With or without Milei

The war in Iran has created renewed interest among investors in Latin America in general and Argentina in particular. Despite the political problems at home – with the ‘$LIBRA’ crypto scam scandal and Manuel Adorni ‘flight-gate’ problems complicating things on the internal front – President Javier Milei’s administration drew fresh attention at three major events in March, all of which happened after the head of state’s state-of-the-union speech to Congress earlier this month: the major PDAC mining conference in Toronto, Argentina Week in New York and the CERAWeek energy fair in Houston.

Regardless of how long it lasts, the conflict in the Middle East arrives with Argentina in a much better position than it was when the last major conflict broke out in Ukraine in 2022. Back then the country had to foot an extra energy bill of US$5 billion, which pushed its energy trade deficit to US$7 billion. The ruling Peronist party of the moment would time and time again cite the war and its impact on energy costs as one of the three reasons why its candidate Sergio Massa lost his presidential race, alongside the Covid-19 pandemic and a record drought in 2023. Last year, on the contrary, Vaca Muerta was propelling Argentina with a US$8-billion energy trade surplus. With oil now hitting the US$100 a barrel mark as missiles fly over the Persian Gulf, Argentina could pocket extra income of some US$5 billion.

The world is looking at this Argentine phenomenon with fresh eyes. All of a sudden, the country is almost fully energy sufficient, except for a small gap in the winter months. Every extra drop of oil and particle of gas goes to the export market and brings cash to the country. The country is advancing at good speed with two major infrastructure projects that will turn it into a global player in oil and gas: the Vaca Muerta Oil Sur (VMOS), a pipeline to export oil, and the Southern Energy LNG (liquefied natural gas) floating export facility. YPF is also advancing with its LNG exporting project.

This is all taking place after President Milei spent some of his time this month insulting top Argentine business leaders, like Paolo Rocca. Business leaders are looking at what Milei does rather than what he says. So far, he has given investors a major set of benefits through the RIGI investment incentive scheme for large projects and has interfered as little as possible in the sector’s dealings.

Milei has given the extractive sectors of the economy a push, but growth there precedes and will outlive his Presidency. Vaca Muerta is arguably the only consensus policy the country has had for the past decade and a half and it is now entering a development momentum that will not stop anytime soon. Stakeholders who once competed for limited resources are now cooperating to grow the country’s overall energy pie and take it to the world. The two main oil and gas exporting projects are being conducted by a consortium of companies, once sworn enemies, who are now working hand in hand for mutual benefit.

Business reaches a point where there is an incentive to move from a zero-sum game to cooperation. This, unfortunately, does not happen much in politics and it will especially not happen in light of President Milei’s entirely confrontational approach to governing. The combination of corruption allegations, stubborn inflation, a hike in unemployment and people’s increasing struggle to make ends meet are eroding Milei’s approval ratings, which now stand at an average of 39 percent – one of the lowest levels since he took office.

The paradox for Milei is that investors in the sector where he feels more comfortable, the financial world, are paying more attention to these numbers than the players of the real economy, some of whom he often insults. Argentina’s country risk rating, the premium the country pays to get international credit, is struggling to fall below 600 basis points. Economy Minister Luis Caputo has been forced to admit that, unlike what many expected, the country will not tap international voluntary debt markets during Milei’s first term in office.

Yet Vaca Muerta – Argentina’s “dead cow” – seems more alive than ever. At CERAWeek in Houston this week, the world’s largest energy conference, organisers devoted most of their time to discussing the Middle East and viable alternatives for an increasingly complex and insecure world. Argentina was part of the conversation, not as it had been for many years. Many companies are seriously considering or effectively moving ahead with concrete investment plans. Milei can claim part of the credit, but these moves would likely happen with or without him.