UBS Sees Argentina Near Market Return As Milei Gains New Leverage

UBS is telling clients that Argentina could stop being a permanent “crisis case” and start looking like a risky but investable story again by 2026.

In a fresh report, the Swiss group says the country’s economic fundamentals should be “broadly positive” next year, provided President Javier Milei keeps his shock-therapy program and the new web of political and international support holds.

Politically, UBS argues, Milei enters his second year stronger. His camp has stitched together a broader voting base in the lower house by cutting deals with more moderate blocs, while relationships with key provincial governors in the north and center have grown less confrontational.

The Senate remains a brake, but no longer a full veto. Crucially, the United States has thrown its weight behind Milei’s experiment, agreeing to a $20 billion currency swap and buying pesos and Argentine bonds to stabilize markets before pivotal midterm elections.

On the macro front, UBS highlights gains that would have sounded unrealistic a few years ago. Fiscal “discipline” has produced a primary surplus of 0.9% of GDP in the first half of 2025.

Core inflation fell to 1.7% in June, with headline prices rising 1.6% that month, the lowest monthly rate in five years. Growth has begun to recover, helped by the International Monetary Fund’s backing and the gradual dismantling of the old system of controls and subsidies that defined Argentina’s interventionist past.

Argentina’s Recovery Hinges on Reserves and Market Re-Entry

The weakest link is still foreign-exchange reserves. UBS notes that net reserves slipped about $2 billion below IMF targets mid-year, forcing a reset of the 2025 goal to a still-negative $2.6 billion.

The bank estimates Argentina needs roughly $4.8 billion in cash each year through 2027 to service external debt, making reserve accumulation non-negotiable.

A grand $20 billion private-bank rescue facility has already been shelved in favor of a more modest $5 billion repo-style loan, underlining that markets will not write blank checks.

Bond investors, however, are already betting on success. Argentine spreads have compressed sharply, and a new issue of inflation-linked “Bontes” in pesos, sold to dollar investors at a steep 29.5% yield, is seen as a first step toward reopening the country’s access to global capital.

UBS believes a full return to markets becomes realistic once Argentina can issue at around 10–11% in dollars. A planned “second wave” of reforms in 2026 – targeting labor rules, taxes, red tape and public-sector efficiency – is, in its view, what will ultimately decide whether Argentina finally breaks with its populist stop-go cycle or slides back into it.

For investors and observers abroad, the message is simple: watch reserves, reforms and Washington. If those three pieces stay aligned, Argentina’s image could shift from serial defaulter to high-risk, high-return partner in just a few years.

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