Argentina opposition warms to Milei reforms, lowering election risk
Argentina's main opposition and business leaders are coalescing around President Javier Milei's market-oriented reforms, raising the prospect of policy continuity that could shrink the country's chronic election risk premium.
Argentina’s business elites and key opposition figures are laying the groundwork to preserve the core of Javier Milei’s economic agenda beyond his presidency. The emerging cross-party consensus aims to prevent the drastic policy reversals that have historically battered the country's markets, regardless of who wins the 2027 election.
The potential shift carries significant implications for a country where Wall Street demands high yields to compensate for a history of defaults and erratic policy swings. “Every election in Argentina appears to be so binary,” BlackRock emerging-markets strategist Pablo Goldberg said last month. “Until the swings of the past are gone and there is a more sustainable path forward, the market will continue to trade with a premium.”
The toll of that binary dynamic is evident in the price action of Argentine assets. The S&P Merval index plunged 37 percent in a single day after a 2019 primary victory by Peronist Alberto Fernández. More recently, New York-listed Argentine stocks dropped 24 percent on a midterm loss last September before rallying 40 percent following an October victory for Milei’s coalition.
Behind the scenes, executives are actively working to secure a post-Milei transition that avoids a return to state intervention. Banco Macro Chairman Jorge Brito has held talks with Peronist strategists Emilio Monzó and Nicolás Massot, while former president Mauricio Macri is pushing members of his PRO party to join the current administration. Techint Chairman Paolo Rocca has also been involved in similar discussions.
The dominant Peronist movement itself is fracturing over its future economic direction, with internal debates now including once-taboo concepts like fiscal discipline and reduced money printing. Public appetite for these changes has grown; a Casa3 poll showed support for reducing welfare programmes climbed to 52 percent this year from 32 percent in 2021. More than half of Argentines now back the principles of Milei’s 2024 fiscal agreement with provincial governments.
Practical economics are driving the shift, as many Peronist governors benefit from Vaca Muerta shale and mining expansion, giving them little incentive to back a radical agenda. “The political pendulum is narrowing for two reasons,” said Marcos Buscaglia, co-founder of Alberdi Partners. “The worst of the economic adjustment is probably behind us, improving the government’s re-election prospects. And the opposition itself is less unified around a return to interventionist policies.”
Quantitative measures reflect this tempered outlook. An AtlasIntel survey placed Argentina’s political risk index at 41 out of 100 in June, ranking it below Mexico, Peru, Chile, Colombia and Venezuela. Only Brazil posted lower political risk among the region's largest economies.
Skeptics note that Peronist leaders have drifted to the centre before only to revert to interventionism once in power. Still, if the current trajectory holds, the structural risk premium on Argentine assets could compress. “Next year could still bring noise for short-term positions such as bonds and equities,” said Marcelo García, Americas director at Horizon Engage. “But for long-term investment in the real economy, the risks should increasingly be at the margin.”
