Argentina’s Fiscal Tightening Under the Milei Administration

Javier Milei, December 2025 -- Ministerio de Defensa, CC BY 4.0, via Wikimedia Commons

By Lucia Converti

Javier Milei’s government took office in December 2023 with a strong rhetoric about the need to expand freedom. However, rather than expanding it, his economic policy reduces it. Neoliberal policy advocates a model of free enterprise, free trade, and free movement of capital that favors the extraction of national surplus toward core countries, limiting the possibilities for local development and reinforcing the conditions of societal impoverishment.

Tricontinental’s Political Economy Substack, The Financial Leash, analyzes the mechanism by which the capitalist system deepens the dependence of peripheral countries through the global financial system, describing the channels through which a country’s surplus is applied (productive investment) and through which it flows out of the country. The latest balance of payments report from the BCRA (March 2026) shows how this dynamic has intensified in Argentina under the current government.

Record Outflow of Profits and Dividends

One of the channels for surplus extraction is financial rent sent abroad: interest on external debt plus profits and dividends repatriated from foreign direct investment. In Argentina, this channel was partially closed for years due to exchange controls.

BCRA Communication A 8226, published in April 2025 as part of Phase 3 of the economic program, blew it wide open: it authorized access to the free exchange market for the payment of dividends to non-resident shareholders.

Data from the balance of payments clearly shows the effect. Between December 2023 and December 2024, outflows for profits and dividends averaged just USD 24 million per month: a reflection of the fact that access to the foreign exchange market was restricted. In the first quarter of 2026, that average reached USD 333 million. And in March 2026, it was USD 882 million—the highest level recorded since 2010, equivalent to approximately 30 months’ worth of profit and dividend outflows under the previous system.

During March, the Energy sector (primarily the oil industry) was the month’s main beneficiary, with USD 460 million in profit outflows, followed by Base Metals and Manufacturing (USD 132 million) and Food, Beverages, and Tobacco (USD 106 million). These are not marginal companies: they are the most dynamic sectors of Argentina’s real economy and the ones on which the current economic model relies exclusively. Liberalization opened the possibility for them to take out of the country the profits generated during years of controls, and they did so on a massive scale.

Interest payments on the debt, though less spectacular in relative terms, remain structurally enormous.

In the first quarter of 2026, they totaled USD 4.07 billion.

The Externalization of Savings

The third channel is the accumulation of foreign assets by the non-financial private sector: what the BCRA currently refers to as purchases of banknotes and foreign currency for non-specific purposes. The numbers tell a story of fluctuating control policies. Between November 2019 and November 2023, following the reimposition of controls that the Mauricio Macri administration had previously liberalized, the non-financial private sector purchased a total of USD 5.5 billion. During 2024, however, with exchange controls in place and the adjustment underway, the sector was a net seller of dollars as a result of de-saving.

Following the lifting of foreign exchange restrictions for individuals and companies—with no limits on amount or destination—the flow reversed dramatically: between April and December 2025, foreign currency purchases reached USD 32.8 billion, with a sharp increase in September and October due to the approaching elections. In the first quarter of 2026, this amount reached USD 6.643 billion, surpassing the cumulative total for the entire previous administration.

The BCRA report estimates that in March, part of that demand went toward current consumption via credit cards and tourism, and about USD 600 million was deposited in local banks in foreign currency. But the scale of the phenomenon, and its abrupt surge following liberalization, is difficult to attribute exclusively to consumption. What the data show is an accelerated dollarization of savings. With the Argentine peso at the bottom of the international monetary hierarchy, dollarization is not an anomaly: it is the most rational strategy for preserving value in a system that structures instability as a permanent condition.

Capital Flight: Export a Lot, Accumulate Little, and Borrow More

The central tension of the model is exposed in a single comparison: since December 2023, Argentina has generated a trade surplus of USD 47 billion, net investments of USD 650 million, and received external financing (IMF, international organizations, and private loans) totaling another USD 46 billion. However, the increase in reserves—that is, revenue from debt issuance and corresponding principal payments to the national government—amounted to only USD 14.7 billion. The difference, approximately USD 78 billion, was absorbed by net interest payments (USD 25.3 billion), the net outflow of profits and dividends (USD 1.6 billion), net foreign exchange purchases by the private sector (USD 36.3 billion), and other public and financial sector operations (USD 14.2 billion).

It is noteworthy that total foreign investment received during the period does not offset the remittance of profits and dividends.

As mentioned in the Tricontinental article, the mechanism is self-reinforcing: the country must maintain high interest rates and dollar reserves to sustain the confidence of financial markets, but that very position generates opportunity costs and structural outflows that prevent the real accumulation of reserves and investment in productive sectors and infrastructure. The visible result is a country risk rating of around 500 points—the lowest level since June 2018—achieved at a high cost: higher debt and a narrower margin for economic independence.

Lucia Converti holds a Bachelor’s degree in Economics and a Master’s degree in Latin American Social Studies from the University of Buenos Aires. She also holds a certificate in Data Science and Artificial Intelligence from UNSAM. She has worked as a researcher at various social and geopolitical research institutes. She is currently a researcher at the Tricontinental Institute for Social Research.

This article was produced by Globetrotter.