Milei Economic Model Shows Signs of Strain in Argentina
Argentina · Economy
Key Facts
- BCRA slowdown: August daily dollar purchases average ~US$33 million, down from ~US$103 million in July.
- Reserves plateau: Gross reserves hover near US$49.5 billion, per Infobae daily reports.
- Poll pattern: About 6 in 10 Argentines disapprove of the economic course, across multiple pollsters.
- Opposition weak: No single leader or coalition is clearly benefiting from the dip in support.
- Country risk rise: JP Morgan’s EMBI for Argentina climbed to ~470 basis points, the highest in two months.
- Melconian warning: Economist Carlos Melconian says the government ‘will have to change’ course.
- Investor caution: Infobae reports Wall Street is reducing Argentina exposure amid election worries.
The Milei economic model is showing signs of strain—from slower reserve buying to weaker poll numbers and investor caution. We break down what’s really happening.
You may have heard that Argentina’s Milei economic model is hitting a rough patch, but what’s actually straining—and how much is real versus media noise? Let’s break down the key signals.
Why the Milei economic model is under scrutiny
The Milei economic model—anchored on crushing inflation and building reserves—is showing visible friction this August. The central bank (BCRA) has cut its daily dollar purchases to the lowest level of the year, and a pile of polls shows approval sagging.
Yet the picture is nuanced. The government still projects monthly inflation below 2%, and the opposition is not clearly benefiting from the dip.
So what’s really going on here? Let’s look at the numbers.
Central bank slows dollar buying to defend the peso
In the first 10 business days of August, the BCRA netted just +US$330 million, averaging about US$33 million per day, per TN. That’s a sharp drop from July’s ~US$103 million daily average, as Ámbito reported.
Reuters noted that the peso is trading near its record low of ~1,500 per dollar, and the BCRA moderated reserve buying from over US$90 million a day in July to under US$24 million a day in the last week. Market sources, like Roberto Geretto of Adcap, see this as a deliberate shift.
So what’s the market read? Reporters say the BCRA is prioritizing defense of the exchange rate and nominal stability over faster reserve accumulation.
That’s a journalistic inference, not an official BCRA statement. Still, it fits the data.
Gross reserves remain around US$49.5 billion, per Infobae’s daily tracking, so there’s no collapse. But the slower buying pace is a clear sign the model’s priorities are being recalibrated.
Polling: ~6 in 10 reject the economic course, but no clear alternative
Multiple polls converge on the same pattern: roughly six in ten Argentines disapprove of the economic course. For instance, AtlasIntel for Bloomberg (fieldwork July 30–August 3, 1,120 cases) found 62.4% disapprove of Milei, with 54.7% rating the government’s performance ‘bad or very bad.’
Hugo Haime & Asociados (via Crónica, August 12) reported only 14% support the Milei economic model as-is, while 47% want to change it totally. ESPOP Universidad de San Andrés (August 5–11) found 69% dissatisfied with how things are going.
But here’s the balance: no single poll asks literally ‘do you support the Milei economic model’ and gets 60% ‘no.’ The ~6-in-10 figure is a consistent pattern across pollsters, not a single question.
And crucially, the opposition is not clearly benefiting. Analysts describe a ‘board without clear leaders,’ meaning voters are unhappy but haven’t flocked to an alternative.
That’s an interpretation from political observers, not hard voting-intention data.
Wall Street turns cautious, but not panicked
Investor sentiment has cooled. Infobae ran a headline on August 16 saying Wall Street was reducing its Argentina exposure, with alarm over falling government support.
The article, citing unnamed investor sources, says backing has stagnated near 35%, seen as insufficient to win in 2027. Investors, it adds, ‘don’t want to risk a complicated electoral scenario.’
That’s Infobae’s narrative—it names no specific U.S. banks or position sizes. Even so, the country risk index (JP Morgan’s EMBI) rose to 466–472 basis points in mid-August, the highest in about two months, per Infobae and La Nación.
That reading is a real market signal, and it tends to move in tandem with the political mood.
The S&P Merval stock index fell 3.2% on August 11, then slipped another 0.76% on August 13. Named analysts, like Gabriel Caamaño of Outlier consultancy, say Argentina is underperforming even a weak emerging-market backdrop.
Eric Ritondale, chief economist at Puente, points to firm U.S. interest rates pressuring emerging-market bonds broadly—so not all of this is Argentina-specific. Still, the University Torcuato Di Tella’s Government Confidence Index fell from 40% to 37%.
The government’s side: growth is the new focus
The government isn’t standing still. Bloomberg reported on August 12 that Milei is easing the cash crunch to reignite economic growth, shifting from a singular focus on crushing inflation toward supporting jobs and growth.
Milei’s approval, per Bloomberg, is ‘mired near the lowest levels of his Presidency,’ but the government still projects monthly inflation below 2%. That’s the official line, and it’s not fantasy—inflation has fallen dramatically under Milei.
Economist Carlos Melconian, however, warns that the government ‘will have to change.’ He describes a ‘complicated dead-end where it lacks reserves, must buy dollars, must reactivate the economy, and must collapse inflation.’ That’s a sharp critique from a respected voice.
The tension is real: the model that crushed inflation is now struggling to deliver growth without breaking the exchange rate. But Melconian’s warning is his opinion, not a market consensus.
Why you should care
If you’re investing in Argentina or watching Latin America, these signals matter because they suggest the Milei economic model is entering a delicate phase—one where reserve accumulation slows, confidence dips, and election jitters start to price in.
Yet the lack of a clear opposition leader means the situation isn’t a simple ‘regime change’ play. For expats, this could mean a steadier but slower path for the peso, and for investors, it’s a reminder to watch country risk, not just headlines.
Frequently Asked Questions
Is the Milei economic model failing?
Not necessarily. The model has crushed inflation and stabilized the economy, but it’s showing strain—central bank dollar purchases are at a 2026 low, and approval polls are weak. Economists are divided, with some warning of a ’dead-end’ and others seeing a necessary adjustment.
What does the central bank’s slower dollar buying mean?
It suggests the BCRA is prioritizing defending the peso over building reserves quickly. Daily purchases dropped from ~US$103 million in July to ~US$33 million in August, per TN and Ámbito, as the peso trades near its record low.
Are Argentines rejecting the economic model?
Polls show roughly 6 in 10 disapprove of the economic course, but no single poll asks that exact question. The opposition is not clearly benefiting, so it’s a vote of no confidence in the current path, not a surge for an alternative.
How are investors reacting?
Cautiously. Country risk has risen to ~470 basis points, the Merval dipped, and Infobae reports Wall Street is reducing exposure. But analysts note that global factors, like U.S. rates, also play a role, so it’s not all Argentina-specific.
Connected Coverage
Milei 2.0: Who Is Winning in Argentina’s New Economy
IMF Chief Backs Milei as Argentina’s Economy Rebounds
Argentina’s Stunning Turnaround: How Milei Tamed 211% Inflation
Sources: TN: Para contener el dólar, el Banco Central redujo las compras de reservas al nivel más bajo en lo que va del año; Ámbito: El BCRA registró la mayor compra del mes, pero las reservas cayeron US$50 millones; Reuters (vía Yahoo Finanzas): El peso argentino cerca de mínimos mientras el Banco Central modera compras; Infobae: Melconian alertó por el tipo de cambio y los costos en dólares y afirmó que el Gobierno ‘va a tener que cambiar’; Crónica: Un estudio reveló que solo el 14% de los argentinos apoya el modelo económico de Milei y casi la mitad espera estar peor dentro de un año; Infobae: Wall Street reduce su exposición en Argentina; hay alerta por la baja del apoyo al Gobierno; La Nación: Qué presiona al riesgo país: los motivos que le impiden a la Argentina perforar la línea de los 400; Bloomberg: Milei Eases Cash Crunch to Reignite Economic Growth
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