EXHIBIT 2
Argentina’s October 2025 midterm elections gave President Javier Milei a decisive win—a crucial test for the two years remaining in his term. With strong international backing, Milei’s government is working to open the economy and stabilize the currency. We believe this may be a window of opportunity—if reforms succeed, growth and market returns may follow. But risks remain high, and outcomes hinge on effective implementation. The following Q&A explores what this could mean for investors.
Argentina is no stranger to crisis, having endured decades of economic and political volatility, hyperinflation, currency collapses, and nine sovereign defaults since its independence in 1816.
The election of libertarian Javier Milei in 2023 marked a dramatic course shift for the country, bringing with his win a mandate to reduce inflation, slash government deficits, and deregulate. Considered a major economic experiment, Argentina’s recent policy measures have proven remarkably successful, dropping monthly inflation from 20% to 2% and achieving the first primary surplus in more than a decade (Exhibit 1). This was accompanied by a remarkable rally across Argentina’s assets, with the nation’s dollar debt returning 144% since the election.1
EXHIBIT 1
Inflation Moderates Under “Mileinomics”
As of 31 December 2025
Source: Instituto Nacional de Estadística y Censos
However, cracks emerged during the September 2025 Buenos Aires provincial election—historically a Peronist stronghold—when Milei's party underperformed expectations. Investors appeared wary that Milei would lack sufficient backing in the congressional elections to advance his economic agenda. At the time, this sparked a massive sell-off, with 10-year yields soaring to more than 17% and the currency slumping near 7% in a single day.2
Within days of the sell-off, however, the United States signed a $20 billion currency swap line with Argentina and the US Treasury intervened to support the peso and shore up confidence, likely signaling support for Milei's free-market reforms contingent on strong midterm results.
Ultimately, the sustainability of Milei’s reform program may depend on his ability to maintain political support and market confidence as the next phase of adjustment unfolds.
In October’s midterm elections, President Milei’s coalition won a landslide 41% versus 32% for the main opposition, tripling the party’s Senate seats and defending veto power.
We believe Argentina has 12-to-18 months to implement major reforms before austerity fatigue and 2027 election pressures force a populist shift away from potential changes. Examples of past failed attempts include President Carlos Menem’s 1990s liberalization collapse in 20013 and President Mauricio Macri’s 2015–2019 abandoned reform moves4 after his electoral defeat. However, we think President Milei’s approach is unlike past efforts. He has delivered on a challenging agenda while maintaining popularity, a rarity in Argentina (Exhibit 2).
Argentina’s Improved Economic Standing
As of 1 July 2025
Source: Ministerio de Economía y Producción
Following his electoral victory, Milei pivoted strategically from confrontation to consensus-building. His earlier campaign rhetoric has vanished from recent speeches, a calculated shift crucial for negotiating with provincial governors who control key votes. This political pivot has yielded concrete legislative results, most notably the passage of Milei's first budget, a critical test of his capacity to advance his agenda through Congress rather than executive decree. Labor reform legislation is now before the Senate, though a broader tax overhaul has been shelved following resistance from provincial governors.
Argentina entered 2026 facing a triple constraint: near-zero net reserves, peso overvaluation, and approximately $20 billion in debt obligations for the year. The critical January payment of $4.3 billion was met through a $3 billion bank repo and a US Treasury swap line drawdown, which has since been repaid. Remaining maturities—approximately $4.5 billion in July plus additional payments in the latter half of the year—will depend on successful reserve accumulation.
The path to rebuilding reserves was further complicated by the peso’s exchange rate framework. The peso operated under a crawling peg with 1% monthly depreciation, but with monthly inflation running higher, the currency became significantly overvalued. The Central Bank of Argentina (BCRA) struggled to build reserves, as maintaining the peg required selling dollars rather than buying them. However, in December 2025 the BCRA announced a pivotal shift addressing concerns of peso overvaluation and reserve accumulation; the bands will now be adjusted by monthly inflation and committed to reserve purchases of $10 billion by the end of 2026 (Exhibit 3). We view this as a positive first step toward restoring credibility to the exchange rate framework and establishing a clearer path to reserve accumulation.5 Given the current pace of accumulation, we think Argentina should surpass this goal.
EXHIBIT 3
A Faster Crawl for the Peso
As of 30 January 2026
Source: Banco Central de la República Argentina
Economy Minister Luis Caputo initially stated that the government was targeting a spread of 500 basis points over US Treasuries to return to the international debt market for the first time since Argentina defaulted in 2020.6 Spreads reached that threshold on 27 January 2026 (Exhibit 4), yet Caputo has since indicated the government does not plan to tap international markets while alternative financing remains available at lower rates. Instead, Argentina has relied on repo lines with banks and a one-time SDR purchase from the US Treasury to meet obligations.7
EXHIBIT 4
Argentine Spreads Reach Target Levels
As of 30 January 2026
Source: J.P. Morgan
Argentina faces significant bond payments over the remainder of Milei's term, including $4.5 billion due in July. The December auction of a $1 billion local-law dollar bond marked a step toward reestablishing market access. Ecuador’s successful return to international markets has further bolstered expectations, demonstrating investor appetite for high-yielding emerging markets sovereigns. It may benefit Argentina to take advantage of current spreads to return to international markets while conditions remain favorable; delaying issuance may risk facing tighter conditions or a shift in risk appetite from investors.
The broader Latin American backdrop appears favorable to the country’s ambitions as the region shifts from left-leaning to center-right administrations. For Argentina, in particular, investors are seeking clear assurances that reforms will be durable.
We think Argentina’s growth trajectory will be driven by three key sectors (Exhibit 5):
- Energy: Major foreign investment is likely to flow into the Vaca Muerta shale formation. Producer Vista will invest more than $4.5 billion and plans to nearly double output by 2030.8 Oil and gas are projected to become Argentina’s largest export, with output expected to surge by 250% by 2030.9
- Mining: Lithium and gold exports are expected to grow 60% over the next four years. Proposed amendments to the National Glacier may open copper mining, with exports projected to reach $6.2 billion by 2030, potentially making Argentina a major global supplier.10
- Agriculture: Historically Argentina’s main growth engine, we believe newly announced export tariff cuts and a trade agreement with the United States could reinvigorate production and exports, restoring its central role in the economy.
EXHIBIT 5
What’s Poised to Drive the Growth Engine?
As of 2 February 2026
Source: Banco Central de la República Argentina, 2024-2030 Trade Balance Projections
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Notes
1. Buenos Aires Times. “Argentina bonds surge after Milei midterm win.” October 27, 2025. https://batimes.com.ar/news/economy/argentina-bonds-surge-after-milei-midterm-win.phtml
2. Bloomberg. Yapur, N., Bellotti Azevedo, G., & Tobias, M. "Argentina Assets Plummet as Milei's Party Loses Buenos Aires Vote." September 8, 2025. https://www.bloomberg.com/news/articles/2025-09-08/argentina-bonds-slump-on-milei-s-defeat-in-buenos-aires-vote
3. President Carlos Menem’s economic program in the 1990s was characterized by large‑scale privatizations, deregulation, and the Convertibility Plan that pegged the peso to the US dollar. While it initially stabilized inflation and attracted investment, it also deepened structural imbalances that contributed to Argentina’s severe 2001–2002 crisis.
4. President Mauricio Macri’s reform program aimed to unwind currency controls, reduce subsidies, restore access to capital markets, and gradually stabilize inflation through fiscal consolidation. However, a mix of external shocks, political resistance, and the government’s preference for gradualism over rapid adjustment led to stalled implementation and ultimately forced Argentina back into an IMF program by 2018.
5. Banco Central de la República Argentina. "Monthly Monetary Report." January 8, 2026. https://www.bcra.gob.ar/en/publicaciones/monthly-monetary-report-december-2025
6. Bloomberg. Andrade, V., Lucchesi, C., & Yapur, N. “Serial defaulter Argentina readies return to foreign bond market.” December 3, 2025. https://www.bloomberg.com/news/articles/2025-12-03/serial-defaulter-argentina-preps-return-to-foreign-bond-market
7. Bloomberg. "Argentina Not Looking to Tap Global Debt Market, Caputo Says." February 2, 2026. https://www.bloomberg.com/news/articles/2026-02-02/argentina-doesn-t-plan-to-tap-global-debt-markets-caputo-says
8. Vista Energy. (2025). Investor Day 2025 presentation. Retrieved from https://vista-energy.cdn.prismic.io/vista-energy/aRRzarpReVYa4YIn_Vista-InvestorDay2025Presentation.pdf
9. Banco Central de la República Argentina. Proyecciones de la balanza comercial 2024–2030 (I). Banco Central de la República Argentina. https://www.bcra.gob.ar/archivos/Pdfs/PublicacionesEstadisticas/Proyecciones-de-la-balanza-comercial-2024-2030.pdf
10. Bloomberg. Seigle, M., and Sigal, L. "Milei Seeks to Accelerate Argentina's Copper Boom by Easing Glacier Rules." November 13, 2025. https://www.bloomberg.com/news/articles/2025-11-13/milei-seeks-to-accelerate-argentina-s-copper-boom-by-easing-glacier-rules
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Published on 10 February 2026
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