Milei at 18 months.
Regime durability scoring.

The analytical framing that dominated Argentina debate in late 2023 is now obsolete. "Will shock therapy work?" was the right question then. It is the wrong question now. The Milei programme succeeded in Phase I on its own terms: the primary fiscal surplus was achieved ahead of schedule, monthly inflation fell from a peak of 25.5% in December 2023 to single digits by mid-2024, and the parallel exchange rate premium compressed from above 180% to below 30% at the point the IMF programme was formally announced. Sovereign spreads on the Global 2030 collapsed from above 2,500 basis points to under 600 over the same period.

The market has moved the question. Investors are no longer pricing whether Milei can announce adjustment. They are pricing whether he can sustain it through four sequential stress tests: the October 2025 midterm elections, which the ruling coalition survived with a net seat gain; the reserve accumulation trajectory, where gross FX purchases must demonstrably exceed capital flight; social tolerance, where real wage recovery has become the political acid test; and IMF programme ownership, which the historical record identifies as the variable most likely to break first in Argentine programmes.

The desk scores each pillar on a 0 to 100 scale and tracks the composite as the primary durability indicator. Deterioration in any two pillars simultaneously triggers a base-case reassessment. The composite currently reads 72, consistent with continued market access but not with a clean convergence to normal B-rated spread levels. The implied risk premium between current spreads and a plausible normalisation outcome is approximately 350 basis points: wide enough to justify selective exposure, but not wide enough to assume the stress case has been priced out.

The headline BCRA gross reserve figure is not the relevant number for solvency assessment. The gross position includes the USD 18 billion equivalent bilateral swap with China, which cannot be drawn freely and should not be treated as liquid reserves; repo obligations to regional multilateral lenders; and SDR allocations that have already been deployed or earmarked. Net freely-usable reserves remain negative by most credible independent estimates: somewhere between negative USD 5 billion and negative USD 8 billion, depending on how the China swap is classified.

The April 2026 IMF disbursement of approximately USD 12 billion converts the net position to marginally positive for the first time since 2022. The improvement is arithmetic, not structural. Structural reserve recovery requires the current account to run a sustained surplus, which requires either continued real peso depreciation or genuine productivity-driven export growth. The desk tracks monthly MULC flow data: agro-dollar liquidation provides a natural tailwind in Q2, but Q4 is the risk window, when seasonal dollar demand rises and the political cycle may create incentives for fiscal accommodation.

The investable implication is sequencing-sensitive. Sovereign bonds are priced as if the net reserve problem has been resolved. The desk's view is that it has been stabilised, not resolved. A sustained overshoot in the parallel rate, even without a formal devaluation, would force the BCRA to choose between defending FX and defending the inflation anchor. That bifurcation point is the desk's primary monitoring priority.

The Milei government achieved a primary surplus of 1.9% of GDP in 2024, the first since 2019. The adjustment was built on energy subsidy compression (approximately 1.2% of GDP), a freeze on public-sector wages in real terms (approximately 0.6% of GDP), and capital expenditure suppression (approximately 0.4% of GDP). The nominal anchor is the "zero emission" commitment: no central bank financing of the fiscal deficit. This commitment has held and has been the cornerstone of the disinflation narrative.

What cannot be compressed easily in 2026 is the pension system. The Supreme Court's October 2024 ruling reinstated the constitutional pension adjustment formula, creating a structural floor for social spending that cannot be overridden by decree. The desk estimates this adds approximately 0.4 to 0.5% of GDP in mandatory spending relative to the 2025 baseline. Combined with the infrastructure backlog accumulated during the adjustment phase, the 2026 primary surplus target of 1.5% of GDP is achievable but requires discipline in all discretionary categories simultaneously.

The more subtle fiscal risk is revenue. The 2024 surplus was partly supported by the "blanqueo" asset regularisation programme, which generated one-off revenue of approximately 0.6% of GDP. That windfall does not recur. Without a replacement revenue source or deeper expenditure cuts, the structural underlying surplus is closer to 1.0 to 1.2% of GDP, not the headline 1.9% that markets are anchoring to.

A composite above 70 is consistent with continued market access and moderate spread compression. A composite between 50 and 70 implies elevated rollover risk and reduced tolerance for policy slippage. Below 50 has historically preceded forced FX adjustment or programme interruption in Argentine programmes. The current reading of 72 offers limited buffer against a simultaneous deterioration in any two pillars.