One of the main global consultants recalculated the scenarios for the rest of the libertarian government, beyond the October result. In both, they discount an initial devaluation from 20% to 30%. A $ 1,600 change rate could balance external accounts.
With the electoral result of Buenos Aires already in hand, international analysts began not only to recalculate the projections for the Argentine economy but to delineate the scenarios for the rest of the Milei government. According to the vision of one of the most influential global consultants among international businessmen, including global investment funds and banks, Oxford Economics (OE), the Argentine government will face a crucial political dilemma despite the result of half mandate. In it Base scenario of the consultant, the administration Milei goes from prioritizing inflation control to focus on the accumulation of reserves and to address the overvaluation of 20% of the peso to promote a constant income of dollarsaccording to the vision of Mauricio Monge, senior economist for the region in OE.
“However, this change could have political costs in the 2027 elections”Monge warns in his latest report on Argentina: “Milei’s Economic and Political Dilemmas Will Only Worsen.” While, In the alternative scenario, Milei maintains its focus on inflation control through continuous intervention in the exchange market. However, this approach would depend on the high rates of real interest, which weigh economic activity. According to Monge, “this scenario assumes that Milei will retain the support of international investors, an increasingly uncertain assumption, as criticisms of their exchange rate management increase, widely perceived as an electoral strategy instead of a sustainable political strategy.”
Scenarios faced by the Government: how do you see it from outside?
- The political landscape for freedom advances (lla) of President Milei has become increasingly uncertain, since the opposition took the lead in Buenos Aires after Sunday’s elections, while the October intermediate elections approach. While LLA maintained a clear advantage over leftist parties, support for Kirchnerism has gained impulse since April. “This change seems to be driven by the growing public concern about personal and macroeconomic conditions, as well as renewed corruption scandals”. “While it is unlikely that the composition of the congress changes significantly (only half of the Chamber of Deputies and one third of the Senate will be renewed), Intermediate elections will serve as a crucial barometer for investors and companies. The results will help measure the degree of public support for the Milei reform agenda for the 2027 presidential elections. ”In addition, regardless of the October election result, the Government will face a key political dilemma, and each option entails important political and economic costs.
- Of the analysis of the possible economic policy trajectories that could arise after the elections and the base scenario of OE is: higher exchange rate, but with an inflation greater than expected. The exchange policy of ‘Crawling PEG’ implemented by 2024 contributed to containing inflation and strengthening electoral support. However, this has had a cost: it has limited the accumulation of reserves and has aggravated external imbalances. The government’s strategy to accumulate reservations has been based on the International Monetary Fund (IMF), multilateral support and debt. However, Net reserves remain negative and the real exchange rate remains highly overvalued, in more than 20%, despite the new mobile band exchange policy implemented last April.
- “We believe that, After the October elections, the government approach will probably go from containing inflation to rebuild international reserves. This change will be necessary to meet the important bond payments and multilateral debt from 2026, maintaining and strengthening the confidence of investors, a fundamental aspect of the Milei reform agenda. ”However, The only sustainable route for the accumulation of reserves is through a significant depreciation of the weight. This would help boost exports and correct artificially high import levels, going from a current account deficit to a surplus. “Our estimates indicate that a current account surplus of around 1.5% of GDP would be sufficient for Argentina. However, this scenario would have a political cost, since it would probably generate inflation superior to that expected, given current trends, and could erode public support (according to Atlasintel, 55% of Argentines consider inflation as the main problem of the country, followed by corruption and unemployment). In addition, a weaker weight could exacerbate capital exits, which already reach record figures, which increases the probability of new capital controls. All this will put the continuity of the Milei agenda at risk after the presidential elections of 2027.
- The alternative scenario: control inflation through the exchange rate, but with few reserves. The government’s strategy to maintain the stability of the exchange market (initially through futures and, more recently, through direct intervention) has contributed to maintaining low inflation and electoral support. However, this has meant a detriment in the accumulation of reserves. The net currency purchases of the Central Bank (BCRA) amounted to AU $ S14.7 billion until August 2024, but were reduced to only US $ 1,300 million in August 2025 and zero since May. “In this scenario, we project a depreciation of the weight of 30% by the late 2026 and 23% by the end of 2027, compared to our base forecast of 46% by 2026 and 31% by 2027. A stronger weight in this scenario would result in lower inflation compared to our base prognosis. We estimate that inflation would reach 19% interannual in 2026, compared to 31% of the base stage, and 16% Interranual in 2027, compared to 25%. “
Investors: more criticism of Milei management
“Preserving exchange stability would help maintain inflation under control and to maintain public approval. In the current monetary framework, this strategy also requires real interest rates, which slows economic activity. However, this scenario presupposes the continuous support of international investors, which is increasing favorable, ”says Monge.
Source: Ambito
