MON · JULY 13, 2026 · ISSUE #046

📌 TODAY'S TOPIC

In late 2023, Argentina had the world's highest inflation rate, foreign reserves approaching zero, and an economy in freefall. A libertarian economist with a chainsaw and five cloned dogs took office and promised to dynamite the central bank. Eighteen months later, inflation has fallen from 211% to 33%, GDP is growing at 4.4%, and poverty is at its lowest since 2018. Here's the full story — and whether it can last.

💡 Inflation collapsed from 211% when Milei took office in December 2023 to approximately 33% in 2025 — one of the fastest disinflation episodes in modern economic history — with forecasts projecting a further decline to 18% in 2026

💡 GDP grew 4.4% in 2025, reversing a 1.7% contraction in 2024, driven by private consumption up 7.9%, exports up 7.6%, and a 16.4% surge in investment — the IMF projects 3.5% growth in 2026

💡 Argentina achieved its first fiscal surplus in 14 years in 2024, while country risk fell from 2,500 basis points in late 2023 to approximately 600 by end-2025 — and Fitch upgraded the sovereign from CCC+ to B-

💡 Vaca Muerta — Argentina's vast shale formation — is driving a historic energy boom, with oil production hitting a record 861,000 barrels per day and making Argentina a net energy exporter for the first time in 14 years

🔍 WHAT IS IT?

Javier Milei took office as Argentina's president on December 10, 2023, promising something no Argentine leader had credibly delivered in a generation: the end of inflation. His method was radical, his rhetoric more so. He campaigned with a literal chainsaw — a prop representing his intention to cut the state — and promised to "dynamite" the central bank, dollarise the economy, and dismantle decades of what he called "the political caste's" economic management. The conventional wisdom, including among many sympathetic economists, was that even if the diagnosis was correct, the cure would be too severe for Argentina's fractured society to absorb.

The data eighteen months later is striking. Annual inflation, which stood at 211% when Milei inherited office — the world's highest at the time — has fallen to approximately 33%, according to Argentina's national statistics institute. That is still high by global standards, but represents one of the fastest sustained disinflation episodes in modern economic history. Monthly inflation, which peaked above 25% in December 2023, fell to 2.1% by September 2025 and has stabilised. Forecasts converge on a further decline toward 18% in 2026 and single digits by 2028.

The fiscal picture is equally dramatic. Argentina's chronic deficit — which had exceeded 5% of GDP — flipped to a primary surplus of 1.8% of GDP in 2024, the country's first fiscal surplus in 14 years. This was achieved through measures that were genuinely extraordinary in their speed and scope: the number of government ministries was cut by 50% within days of inauguration, 56,000 civil servants were laid off, subsidies were slashed, and public works spending was effectively frozen.

The economic recovery that followed the initial shock has been real and broad-based. GDP grew 4.4% in 2025 after a painful 1.7% contraction in Milei's first year of austerity — the contraction was the expected cost of the adjustment, and the recovery has exceeded most forecasts in its pace. Private consumption grew 7.9%, investment surged 16.4%, and exports climbed 7.6%. The IMF projects 3.5% growth in 2026, the OECD a slightly more cautious 3%, and Milei's own government targets 5% — a figure virtually no independent economist considers achievable, but one that illustrates the administration's confidence in its own programme.

Argentina's country risk premium has collapsed. Country risk — the additional interest rate spread investors demand to hold Argentine debt rather than US Treasuries — fell from 2,500 basis points in late 2023 to approximately 600 by end-2025. Fitch upgraded Argentina's sovereign credit rating from CCC+ to B-, the first upgrade in years. International reserves, which had been approaching zero, hit the IMF's $10 billion target milestone in the first half of 2026 — ahead of schedule, a significant credibility signal for a programme anchored by a $20 billion IMF Extended Fund Facility agreed in April 2025.

📖 INTERESTING HISTORY

Argentina's economic history is one of the most turbulent in the world — a country that has started 23 IMF programmes and completed roughly two or three, defaulted on its sovereign debt multiple times, and watched its living standards fall from among the highest in Latin America a century ago to chronic instability today.

The Original Promise — A Century of Squandered Potential
Argentina entered the 20th century as one of the world's wealthiest nations per capita, blessed with extraordinary agricultural land, mineral wealth, and a highly educated European immigrant population. In 1913, Argentina's per capita income was comparable to France and Germany. The question of how a country with such extraordinary endowments became associated with chronic economic crisis is one of the most studied problems in development economics. The short answer: a century of populist fiscal cycles, periodic hyperinflation, and a political economy that repeatedly redistributed existing wealth rather than creating new wealth, combined with excessive dependence on commodity export cycles and a chronic inability to maintain fiscal discipline across electoral cycles.

The Peronist Legacy
Juan Perón's economic model, established in the late 1940s, created the structural pattern that has defined Argentine politics ever since: state-led industrialisation funded by export taxes on agriculture, massive public employment, heavily subsidised utilities, and wages maintained at politically determined levels through union power rather than productivity growth. The model delivered growth during its early decades but became increasingly unworkable as the distortions it created compounded over time. Every attempt to unwind Peronist economic structures has encountered massive political resistance and has usually ended in either the abandonment of reform or political crisis, often both simultaneously.

Previous Reform Attempts — The Track Record
Argentina's reform history is littered with programmes that worked initially and then reversed. Carlos Menem's 1990s peso-dollar peg stabilised inflation and attracted investment — until the exchange rate became untenable and the 2001 crisis produced the largest sovereign default in history at that time. Mauricio Macri's 2015-2019 reformist government made genuine progress on reducing distortions but moved too cautiously on fiscal adjustment and ultimately lost the 2019 election to the Peronists, who quickly reversed much of what had been accomplished. Every previous reformist Argentine president has faced the same fundamental challenge: the social costs of adjustment arrive quickly while the benefits arrive slowly, creating an almost inevitable political reversal before the programme has time to prove itself.

Why This Time Looks Different — So Far
Three factors distinguish Milei's programme from previous Argentine reform attempts. First, the shock was genuinely more radical and faster than predecessors — Milei front-loaded the adjustment in a way that previous reformers avoided, accepting a severe 2024 recession in exchange for much faster disinflation. Second, the October 2025 midterm elections, held after 18 months of austerity, produced a genuine mandate: Milei's La Libertad Avanza party won 41% of the vote and became the largest parliamentary group in the National Assembly for the first time since 1989 that the Peronists have not held that position. Third, US political support under the Trump administration has been unusually concrete — a $20 billion IMF facility, a currency swap line, and the reversal of a $16 billion court judgment against YPF have all provided meaningful external financial backing.

🎯 WHY IT MATTERS TO YOU

Argentina's experiment offers genuinely important lessons for economists, investors, and anyone interested in how broken economies can — or cannot — be fixed. It is also creating real, investable opportunities for the first time in decades.

The Vaca Muerta opportunity — a genuine energy boom
The single most transformative development in Argentina's economic story is Vaca Muerta — the vast shale formation in Neuquén province that holds the world's fourth-largest shale oil reserves and second-largest shale gas deposits. Argentina's oil production hit a record 861,000 barrels per day in 2025, making the country a net energy exporter for the first time in 14 years. The $3 billion Vaca Muerta-to-Atlantic pipeline, expected to complete in late 2026, would double export capacity to 930,000 barrels per day when operational. IMF projections suggest Vaca Muerta could eventually generate $15 to $20 billion in annual export revenues — a transformative figure for an economy that has spent decades haemorrhaging foreign currency. Global energy companies including Shell, TotalEnergies, and ExxonMobil have been investing actively. The Iran war's sustained pressure on global oil prices has, ironically, been a meaningful windfall for Argentina's energy export revenues even as it has complicated the global economic environment.

The lithium angle — the battery metal of the century
Argentina holds the world's fourth-largest lithium reserves and is part of the "Lithium Triangle" alongside Chile and Bolivia — the region that holds roughly 60% of the world's economically viable lithium deposits. As the global electric vehicle revolution we covered in Issue #035 accelerates demand for battery materials, Argentina's lithium exports are positioned to become a significant revenue source alongside oil and gas. Milei's deregulation agenda has actively courted foreign mining investment, and RIGI — the Large Investment Incentive Regime established in 2024 — offers specific tax incentives for mining projects above $200 million. Several major lithium projects are currently in development or construction, representing multi-billion dollar investments that will take years to produce but signal genuine long-term confidence in Argentina's resource story.

The investment access question — how to express a view
Argentina's improving fundamentals have created several identifiable investment vehicles, though each carries distinct risk profiles. Argentine sovereign bonds, which trade at significant discounts to par, offer high yields that reflect both the improving trajectory and the residual political risk. The Global X MSCI Argentina ETF (ARGT) provides equity market exposure, with heavy weighting toward MercadoLibre — Latin America's largest e-commerce and fintech platform — alongside energy and financial companies. YPF, Argentina's state-controlled energy company, offers direct Vaca Muerta exposure with New York-listed ADRs, though state ownership creates governance risk. Individual provincial bonds — particularly Neuquén province, which sits atop Vaca Muerta — have attracted specific interest from investors wanting direct energy-sector exposure.

The risks that remain — honest accounting
The honest assessment of Argentina's situation acknowledges the genuine risks alongside the genuine progress. Inflation at 33% is dramatically lower than 211%, but still high by any international comparison, and the disinflation path from 33% to single digits is likely to be slower and politically harder than the initial phase from 211% to 33%. The 2027 presidential election shadow is real: Argentine bond markets already price in a meaningful probability that a Peronist return to power reverses key

📊 THE NUMBER TO KNOW

211% → 33%

Argentina's annual inflation rate when Milei took office in December 2023 — the world's highest at the time — versus today's approximately 33%. That 178 percentage point decline in roughly 18 months represents one of the fastest sustained disinflation episodes in modern economic history. For context: the US Federal Reserve spent three years fighting to bring inflation from 9% to 3%. Argentina brought it from 211% to 33% in a year and a half — through a combination of fiscal austerity so severe it would be politically unthinkable in any advanced economy, and a degree of popular tolerance for short-term pain that reflects how desperate Argentines had become for a genuinely different outcome. The chainsaw was not a metaphor. It was a management strategy.

➡️ NEXT ISSUE

"The Ultra Luxury Hotel Boom — Why Aman, Capella, and Rosewood Are Thriving While Everyone Else Struggles"

Average hotel rates at the world's top ultra-luxury properties now exceed $2,000 per night — and they are almost always full. On Wednesday we explain the economics of the most resilient segment of the hospitality industry, how properties like Aman, Six Senses, Cheval Blanc, and Rosewood are performing, and what the ultra-luxury travel boom tells us about the global economy.

Thanks for reading MWF Macro.

Forty-six issues in — and today's story is one of the most genuinely surprising of the year. A country with 23 failed IMF programmes, chronic hyperinflation, and a default history that would discourage most investors has, at least for now, produced results that most economists said were impossible. Whether it lasts is the right question. That it happened at all is the remarkable fact. Forward this to someone who thinks broken economies can never be fixed.