Investors Double Down on Argentina Amid Milei’s Bold Economic Reforms

Investors are doubling down on Argentina as the country’s stocks and bonds reach record highs. Their optimism stems from President Javier Milei’s bold reforms, which aim to stabilize the nation’s fragile economy. Milei, elected a year ago, has vowed to slash government spending and stop the printing of excess pesos, a strategy designed to curb inflation and attract global confidence.

Known for his unconventional style, Milei struck a chord with voters tired of establishment politics. Since taking office, he has passed aggressive reform laws, including deep spending cuts, while achieving ten consecutive months of budget surpluses. A tax amnesty program has also brought $18 billion into local banks.

“Milei’s quick moves to address spending and inflation are reassuring to investors,” said Graham Stock, senior sovereign strategist at RBC Global Asset Management. “Even more surprising is that the public has largely supported these tough decisions, helping his popularity hold steady.”

A Glimmer of Hope in a Troubled Economy

Argentina’s economy faces significant challenges. The country is in its second year of recession, and the International Monetary Fund (IMF) predicts a 3.5% economic contraction in 2024. Yet, investors are betting big. Argentina’s dollar bonds have delivered a staggering 90% return this year, and the local stock market is up an eye-popping 125%.

However, the struggles on the ground remain dire. Inflation is still in the triple digits, and the peso has lost 19% of its value, leaving many Argentines struggling to make ends meet. More than half of the country’s 46 million citizens live in poverty.

Despite this, a survey by Torcuato Di Tella University showed that confidence in the government has rebounded, putting Milei’s administration among the most trusted at this stage of a presidency since 2003.

Free from the Past

Argentina has been here before. Former President Mauricio Macri initially inspired investor optimism, only to see his tenure end in financial collapse. Critics wonder if Milei’s government will suffer a similar fate.

Investors, however, believe this time might be different. “This government has a genuine shot at bringing Argentina back to economic stability,” said Thomas Haugaard, a portfolio manager at Janus Henderson. “The early reforms are promising, though success isn’t guaranteed.”

While some street protests have erupted over budget cuts to universities and blocked pension increases, Milei’s focus on curbing inflation resonates with the public. Consumer prices slowed in October, prompting JPMorgan to forecast Argentina’s 2025 inflation at 29%, its lowest level in nearly a decade.

What’s Next for Argentina?

Milei’s true test lies ahead. By the October 2025 midterm elections, he will need to show progress in job creation and poverty reduction. The elections will determine control of Congress, a critical factor in sustaining his reforms.

“What we’re watching is whether he can maintain momentum and avoid setbacks,” said Shamaila Khan, head of emerging markets at UBS Asset Management.

Milei’s recent meeting with U.S. President-elect Donald Trump has also added to the optimism. Investors see a potential boost in Argentina’s relationship with the U.S., especially in renegotiating IMF repayment terms, which are set to quadruple by 2025.

“They’ll need more IMF funding and market access,” said Haugaard. “While there’s growing confidence, Argentina remains a high-risk, high-reward environment.”

A Transformative Moment

Argentina’s economic transformation won’t happen overnight, but Milei’s reforms have captured the attention of global investors. While the road ahead is uncertain, many believe Argentina could be on the cusp of a long-awaited turnaround.