The South American economy is showing encouraging signs as of mid-2026. The stabilization program launched in late 2023 is taking hold, with fiscal discipline, falling inflation, and economic activity returning to growth. 

The primary surplus is projected to be around 1.5% of GDP for 2026 and 2027, while inflation has resumed its downward trend, with year-end forecasts near 29%. This is a significant change for a country that had been recording double-digit monthly rates. After growing 4.4% in 2025, the economy is expected to grow by about 3.6% in 2026, driven by the energy, mining, and agricultural sectors.  

In the financial markets, the signal is even clearer. Thanks to upgrades in the sovereign ratings assigned by Fitch and Standard & Poor’s, the country risk spread fell to around 420 basis points, a level not seen in years. 

On the political front, the ruling party emerged stronger from the legislative elections held on October 26, 2025. In the Chamber of Deputies, La Libertad Avanza (LLA) became the largest opposition party with 95 seats, surpassing Peronism (93). Further behind were Provincias Unidas, with 18 seats, and the PRO, with 12.  

In the Senate, LLA increased its representation from 6 to 19 senators, compared with Fuerza Patria’s 22 seats, with no bloc achieving an absolute majority of 37 seats. Although the government still must negotiate with governors and allies to secure the 129 deputies and 37 senators required for a majority, it now has a significantly greater political margin than it did at the start of its term. 

Looking ahead to the October 2027 presidential election, in which Javier Milei could seek reelection, polls show him in the lead. Libertad Avanza leads in voter preference among political blocs, with about 30%, bolstered by the fragmentation of Peronism, whose main figurehead is Axel Kicillof, governor of Buenos Aires.  

In a potential runoff between Milei and Kicillof, the current president would prevail, albeit by a narrow margin. The outcome remains uncertain (Milei faces high disapproval ratings and the real economy has yet to improve), but the ruling party remains the country’s most competitive political force. 

The outlook is encouraging. For the first time in a long while, key indicators are moving in the same direction, and the government has greater political support to stay the course. If stability translates into sustained growth and higher wages, 2026 could be remembered as the year Argentina began to leave the crisis behind and build on a firmer foundation.

Pablo Gonella 

Assistant Manager, International Fixed Income, Money Market Desk