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“Argentina posted its worst monthly performance since the April 2020 lockdown, with the monthly activity indicator declining 2.9% month on month.”
It is probably fair to say that JP Morgan Chase holds more sway over the Argentine economy than any other banking institution. At last count, six of the senior roles in the Milei government were held by former JP Morgan employees. They include Minister of Economy Luis Caputo, Foreign Minister Pablo Quirno, the President of the Central Bank of Argentina, Santiago Bausili, his deputy, Vladimir Werning, and the deputy minister of Economy, José Luis Daza.
That sort of presence, in theory at least, buys you a lot of influence. JP Morgan has also been one of the biggest proponents of the Milei project — until now. JP Morgan CEO Jamie Dimon has made periodic visits to the country. In October 2025, Dimon was joined on his visit by the current joint chairman of JP Morgan’s International Council, Tony Blair, and former US Secretary of State Condeleeza Rice, who also sits on the council.
Dimon met with members of Milei’s senior economic team during his stay. As we noted at the time, he presumably received a warm welcome considering all four of them are former JP Morgan Chase executives.
Argentina’s right-wing libertarian government is run by Wall Street, both indirectly and directly.
President Javier Milei’s minister & vice minister of the economy, and the president & vice president of the central bank, all previously worked for JPMorgan, the largest US bank. https://t.co/k9yqKikxge pic.twitter.com/1LUSXhrq3O
— Ben Norton (@BenjaminNorton) October 21, 2025
In March this year, JP Morgan even agreed to host the annual Argentina Week, a gathering aimed at attracting foreign investment in the country, at its New York headquarters. Dimon gave the opening address. Which is why it may have come as a bit of shock to President Javier Milei and his economic team when they read the US bank’s latest report on the Argentine economy, published just a few days ago. The first paragraph sets the tone:
We expected a weak activity print in July, consistent with the soft backdrop that characterized the second quarter. However, the reported contraction significantly exceeded our forecast of roughly -1% m/m. Argentina posted its worst monthly performance since the April 2020 lockdown, with the monthly activity indicator declining 2.9% m/m, sa and -1.4% relative to July 2025. Excluding the 2020 lockdown, the late-2008 global financial shock and the 2018-19 period of financial stress, no month since 2008 has registered a larger decline.
The preliminary data for July comes on the heels of a 0.6% contraction in the second quarter of 2026. In other words, the Argentine economy is once again on the brink of a technical recession — for what would be the ninth time in 32 years. According to economists consulted by Bloomberg, the only way of avoiding that fate is if economic activity were to grow by around 6% between August and September, which is, to put it mildly, highly unlikely.
Perhaps most striking is the fact that just days before publishing this surprisingly negative report, analysts at JP Morgan Chase were actually forecasting that Argentina could be on its way to achieving investment grade, which would allow international funds to invest with much greater ease in the country. A day later, the National Institute of Statistics and Censuses’ publication of the official economic activity data for July changed everything.
Another problem highlighted by JP Morgan is Argentina’s bleak job landscape. You see, most of the sectors that are growing in Milei’s highly extractive economic model, such as agribusiness, mining, energy and fishing, are not labour intensive while those that are, such as manufacturing, wholesale and retail, are either stagnating or shrinking.
As a consequence, formal employment is today 3.9% below the 2016-2019 average following falls of 5.8% in manufacturing and 29.2% in construction, while low-quality self-employment has grown 3.9% annually since 2016. Fifteen years of practically flat formal job creation, says JP Morgan, is not a cyclical anomaly; it is a structural trend.
Another concerning datapoint: Argentina’s country risk index, a measure of how confident investors are about a nation’s sovereign sovereign debt, has risen more than 50% in the past two months, and is now over 600 basis points, its highest level in five months. The index is still significantly below where it was when Milei took over (1,809) but the recent moves have been quite violent.
When the indicator rises, it becomes more expensive for the government and private companies to borrow abroad. A rising risk score also signals that investors perceive a greater possibility of financial stress, debt restructuring, currency instability, or political disruption. A sharp economic slowdown, or recession, could have such an effect, especially roughly a year before general elections.
A recession, with the accompanying deterioration in economic activity, employment conditions and wages, is not going to help Milei’s re-election prospects for November 2027. It is not the fall in economic activity per se that is important for the investor — indeed, it could be argued that in isolation it is preferable since declines in activity improve external balances. What is important is the effect it could have on the electoral outcome in 2026.
There is another possible reason why Argentina’s country risk is suddenly surging: the worsening global economic situation. While emerging markets have shown remarkable resilience to risk-off shocks in recent years, it is only a matter of time before emerging market bonds face pressure as surging US yields prompt investors to favour higher-quality issuers and local-currency debt.
In such an event, Argentina is particularly at risk. According to a recent report by the Inter-American Development Bank (IDB) that analyses how Latin American economies could react to global risk shocks, Argentina is not just the most dangerous country in the region; it is in an entire league of its own. The country scored 80 points on the vulnerability index, almost double second-place Dominican Republic (46).
With Wall Street banks now warning about the potential risks of Argentina’s economy, times have most definitely changed. Less than a year ago, a coterie of US lenders, including of course JP Morgan, allegedly chipped in $20 billions to Argentina pre-election bailout fund, which was instrumental in helping Milei win — or at least not lose — the mid-term elections. At least that’s what the world was told. Months later, it turned out that it was all smoke and mirrors.
Wall Street Banks Come to the “Rescue” of Milei’s Argentina Just Days Before Make-or-Break Elections https://t.co/e1H8vsobKg pic.twitter.com/elcEKK3zEP
— Yves Smith (@yvessmith) October 24, 2025
It’s not just Wall Street banks that are changing their tone on Argentina. For the first time that I can recall since Milei was elected in November 2023, financial news outlets, both English and Spanish-speaking, are finally asking serious questions about the sustainability of Milei’s shock-therapy-on-steroids economic model.
Spain’s El Economista, which for the past three years has been one of Milei’s biggest cheerleaders, now suggests that the Milei project’s early success had perhaps led to over-excitement and over-blown expectations on the part of, ahem, some analysts:
Javier Milei’s great economic experiment is going through a difficult time. The economy has begun to contract and the risk of falling into a technical recession (two consecutive quarters of GDP contraction) is increasing, while one of the indicators that had given the country and Milei’s government the most joy, the poverty rate, has begun to deteriorate. No one said the country’s economic transformation was going to be easy, but the truth is that the first positive results were seen very soon (at the end of 2024) in the economy, which unleashed euphoria among analysts, the media and Argentine society itself.
However, the tough measures to win the battle against inflation (high interest rates, cuts in public spending, a very strong weight against the dollar…) and the reconversion of the economy towards an export model supported by the oil, gas, mining and agriculture industries are generating a significant bump in the economy. If the economy deflates, Milei’s electoral prospects are reduced and this expectation is already impacting the country risk, which once again exceeds 600 basis points (after having recently fallen to the 4000 basis point area).
All of this has led JP Morgan to revise downwards its outlook for the Argentine economy as well as reduce its growth estimate for all of 2026 from 2.7% to 1.5%. The US lender also forecasts an annualised contraction of 4% during the third quarter, after the decline recorded in the second quarter.
The report also highlighted that urban employment remained virtually unchanged in July, after five consecutive months of declines, and was 1.1% below the level of a year ago. For the bank, this trend limits any chances of a recovery in household consumption in the short term. As the bank admits, mining and energy production for export, two of the main pillars of Milei’s uber-extractivist model, create very few jobs in the domestic market.
The Wall Street Journal has also somewhat shifted its tone regarding Milei in recent months. An article in June warned that the Argentine president’s confrontational social-media style, which helped his campaign, is now alienating allies and eroding public support:
“He’s a creature of the internet, his persona was built online,” said Benjamin Gedan, director of the Latin America Program at the Stimson Center, a Washington-based policy group. “Milei’s thirst for combat on X showcases the traits that limit his ability to build durable coalitions and win over moderates.”
Milei’s approval rating recently fell to its lowest level since he took office. His chief of staff faces allegations of illicit enrichment. Public dissatisfaction with the economy remains high. While inflation has slowed sharply, many Argentines say they still struggle to make ends meet, and polls suggest growing fatigue with Milei’s combative style.
Milei has responded to the latest criticism by asserting that much of the official economic data underlying it is plain wrong, which in all fairness it may be — but almost certainly in the government’s favour.
“The economy has been growing for 27 or 28 months consecutively,” he insisted in an interview last week, which flies in the face of the official data: Argentina’s economy did not emerge from deep recession until the fourth quarter of 2024, which is no more than 24 months ago. There have also been months of negative economic growth since then.
Milei has also played down the seriousness of the collapse in economic activity in July while his Economy Minister, Caputo, attributed part of the fall to the fact that people stopped working to watch the FIFA World Cup. Caputo has also argued that investors are getting cold feet because of the fear of a possible return of “Kirchenismo”, Argentina’s ever-so-slightly left-of-centre main opposition bloc.
Of course, this tired old script has played out many times before in Argentina. As the lawyer and financial analyst Carlos Masláton notes, this is not the first time JP Morgan has pulled the plug on a totally unsustainable economic project after years of peddling said project:
JP Morgan, is this a joke? How are they going to say right now that things are going wrong in Argentina? They did not stop praising Caputo and Milei’s plan for three years, although they should have known that overvaluation of the exchange rate paid for with interest rates and debt does not work and explodes, and now they say that they are disappointed?
Always the same, JP Morgan… I know how the international financial establishment works, but there are hundreds of thousands of naïve people who believe it and who think that if a Wall Street source says it, it’s because everything is fine.
As others have pointed out, the bank has probably already got what it wanted, anyway. After nearly three years of Milei’s economic miracle, which prioritises short-term profits from financial speculation over the real economy, financial speculators have gorged themselves on vast sums of easy, guaranteed money that will probably soon run dry.
The Palestinian-Jordanian economist Saifedean Ammous explains how the so-called “financial bicycle” works, how it became the most important industry in Argentina, and why it is wholly unsustainable:
Since Milei came into office in December 2023 and reneged on his promise to shut the central bank, he announced that the peso exchange rate would be allowed to decline against the US dollar at a controlled pace of 2% per month. In February 2025, this was reduced to 1% per month, and by the end of April 2025, the crawling peg was removed, and the government announced its intention to keep the peso trading in the range between 1000 and 1400 pesos per dollar.
In the bond market, the Argentine government was offering its bonds with absurdly high interest rates that exceed the rate of devaluation of the peso against the dollar. This creates a huge arbitrage opportunity. Any individual can now buy bonds and make a return that exceeds the devaluation of the peso. This is particularly tempting to people who have dollar savings. If the bonds are offering 5% a month, and the peso only devalues by 2% a month, then you are making a nice 3% per month return. This is what is called the carry trade, or in Argentina, la bicicleta financiera. A true ponzi scheme, la bicicleta is currently the most important industry in Argentina. If you’re riding la bicicleta in Argentina, your children go to bed well-fed every day. If you’re not riding it, they are highly likely to go to bed hungry.
The bicicleta is obviously unsustainable, because as the government offers high yields on its bonds, it needs to create more pesos, which devalues the peso. It is impossible for this bicicleta to run forever, because it’s impossible for the government to keep offering yields that are higher than the devaluation of the currency, because the higher the yields, the more currency is created, and the more the currency will face pressure to decline. There must inevitably come a point at which the peso devalues significantly, at a rate exceeding the yield on the bonds. At that point, the bicicleta breaks down and the people riding it lose money. As soon as that happens, it becomes highly likely that the devaluation will increase, and that the bicicleta riders will leave, and there ensues a mass exodus from the bicicleta ponzi. The bicicleta riders dump government bonds and pesos, and instead seek safety in dollars… The peso collapses, the bonds collapse, and the government is left having to beg the IMF for a bailout.
Former JP Morgan banker and current Economy Minister Luis “Toto” Caputo, who already helped bankrupt the Argentina state in 2018 as finance minister under Marci, is “the main Argentine idealogue of the financial bicycle”, warns Máslaton.
There is one major difference, however, between 2018 and now, and that is the Milei government’s attempts to remove all limitations on foreign ownership of Argentine land. Those attempts just received a major fillip yesterday after the Argentine Supreme Court restored a presidential decree by Milei that scraps limits in place since 2011.
The Constitutional Andrés Gil Dominguez warned on Twitter that following the ruling “any foreign natural or legal person or any foreign state can now buy all rural land wherever they want – including border areas – without any limit.” In other words, the next time Argentina’s economy collapses, which seemingly could be quite soon, everything will be put on sale — presumably at bargain basement prices.
Asked in a recent interview whether a foreign investor should be able to buy an entire village or an entire province, of which there are only 23 in Argentina, Foreign Minister (and former JP Morgan banker) Pablo Quirno said: “yes, that will produce benefits (he actually used the word “beneficios“, which can also mean profits) for Argentina”.
