In a recent political development, Argentina has elected libertarian economist Javier Milei as its new president on November 19, according to reports. As the leader of South America’s second-largest economy, Milei inherits a challenging economic landscape characterised by spiralling inflation, mounting debt, and increasing poverty levels. The need to restore investor confidence becomes a paramount concern for his administration.
The economic outlook for Argentina is dire, with hyperinflation reaching an all-time high of 142.7% in October. The Argentine government’s attempts to curb the devaluation of the peso, including measures such as currency controls, price freezes, and import restrictions, have failed to reverse the decline in international currency reserves. Notably, Argentina currently owes the International Monetary Fund (IMF) approximately $43 billion, surpassing any other country’s debt to the organisation.
While foreign direct investment (FDI) flows to Argentina more than doubled between 2021 and 2022, reaching $15.4 billion, the composition of these investments paints a challenging picture. Over 90% of the FDI came in the form of inter-company loans and reinvestment of earnings, with equity accounting for just 5.4%—the lowest share since 2014. This highlights the difficulty Argentine companies face in accessing international markets to meet their financing needs.
Addressing these economic challenges will be crucial for President Milei’s administration. The reliance on FDI and the need for US dollar inflows to stabilise the economy underscores the importance of attracting diverse investment sources. Additionally, the reported difficulties in securing project finance in Argentina, particularly for long-term infrastructure and industrial investments, indicate the necessity for comprehensive economic reforms.
As Javier Milei assumes leadership, the eyes of both domestic and international observers will be closely watching how his administration tackles these pressing economic issues and implements policies aimed at restoring stability and fostering sustainable growth in Argentina.
