It often happens that a country in one corner of the world, like Argentina, minds its own business as if nothing else mattered until somebody or something bursts its bubble – overnight or gradually, even unnoticeably.
Last Sunday, representatives of a bunch of OPEC+ oil-producing countries (Saudi Arabia, Russia, Iraq, UAE, Kuwait, Kazakhstan, Algeria and Oman) met over Zoom to decide that they will increase their production of oil next month by over half a million barrels a day. They are reverting a prior voluntary cut, hoping not to lose more market share to other, mostly Western, players.
The news went mostly unnoticed here. It should not, if only for the magnitude of the decision compared to Argentina’s relative size. Half a million barrels of oil is more than the output of Vaca Muerta’s recent record production of 476,000 barrels a day.
President Javier Milei’s economic programme relies heavily on the prospects of Argentina massively increasing its exports in the coming years. The economic team has said it explicitly: “Argentina will triple its exports in the coming eight years,” Finance Secretary Pablo Quirno commented at a business event this week. If that happens, he added, “there will be no shortage of dollars in the coming years.”
But what if it doesn’t? Projections work better on paper than in reality. It is true that Argentina has been turning some things around in the last few years. In 2022, for instance, the country had an energy trade deficit of almost US$5 billion. Last year, the sector posted a surplus of US$5.6 billion. Initial estimates indicated the surplus would climb to US$7.5 billion this year but the global price cut has lowered those expectations to around US$6 billion now. The OPEC+ countries’ decision might sink prices even further later this year – if the market perceives there might be an “oil glut” ahead. Donald Trump would be happy about that.
Energy and mining are the big promise, everywhere you go and anybody you talk to. This week newspapers carried the news about “the biggest investment project in the history of Argentina” for US$15 billion in a copper mine in the western province of San Juan by a joint venture of an Australian and a Canadian firm. The headline is catchy and the promise is there but this is money that would only materialise over many years in the form of real exports. Also this week, the company Southern Energy made its final investment decision on the second leg of a project to export liquefied natural gas (LNG) for a price tag of US$6 billion over the next decade and, according to the company, up to US$15 billion along the supply chain over the next 20 years.
Like projections, investments look neat on paper but making the paper match reality is a different story. Few may still remember when, in late 2021, the Australian firm Fortescue announced what was until then also the biggest private investment in decades: US$8.4 billion for a green hydrogen plant in Río Negro. Four years later, the company has finally acknowledged the project will not go ahead.
Argentina runs the risk of living today as if the promise of tomorrow were already more than that, still a promise. In 2026 and 2027, Argentina must pay around US$25 billion per year in foreign debt, so Economy Minister Luis Caputo and his team desperately need to see country risk ratings down to a level at which rolling it over (i.e., getting new debt to cancel it) becomes affordable. Thus, their insistence these days to say that the election will kill “the kuka” risk (or Kirchner risk, with an allusion to cockroaches) and, from then on, Milei will cruise to re-election to complete his transformation of the country. “We have to get the right vote,” said Quirno.
A commoditised Argentina, with a strong peso and high wages in dollars, would need a massive avalanche of dollars, not to succeed but merely to make ends meet, especially if the country does not make savings in times of boom to survive the moments of bust. The feverish level of foreign tourism, even this winter, is obvious for anybody to see – as reported recently by a Financial Times correspondent stunned by the number of Argentines sipping caipirinhas on Rio de Janeiro beaches. Even if the Milei programme continues to score fiscal surpluses for the federal administration despite the permanent defiance of Congress, somebody will have to foot the bill sooner or later, at the expense of swindling Central Bank foreign reserves. In cash.
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