A stable dollar isn’t enough: Milei’s pressing economic problems

Argentina's economy finds itself in an unusual situation, with the U.S. dollar's volatility no longer at the forefront of concerns. Inflation has remained high compared to regional standards, but signs of improvement are emerging. However, President Javier Milei's economic model has come under fire, particularly in sectors closely linked to domestic consumption such as manufacturing, construction, and retail.

These are among the nation's largest employers. The real economy, Milei's primary target, is facing significant challenges. The oil and gas sector, boosted by increased production at Vaca Muerta, is thriving, but labor-intensive industries are struggling. Between November 2023 and June 2026, industrial output dropped by 7%, with the utilization of industrial capacity at 58.4%.

Notable closures include tire manufacturer Fate, which had been a symbol of Argentine industry since 1940. Economy Minister Luis Caputo dismissed critics, claiming the sector had contracted by 10% despite subsidies. Retail sales plummeted 8.47% during the same period, with small retailers witnessing an even steeper decline of 24%.

The government attributes the decline in retail to changing consumer habits rather than a collapse in demand, citing the rise of e-commerce. However, this growth has not been sufficient to counterbalance the overall weakness in consumption, which has seen a 2.9% year-to-date decline. The construction sector has also suffered, with activity falling by 20% since Milei's administration took office.

Together, these three sectors account for nearly 38% of employment in Argentina, with retail leading at 19.2%, manufacturing at 10.8%, and construction at 8.4%. The government maintains that the growth in extractive industries like mining and oil will eventually offset job losses, but primary industries currently only account for 0.9% of total employment.

The government's optimism is evident, with Minister Federico Sturzenegger predicting millions of Argentines will relocate to benefit from these industries. However, the government's approach has led to a decline of 28,262 companies since Milei's inauguration, representing 5.5% of the country's businesses. This decline, the steepest in any Argentine administration within the first 29 months, has contributed to rising unemployment and worsening job insecurity.

The unemployment rate reached 7.7% in the first quarter of 2024, up 0.8 percentage points from the same period a year earlier, and stood at 7.8% in the first quarter of 2026. Informal employment has surged to 44.2% of all workers, the highest level since the fourth quarter of 2023. The quality of employment has deteriorated, with formal employment declining by 166,800 jobs and informal employment increasing by 379,600, resulting in a net increase in low-quality employment.

This trend has also led to an increase in app-based delivery and ride-hailing drivers, with approximately one million people now working through digital platforms.