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IV Macro Policy & Sovereign DebtAmericas

From Buenos Aires, Milei failed on the economy and retreats to Malvinas

The White House, north façade, Washington (July 2007)Photo: Nishkid64 / Wikimedia Commons · Public domain · Source
Institution
Nueva Sociedad
Author
Pablo Stefanoni
Country · language
Latin America (Argentina) · Spanish
Affiliation
Independent journal, backed by FES

Summary

In a piece published in Nueva Sociedad on 2 October 2026, Argentine journalist and author Pablo Stefanoni weighs the economic promises of Javier Milei, now past the midpoint of his term. Milei had said inflation would be close to zero by this point; the August reading was 1.7% a month. The official poverty rate has risen again to 32.3%, and the author argues it would be higher if the calculation basket were updated. The country risk premium fell to its lowest since 2018 in July, then climbed back above 600 basis points to the year's peak. At the end of August, Uruguay stood at 65, Peru at 106 and Mexico at roughly 200 basis points. Milei attributes the gap to the risk of a Peronist return.

According to Stefanoni, when growth failed to arrive, Milei seized on the Malvinas question, which had not previously interested him. Trump hinted that the US might abandon its neutrality. Argentina then announced that it would sanction companies taking part in the Sea Lion oil project on the islands and bar them from the Vaca Muerta gas field. The author thinks this turn will not win votes unless the economy recovers. Even so, two factors give Milei room a year before the 2027 election. One is his stable base of roughly 30%. The other is the split in the Peronist camp, namely the rivalry between Cristina Fernández de Kirchner, under house arrest, and Buenos Aires governor Axel Kicillof.

Blind spot

What the West misses: New York and Washington see Milei as the reformer who tamed inflation. The Latin American left sees him masking economic fatigue with nationalist symbols. The Malvinas move targets British and Israeli firms and raises energy investment risk. The weakness of this reading: the author is openly left-leaning and the journal is FES-backed. It ignores reserve accumulation, the fiscal balance and the IMF programme.

Talay assessment

Bottom line

The Nueva Sociedad reading shows political risk being repriced as Argentina enters the electoral calendar with a risk premium above 600 basis points. The threat of sanctions around the Malvinas adds fresh uncertainty to foreign investment decisions in Vaca Muerta. The most likely path is a fragile equilibrium lasting until 2027, with a high risk premium and slow growth.

Likely effects

  • Argentine borrowing costsNegative1–6 months

    While the risk premium stays far above Uruguay's and Peru's, dollar borrowing in the market remains expensive for Argentina, and refinancing depends on external support.

  • South Atlantic energyNegative1–6 months

    The threat of a Vaca Muerta ban on companies in the Sea Lion project could delay decisions by energy firms seeking to invest in both fields.

  • Reading for TürkiyeNegativeWeeks

    If Argentina's risk premium and political uncertainty rise, risk appetite for emerging-market bonds weakens; economies with large external financing needs, such as Türkiye, could also be affected.

Possibilities, ranked

  1. 1
    Fragile equilibrium50%

    Monthly inflation stays in the 1–2% band, growth remains weak, and Milei stays competitive thanks to his stable base and the Peronist split.

    Watch: INDEC monthly inflation data and Argentina's country risk premium around 600 basis points

  2. 2
    Peronist recovery30%

    Peronism unites around Kicillof, takes the lead in polls, and markets begin pricing a policy change ahead of 2027.

    Watch: The Peronist camp's candidate selection process and Kicillof's share in national polls

  3. 3
    Economic recovery20%

    Record farm and energy exports strengthen reserves, the risk premium recedes and Milei returns to a growth narrative.

    Watch: A rise in the central bank's gross reserves and the risk premium falling below 500 basis points

Probabilities are calibrated judgement based on the sources, not measurement, and are revised as new information arrives. Not investment advice.

Original publication: nuso.org · 3 October 2026

This page summarises the institution's view and does not reflect the view of Talay Insight. No direct quotation is used.