Weak employment is eroding popular support for the policy mix, clouding Argentina’s outlook beyond the 2027 vote. Modest policy adjustments, we argue, could go a long way to reassure voters and investors.
The June upgrade of Argentina’s sovereign rating by S&P Global reflected progress with the country’s macro rebalancing required to return to a sustainable growth path1. For markets, the result of Argentina’s improved fundamental picture is a narrower range of potential outcomes. And that marks a break from a past of recurrent bouts of economic and financial instability. The economy has been on a steady, if uneven, recovery since mid-2024 led by primary sectors (labor-intensive areas like retail and construction remain sluggish). The commitment to fiscal discipline is addressing a historical vulnerability, namely Argentina’s habit of living beyond its means, while also contributing to the disinflationary process2. Multilateral funding is buying time for authorities to keep rebuilding external buffers3. Regaining full market access - the final test of debt sustainability - would probably require more active management of the yield curve through exchanges before the door opens to new debt issuance.
An alignment between the administration, market participants and the population has been instrumental to the success of the rebalancing. Early on, the population tolerated the economic pain – as evidenced by the resilience in President Milei’s approval throughout 2024 – from policies necessary to bring triple-digit inflation under control. In fact, around the time when President Milei took office, inflation was Argentines’ top concern with 68% of participants in a survey calling it as one of their top three worries4 (see Figure 1). Yet that alignment is now under pressure and the source of the tension seems to be mounting concerns over sluggish job growth, which is leading to reform fatigue5. Today, unemployment (57%) and poverty (41%) replaced inflation as consumers’ top worries4.
Figure 1: Jobs and poverty top concerns among Argentines (% of answers, question: what are your top three concerns?)
For investors, the critical question is if the current policy mix can ensure continued popular support for the pro-business agenda – the anchor of Argentina’s investment case. Fiscal discipline, reserve accumulation and deregulation are important steps to rebalance the economy, yet its sustainability hinges on its ability to boost investment and jobs. Market fears about an electoral setback, we suspect, come mainly from voters’ perception that the economy isn’t delivering for them5. And mounting investment pledges in primary sectors are unlikely to generate benefits — tax receipts, inflows, jobs — soon enough6. Bolstering popular support until then, we think, does not require major policy reversals, just adjustments on three key fronts:
Communication – Policymakers keep reassuring investors of the commitment to the fiscal anchor and the capital market strategy, including pledges not to tap external markets. Similarly, they could redouble efforts to communicate with the population how the reform agenda will pay off in terms of jobs and prosperity, while taking steps to alleviate some of the adverse trade-offs. The replacement of the chief of staff, for example, stands as a pragmatic response to popular demands for change7. While Argentina bulls rightly point out that the opposition is weak, the 2027 vote is still far and a lot can shift until then. A fragile opposition also means the government will get the full blame for any shortcomings with the economy or corruption.
Capital controls – Increased investment is necessary to boost growth. Scrapping capital controls on profits generated starting 2025 was a step in the right direction8. However, we think that it is probably not sufficient to reassure investors who either have money trapped in the country — subject to a double standard that penalizes prior investment — or who see remaining controls as a sign that barriers could come back. The recent MSCI decision to keep Argentina out of global stock indices is indicative of the need to further lower barriers to capital9. For policymakers, the trade-off for reassuring investors by providing a path for lowering capital controls is accepting some peso weakness, along with more gradual disinflation.
Investment incentives – The scheme for large-scale projects (RIGI) that provides long-term certainty (tax, regulation, etc.) is attracting interest, mainly in mining and energy10. Yet these commitments involve little actual upfront spending for compliance with the rules, and investors seem inclined to wait for either a weaker currency and/or election results. Moreover, the contradiction of rolling out incentives to new players while limiting the ability of prior investors to repatriate capital adds further uncertainty to capex plans, in our view. After all, investors’ main historical challenge has been dealing with sharp policy reversals and uncertainty. Separately, policymakers unveiled a scheme for capex by smaller companies (RIMI) focusing on tax breaks11. Extending some of the features that make RIGI compelling would help generate investment upfront.
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IMPORTANT INFORMATION – REFERENCES
1 S&P Global. (June 10, 2026). Argentina Long-Term Ratings Raised to ‘B-‘ on Better Access to Financing; Outlook Stable.
2 International Monetary Fund. (May 21, 2026). IMF Executive Board Completes Second Review of the Extended Arrangement Under the Extended Fund Facility and Concludes 2026 Article IV Consultation with Argentina.
3 Buenos Aires Times. (June 4, 2026). Argentina’s dollar buying tops US$10 billion goal on export boom.
4 IPSOS. (January 29, 2024, and April 21, 2026). What Worries the World?.
5 The Economist. (May 5, 2026). Javier Milei is in Serious Trouble.
6 The Net-Zero Circle. (June 18, 2026). Argentina RIGI Pipeline Tops USD 140 Billion — 25 Projects Still Under Evaluation.
7 Reuters. (June 27, 2026). Argentina Cabinet Chief Resigns After Corruption Allegations.
8 Dentons. (April 16, 2025). Removal of foreign exchange controls in Argentina.
9 Bloomberg. (June 23, 2026). MSCI Upgrades Bulgaria to Frontier; Vietnam, Argentina Unchanged.
10 EIU. (July 25, 2024). Argentina’s new investment promotion regime: key points.
11 Dentons. (March 6, 2026). Argentina Introduces the Incentive Regime for Medium-Sized Investments (RIMI)
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