Milei’s economy: From surf the wave to kick the can

I don't know when the Milei hype bubble will pop. Probably not tomorrow. Definitely before 2030.

You can divide the views on Argentina and Milei into three camps:

1. Everything is terrible. This is the take of the Peronists, who see Milei undermining the economic safety net for the one-third of Argentines who live in poverty and the many others who struggle economically, even as the macroeconomic indicators come back positively and the wealthy and business elite are doing better than ever. I don’t deal with this view much in today’s newsletter, but be aware that it exists and represents a political threat to Milei.

2. This time is different (in a good way). This is the take of Milei and his backers, who think the president’s reform agenda is the path to ending Argentina’s historic boom and bust cycles.

3. The Milei hype is a bubble. It’s great on the way up, but an eventual crash is practically inevitable. This remains my view.

The following is from my newsletter from December 2024 about the hype around Milei’s economic reforms:

Will it continue into 2025? I’d absolutely bet on it going another year or two. All the conditions are lined up and the enthusiasm is going to push things forward. I don’t give market advice, but this is not the newsletter where I tell you it’s all going to crash and burn soon. This is one where I say that I think the momentum is there and people should ride Milei’s chainsaw like a surfboard….

…Don’t mistake a great 2025 and 2026 for Argentina becoming a developed market. Don’t confuse the boom years of a boom-bust cycle with being a permanent escape from that cycle.

Fourteen months later, even though I still don’t give market advice, I feel like I nailed that prediction about riding the wave of Argentina enthusiasm. Unfortunately, I see many analysts right now mistaking the economic bubble for something permanent. And yet, despite my view that Argentina’s positive economic image is a bubble, this is still not the newsletter where I tell you everything is going to crash in the next month or two. The Milei bubble has plenty of room left to run. But if you are invested in Argentina, you are no longer surfing a wave. You are following a can that is being kicked down the road, hoping to enjoy the boom while it exists, but exiting before it hits the messy end.

What is going right for Milei today?