New Year, New Opportunities: Argentina Continues its Growth
Sustained economic growth, falling inflation, and consecutive fiscal surpluses are showing that liberalisation, fiscal responsibility, and a smaller state can turn any country around.
We are pleased to continue our new series: What is Happening in Argentina! Each month, Fighting for a Free Future Associate, Luke Lucas, will report for Voices for a Free Future on what has been happening under the world’s only libertarian presidency.
“Free trade means a little more wealth; the spirit of free trade is a reform of the mind itself, that is to say, the source of all reform.” Frédéric Bastiat
It has been just over a month since my last Argentina update, and with so much happening globally, it can be difficult to stay current. Over the past week, several major developments have emerged: the European Union and Mercosur signed a long-awaited Free Trade Agreement, reports indicate that the U.S. Stabilisation Fund no longer holds Argentine pesos from the currency swap, and Argentina is projecting a year-to-date economic growth of 1.7% in November. Another exciting thing for those following political developments on social media, President Milei has launched an English account so you can follow him here: https://x.com/jmilei_english
On January 17, 2026, after over 25 years of negotiations, the European Union and the Mercosur trade bloc signed a free-trade agreement. The agreement is designed to lower tariffs and boost trade between the two regions by gradually reducing import duties on just over 90% if exports over a 15-year period, while also unilaterally increasing import quotas for certain products. However, the agreement still requires approval from the European Parliament and ratification by the legislatures of all Mercosur members.
While this deal promises lower tariffs and greater competition, its implementation faced an immediate procedural hurdle: on January 21, 2026, the European Parliament voted narrowly to refer the agreement to the European Court of Justice for a judicial review of its compatibility with EU treaties, suspending the ratification process until the court delivers its opinion. The vote was tight with 334 in favour, 324 against and 11 abstentions and demonstrates how bureaucratic and legal mechanisms can constrain trade liberalisation, even after political leaders have signed a deal aimed at expanding economic freedom.
France, particularly, is leading the challenge, citing concerns that an influx of beef could undercut small farmers - the agreement was approved, though in a vote of 21-5, with Austria, France, Hungary, Ireland and Poland dissenting. Overall, the agreement can be seen as a net positive: tariffs act as a consumer tax, so reducing them lowers prices, increases choice and encourages competition. EU farmers gain access to more than 260 million additional consumers, while in 2018, the EU was already Mercosur’s largest trading and investment partner, accounting for 20.1% of the bloc’s exports. In a world trending towards protectionism, the Mercosur-EU deal represents a step toward freer, more competitive markets, reducing politically motivated favouritism.
At the same time, it is worth remaining cautious. I would argue that a “Free Trade Agreement” is a misnomer when trade is governed by supranational institutions. Decision-making shifts from individuals and local institutions to distant technocratic bodies. These risk entrenching incumbents and limit true market freedom. Although both nations would be better off unilaterally liberalising trade instead of bargaining for partial access under EU rules, managed trade is still better than the status quo.
The next major development is Argentina’s repayment of the U.S. currency swap line. Ahead of the 2025 Argentine midterms, the U.S. established a $20 billion currency swap with Argentina, providing a safeguard against the Peronists winning the midterms and to stabilise the peso during periods of intense volatility following a landslide loss for Milei’s party in local elections in Buenos Aires and a fear of this repeating in the midterms.
Some critics viewed the swap as foreign interference in Argentina’s elections, whilst supporters saw it as a routine financial safeguard. Importantly, only a fraction of the full $20 billion was ever drawn. As of early January 2026, Scott Bessent confirmed that Argentina had “quickly and fully” repaid its drawdown, and the Exchange Stabilization Fund no longer holds Argentine peso.
For context, a currency swap is an agreement between two central banks or governments to exchange currencies for a fixed period at a pre-agreed rate. Such swaps are designed to address short-term liquidity crises, bolster reserves and ensure trade continuity. They are temporary liquidity bridges, not bailouts, and do not solve structural economic problems. Nevertheless, Argentina’s repayment is a positive signal: it reflects improving financial stability, growing credibility and progress from a stabilisation phase to early economic recovery. Paying off a sap line does not mean the country is wealthy; however, it does show that it can honour obligations and manage its finances properly.
Supporting this optimistic outlook, Argentina’s economic activity grew 1.7% year-on-year in November 2025, indicating sustained growth through the year. In comparison, the United Kingdom’s economy grew 1.4% year-on-year over the same period, with monthly fluctuations of 0.3% growth in November and a 0.1% contraction in October. Argentina also achieved a primary fiscal surplus of 1.4% of GDP in 2025, marking the first consecutive surplus years since 2008, alongside a decline in inflation to its lowest level in eight years. The World Bank projects Argentina’s GDP growth in 2026 at 4%, compared with roughly 1.2% for the UK, suggesting that Argentina is entering a phase of stronger recovery and macroeconomic stabilisation under Milei’s reforms.
Taken together, these developments paint an optimistic future for Argentina. The Mercosur-EU Free Trade Agreement offers a path toward greater market integration and reduced protectionism, even if managed trade limits full unilateral liberalisation. Repaying the U.S. currency swap demonstrates that Argentina can manage its finances without ongoing foreign backstops, signalling credibility and fiscal discipline. Combined with sustained economic growth, falling inflation and consecutive fiscal surpluses, these indicators suggest liberalisation, fiscal responsibility and reduced government intervention are beginning to create the conditions for genuine economic resilience. While challenges remain, the trend toward freer markets and responsible governance provides reason for cautious optimism about Argentina’s future.
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