Argentina travel takeaways

Summary

The International Economic research team recently traveled to Argentina to meet with a range of market participants. During our trip, we discussed the outlook for, and importance of, local midterm elections as well as the 2027 presidential election for the sustainability of Argentina's economic transition. We also discussed whether financial markets are overly optimistic on Argentina given the country's mixed track record of policy implementation and structural reforms. In this report, we summarize key takeaways of those conversations.

Argentina travel takeaways

Congressional elections may not be a landslide for Milei and La Libertad Avanza (LLA). For good reason, local market participants are overwhelmingly satisfied with the economic turnaround orchestrated by President Milei and his LLA party. But while policy has turned more market friendly and consistent with economic stability under Milei, we were left puzzled by how many of our counterparts did not express more optimism around LLA's prospects in upcoming midterm elections. While every private sector counterpart we spoke with acknowledged the successes of Milei's reform agenda to date, most expressed varying degrees of displeasure with at least the perception of Milei's contentious rhetoric, acceptance of the IMF, disregard for the state, and broader Libertarian/anarcho-capitalist mindset. Despite Milei backing off some of his more unorthodox and anarcho-capitalist proposals—abolishing the central bank, in particular—we interpreted the sentiments shared with us as voters may not being fully supportive of Milei going forward. In addition, we heard from many private sector counterparts that Milei's win in 2023 was more a vote in favor of anti-establishment candidates, and specifically anti-Cristina Kirchner, rather than a vote for Milei. With Kirchner unable to participate in Argentine politics and no establishment candidate as the new face of Kirchnerism/Peronism, voter turnout for the midterms may be low. Subdued election participation, despite mandatory participation laws, may pose a challenge for Milei and LLA. To be clear, we expect Milei's economic success to result in LLA candidates winning a sizable amount of seats in both the Senate and Chamber; however, we have become more willing to accept the idea that LLA may underperform, relative to our expectations. As far as those expectations, winning at least 40% of the vote in each house is our benchmark for success, which we shared in conversations, and peers believe to be fair. 40% is the threshold Mauricio Macri surpassed in Argentina's 2017 midterms, which markets determined was a win for Macri and a victory against the far-left Peronist platform. Prior to our visit, we assigned an 80% probability that LLA would win 40% of votes in both houses of Congress. Post visit, we are reducing our probability of LLA success to 65%.

Download The Full International Commentary