For Javier Milei, economist, popularizer, panelist and provocateur, Sunday Felipe Cavallo He had been the best Argentine Minister of Economy and especially praised his tandem with another civic hero, Carlos Menem in his first presidency. However, when Cavallo made observations about the progress of the economic program, what seemed like a solid front cracked. The last warning was the risk of the economy falling into “stagflation”, a term that refers to the coexistence of inflation with stagnation of activity. A combination that would mark the “exhaustion” of the program in progress: successfully moving the economy away from hyperinflationbut with difficulty in converging to one digit annual inflation, like the rest of the countries in the region. With more ordered macro variables, but with too much effort for the productive structure to get going and thus start the virtuous circle.
The data. That is, Cavallo pointed to two specific facts. On the one hand, the slowdown in inflation stopped as if it were impossible to continue drilling a 2% monthly floor. Since the last quarter of last year, for example, meat began a cycle of restocking stocks and raising prices; Rates resumed the updating path to complete their recovery and the fuel tax was unfrozen. Everything adds up.
In addition, the level of activity also slowed in the second quarter of 2025, when the pull of devaluation expectations began and after July, with the tightening of monetary policy. The reversal of the situation after the October elections and despite the wind in its favor, the Government had to juggle to combine contained inflationary pressure with falling activity in the sectors most sensitive to domestic consumption.
The latest INDEC indicator, the monthly economic activity estimator (EMAE), showed growth of 1.8% in December compared to the previous month and 3.5% year-on-year, with a positive 4.4% in the 2025 vs 2024 averages. There is some carryover from the previous year, but what is notable about this figure, the last available, is the continuous sectoral disparity it shows. The researcher of the IERAL Marcos Cohen Arazi points out that, until November, the indicator reflected clear signs of stagnation, but in December it turned out to be the largest monthly advance since July 2024. “In the coming months it will be possible to establish whether this is a significant change in trend and whether it marks the beginning of a more dynamic cycle for production.” he adds. But the gap is visible: since November 2023, the sectors that lead growth stand out above 20% in those 25 months: financial intermediation (+23%), agriculture (+18.5%) and mining (+18.3%). On the other hand, the most lagging sectors are the industrial average (+6.5%) and construction (-12.8%), only surpassed by the tourism segment associated with international travelers (-29%).
Cohen Arazi points out that in the industry, half of the sub-branches contracted, while the other half showed growth or a stable production level. The branches that fell the most in the month include other equipment, appliances and instruments, other transportation equipment, tobacco products, rubber and plastic products and machinery and equipment. “In this way, in the 25 months from November 2023, only two industrial segments are in positive territory: oil refining and related products (+8.3%) and food and beverages (+4.3%), which have a profile marked by export orientation.”he concludes.
Always at 0. The other indicator that seems hard to lower is inflation despite the fact that imported items put a ceiling in several sectors and the dollar is under “control.” But the fear, above all, is that there are other long-term pressures without productive roots or relative delays (such as food or tariffs). The primary surplus achieved during the first two years of management was the result of limiting expenses and trying to collect more, something that is made difficult by the slowdown in growth in sectors linked to consumption that generate most of the collection. In a recent work by IDESA, It is shown that almost 40% of the increase in total public spending, which went from 25% to 33.00% of GDP, was due to greater pension expenditure (and not due to growth in the amount but in the number of benefits). According to the Congressional Budget Office, national pension spending increased 2.2% of GDP and provincial pension spending increased 0.8% of GDP. But with the labor reform, the financing of this growing flow will increase. “It is not advisable to exaggerate expectations regarding the impact that the reform will have
“Do not exaggerate expectations regarding the impacts that the reform will have,” he emphasizes. Jorge ColinaIDESA economist. He believes that the changes, by providing more predictability, could stimulate the creation of formal jobs, especially in the segment of medium and large companies. “But labor informality is concentrated in smaller companies for which the reform does not contemplate specific and powerful regulatory and tax relief,” point.
Another indicator that sows uncertainty for employment and activity is the closure of companies: almost 22,000 closed their shutters in 2024-2025 with the impact on the sectors that were most exposed. But for the economist Fernando Marull It is not certain that they have completely disappeared, but they have stopped contracting ART coverage (which is taken as an indicator): that is, it would support the thesis of a precariousness of the activity and consequently of employment establishing a “two-speed economy” as a relevant characteristic.
Order and progress. The solution that Cavallo suggested does not contradict the precept of supporting the primary surplus as a necessary condition, but he adds that one should not “be afraid of issuing money with support.” In summary, the former minister’s “advice” is that they continue buying reserves while eliminating restrictions on corporate and financial demand for dollars at the risk of their value increasing and monetary policy being loosened to increase credit. A risky bet that, in his opinion, would begin that virtuous circuit. The Central Bank bought US$1,158 million in January (which continued in February) and thus reserves rose to US$44,503 million. The struggle is precisely to sustain the level of foreign currency purchases to increase reserves and increase them, if necessary to be able to free the exchange market, creating additional demand for the dollar, which today is seeking its floor.
The difference can also be seen as a nuance: the decision is whether to accelerate a change that can be observed or let the circuit feed itself at its own pace. For example, Pablo BankCFO of fintech Alprestamothe latest report from the Central Bank shows that, after four months of decline, consumer credit recovered in January. “In year-on-year terms, personal loans accumulate a real increase of 35.9%, while mortgage credit has chained 19 consecutive months of expansion with an increase of 160% in the last 12 months, driven by UVA loans”he explains. For its part, commercial credit increased a real 3.3%, while pledges recorded a monthly drop of 1.9%, although they remain 30.5% above the level of a year ago. Do these data mean a temporal issue? “I interpret it as an early sign of a change in trend. Continuity will depend on disinflation being sustained and real household income gradually improving,” he closes. Once again, in addition to two speeds, there will also be a different reading for the sectors for which the wind begins to blow in their favor and the others that must continue fighting against contrary gusts. The truth is that, in this scenario, the averages are increasingly less representative.
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by Tristán Rodríguez Loredo
