Will Milei change the Argentine economy or will the Argentine economy change Milei?

The Monetary Fund, a few months after that press conference, published in a box of a staff report on the Argentine economy that More than half of a sample of 35 countries that lowered inflation from levels like Argentina to single-digit rates had taken them more than ten years.. In that conference on January 13, 2016, Macri proposed to lower inflation faster than Colombia, Chile or Uruguay. In 2019 acknowledged the mistake: “I underestimated the difficulty of eradicating inflation in our country”. Instead of closing with 5% as the power point in the Economía microcinema said, it ended with 53.8%.

Milei learned from Macri’s failure: To stabilize, an orthodox leg of the plan is needed (which Macri did not have). But he believed that with that, plus the elimination of the Central Bank’s paid liabilities, inflation would go down, and quickly. A year ago I said that inflation at this point was going to have a death certificate. But although much of the acceleration in inflation in recent months is due to shocks in the prices of the dollar, meat and fuel, The idea is consolidated that there is inertial inflation in the area of ​​2%-2.5% that is difficult to drillto such an extent that last week Milei rated X a work by an economist from Martín Guzmán’s team (Fernando Morra), in line with that IMF work from ten years ago.

Does the persistence of Argentines’ survival mechanisms to defend themselves against inflation, that is, indexing, Will they change the Austrian vision of the President?

There are differences between Milei and Macri in how they stand at this point in their respective efforts to face inflation.

In the case of Cambiemos, its government faced an external deficit of more than 5% of GDP which caused a jump in the dollar as swallow capitals withdrew in the midst of a global financial climate of volatility and rate hikes by the Federal Reserve.

The second difference is that Milei had the support of the IMF and the United States.

In that sense, the Argentine economy has been flying over the international conflict without major tensions beyond those expected in prices due to the impact of gasoline. For example, the Capital Foundation estimates that inflation this year would be 32%, in line with that of 2025 (31.5%). But the currencies of net oil exporting countries such as Argentina have appreciated in recent weeks, something that decompresses exchange rate pressure. unlike with Macri.

Economists ranging from Marina Dal Poggetto to Nicolás Dujovne and Rodolfo Santángelo suggest that this year the current account deficit would be very slight or even positive.

“Argentina is better positioned today than with Macri to face an external shock”says Santangelo, who foresees a trade balance of about US$25 billion. “There will not be a crisis like the one in 2018.”

The exchange rate appreciation of net oil exporting countries could mean, in any case, a pressure cooker in the future for Argentina, especially because the Government today resorts to the exchange rate anchor to prevent inflation from rising further. The level of the multilateral exchange rate is equivalent to that of November 2023. Colombia, Chile and Mexico appreciated their currencies by more than 40% during their stabilization, according to the IMF work published ten years ago. Hence, these countries took a long time to lower inflation: because at some point they had to devalue.

Hence, many economists and the organization itself suggest Milei buy all the reserves it can, to mitigate these sudden movements in the exchange rate or to have more margin. “They have to buy more dollars because Argentines’ purchases for hoarding are still high”says Santangelo.

The Central Bank said this Monday that it will add US$8 billion this year. A JP Morgan paper from that same day projects that “net international reserves increase by at least US$10 billion in 2026, thanks to efforts to mobilize foreign currency financing and maintain Central Banks’ foreign exchange purchases worth at least US$8 billion this year”. In the Government, at a low level, they say that in four months they could have bought almost twice as much. And they see conditions to put more pesos on the street in exchange for those dollars since while they buy foreign currency the exchange rate drops and the interest rate will do so even more.

The market’s main doubt is not whether there will be enough exports or whether activity will rebound. The unknown is whether Argentines will demand US$30 billion again in 2027. The Central Bank anticipated on Monday that the purchase of retail dollars in March was somewhat lower than in February and the pre-election period. Has Milei learned the lesson that Argentines buy dollars while they can and that means while it is cheap for them? Will the Argentine economy change Milei ahead of the 2027 elections? As Pablo Gerchunoff and Lucas Llach say in their essay See on throne the noble equality, rise and fall of the Argentine economy from 1880 to the presentthe balance between equity y growth It is the manifestation of classic dilemmas when stabilization, the exchange rate situation and openness interact. Milei will have to choose.