Argentina’s Economic Outlook Darkens: Barclays Warns of Reserve Crisis Under Milei
BUENOS AIRES – A stark warning from Barclays bank is sending ripples through global financial markets, casting serious doubt on the sustainability of Argentina’s economic program under President Javier Milei. The report, internally dubbed “You can’t always have what you want” – a nod to the Rolling Stones – paints a grim picture of dwindling net reserves and limited prospects for improvement, even as the government attempts radical economic reforms. This is breaking news that demands attention, especially for investors and anyone following the volatile landscape of emerging markets.
Barclays Report: Reserves Plummet Despite Milei’s Reforms
According to the December 1st report, accessed by LPO, Argentina’s net reserves, excluding funds from the International Monetary Fund (IMF), are lower today than when Milei assumed office just months ago. This is a critical finding, as bolstering reserves was a key promise of the new administration. Barclays warns there are “no clear signs that the Government intends to reverse this external fragility.” The situation is so concerning that the bank draws comparisons to countries facing significant economic hardship, including Ecuador, Kenya, Nigeria, and Egypt.
The numbers are stark: net reserves have fallen from minus USD 11 billion to minus USD 16 billion since Milei took office, falling USD 13 billion short of revised IMF targets. Liquid reserves, including gold, stand at USD 28 billion, but a significant portion – USD 16 billion – is held as bank deposits within the Central Bank of Argentina (BCRA). When factoring in potential withdrawals, effective liquidity drops to USD 23 billion, facing USD 33 billion in maturities between 2026 and 2027. This has fueled speculation that recent debt payments, like the USD 1 billion Bopreales maturity, were covered using people’s dollar deposits held by the Central Bank.
Prioritizing Politics Over Reserves? A Strategy Backfiring
Barclays analysts Ivan Stambulsky and Jason Keene suggest the Milei administration initially prioritized political stability and tackling inflation over strengthening the external balance. While they acknowledge a potential rationale for this approach, they now believe that “margin has been exhausted.” The bank’s assessment echoes concerns raised by other international financial institutions, including UBS, Santander, and BBVA, signaling a growing consensus of skepticism towards Argentina’s current economic trajectory.
Evergreen Insight: The prioritization of short-term political gains over long-term economic fundamentals is a recurring theme in emerging market crises. Argentina’s history is littered with examples of governments attempting to bypass necessary structural reforms, ultimately leading to deeper economic instability. Understanding this pattern is crucial for investors and policymakers alike.
Debt and the Illusion of Reduction
The report also challenges the government’s claim of reducing dollar-denominated debt. Barclays points out that while the stock of public debt in foreign currency hasn’t significantly decreased, it has actually increased from USD 170 billion in December 2023 to USD 189 billion in November 2025. This increase is largely attributed to Bopreales and bank repos, adding USD 12 billion in dollar-denominated debt that didn’t exist previously.
Exchange Rate Policy: A Stifling Factor
A key criticism leveled by Barclays is the impact of Argentina’s exchange rate policy. The bank argues that the current regime is stifling economic recovery, with economic activity (excluding financial intermediation) remaining stagnant – 0.7% below December 2023 levels. This contradicts official government data suggesting a recovery. The “exchange delay,” as Barclays terms it, means the real exchange rate is only 6% weaker than in 2017, despite a significantly worsened economic backdrop (primary deficit of 4% vs. current 650 spread points).
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Ecuador Comparison and Future Risks
The markets are already reacting to the negative sentiment, with a growing comparison to Ecuador. Ecuadorian 10-year bond yields have fallen below 10% and decoupled from Argentine bonds for the first time since the elections. Local Argentine debt has “lost momentum,” with a widening differential between 2030 and 2035 bonds. With almost USD 3 billion in international bond payments due on January 9th (3% of the total stock), the immediate future remains precarious. While the short tranche appears to have priced in a high probability of payment, the underlying fragility of reserves persists.
Barclays remains “neutral” on Argentina (“Market Weight”), acknowledging Milei’s strong political support but emphasizing the need for a more flexible exchange rate policy and a credible reserve purchase program to sustain economic recovery and regain market access. Without these changes, a sustainable recovery remains elusive.
This is a developing story, and archyde.com will continue to provide updates and in-depth analysis as the situation unfolds. Stay informed and explore our extensive coverage of global finance and emerging markets for more insights. Don’t miss our upcoming report on the impact of IMF policies on Latin American economies – subscribe to our newsletter for exclusive content and breaking news alerts.
