destroying productive capacity during the transition. The organization also presented its own project, the so-called Federal Industrial Fiscal Pact, an incentive scheme similar to RIGI but oriented toward the manufacturing sector, with tax reductions and fiscal stability for 30 years that would require an agreement between the national government, the provinces and the municipalities. The text of the conference was eloquent in what it did not say: the reduction of the tax burden, the industrialists' main demand, still has no concrete date.

The government, in parallel, swiftly defused a legislative slip-up that triggered alarm: the Financial Competitiveness Bill sent to Congress included an article proposing to levy income tax on transactions involving CEDEARs, the certificates that allow investors in Argentina to hold foreign assets. Amid the uproar among tax specialists and market participants, Felipe Núñez, director of BICE and a key adviser to the minister, confirmed that the text "was left over from an old draft" and would be removed from the bill. The correction was quick, but it revealed the degree of legislative craftsmanship with which the Treasury Palace operates at moments of high market sensitivity.

The official exchange rate closed Tuesday at $1,551 in the wholesale segment, breaking through that barrier for the first time and marking its second consecutive all-time high. The Central Bank opted not to intervene for the fifth day in the last seven sessions, letting the market absorb greater dollarization from the private sector. The ceiling of the currency band for November stands at $1,989, meaning the official exchange rate is still 26% below that limit. In this framework, the retail dollar reached $1,570 according to the Banco Nación reference.

The financial noise contrasts with some structural data the government points to as an anchor. Tax revenue grew in October for the second consecutive month in real terms, with a nominal year-on-year increase of 33.7% that marginally outpaces estimated inflation for the period. The agricultural sector liquidated USD 2.88 billion in October, the best reading for that month in 25 years of historical data. Natural gas production hit an all-time high in 2026 driven by Vaca Muerta, and the energy surplus nearly doubled in September. IMF Managing Director Kristalina Georgieva explicitly cited Argentina alongside Greece, Portugal and Ireland as an example of fiscal discipline at the International Banking Conference organized by Santander in Madrid, where Deregulation Secretary Alejandro Cacace also spoke to defend the libertarian roadmap before an international audience.

In the industrial microclimate, the signals are more worrying. Capital goods imports fell 13.9% in volume between January and September versus the same period of 2025, and parts and accessories for those goods collapsed 25.9%. The contraction signals that private investment is not rebounding. Metalfor, a national leader in agricultural machinery with debts to 23 banks totaling $52 billion pesos, filed for bankruptcy protection with the Córdoba courts. In the tractor sector, the Pauny factory in Las Varillas woke up virtually seized by its 450 workers demanding two months of unpaid wages. Clara Barceló, the premium footwear brand, did likewise on the bankruptcy front. These are signs that the adjustment has real costs that are accumulating in the industrial fabric.

What lies ahead in the coming days will determine whether the pressure eases or deepens. The results of the US midterm elections will be known in the coming hours and the market will react according to how much political leeway the Trump administration retains to continue operating as a financial backstop for Buenos Aires. The third review of the IMF program was technically approved, but the Executive Board has yet to rule and the disbursement of around USD 900 million will not arrive before the first week of December. The Central Bank, meanwhile, needs to resume its foreign currency purchases to maintain the pace required toward the reserve accumulation target, in an environment where private dollarization and the absence of intervention combine uncomfortably.