Argentina's economy is reborn under Milei and football becomes an unexpected winner: "The stronger peso makes us competitive"

The revolution that the Argentine economy is undergoing (or enjoying, depending on how you look at it) has an impact or consequence in every corner of the economy. One of the clearest and most desired was the moderation of inflation, that 'tax on the poor' that has been threatening and crushing Argentines for decades. Another effect, in this case less benign, equally striking, is the renaissance that Argentine football is experiencing . Amidst the tangle of spending cuts, deregulation and a battery of different measures to try to transform the country, the sport that Argentines are passionate about is taking off and part of the credit is due to the policies implemented by Javier Milei . Today, up to 20 players in the national league have salaries that reach or exceed one million dollars annually, something that no one would have bet on just two years ago.

The renaissance of Argentine football under Javier Milei's presidency has a clear economic explanation: exchange rate stability and the relative strengthening of the peso have allowed local clubs to compete in the international transfer market, something unthinkable just a few years ago. Milei's policies have restored investor confidence in Argentina and that of Argentines themselves. This is generating a significant effect on capital flows , which in turn impacts the peso. Faced with years of hasty depreciation of the Argentine currency against the dollar, the peso is now stable, while Argentines keep a greater portion of their savings in the national currency in anticipation of maintaining exchange rate stability.

This change is, in part, a consequence of Milei's 'chainsaw' that has drastically reduced the fiscal deficit and stabilized the currency with results that have even exceeded the most optimistic forecasts. So much so that some agricultural companies that borrowed in pesos and then obtained their income in dollars (they earned with the subsequent exchange rate by delivering dollars and receiving pesos again) are going bankrupt and having serious liquidity problems due to the strength of the Argentine currency. All this has also been accompanied by the return of economic growth to the country, which, in the absence of official data, once again expanded intensely in the last quarter of 2024, as can be deduced from the economic activity estimate indicator.

This has been helped by the control of inflation , which in just over a year has gone from 25% per month to 2.2%, putting an end to the risk of hyperinflation that Argentina was facing. According to data from the Central Bank of Argentina, the peso is at its strongest level in a decade if adjusted for inflation. This has increased the purchasing power of Argentines abroad and, at the same time, has made local salaries more competitive in terms of dollars. Applied to football, the improvement in the exchange rate has allowed Argentine clubs to retain talent and even recover players who had emigrated to less powerful leagues such as Paraguay or Bolivia.

The truth is that the exchange rate effect alleviates one of the great gaps in national football, the great passion of the Argentines, extending the 'honeymoon' of the president with his citizens after the initial doubts. Immersed in an endless series of economic crises, local football has been reluctantly exporting its best football players for decades. However passionate the local fans may be, Argentine clubs have not traditionally had the financial power necessary to compete with the big contracts offered in Europe and, recently, in neighbouring countries with less media-friendly leagues.

Suddenly, there are more than 20 players earning a million dollars or more a year in the Argentine league, when a couple of years ago there were not even ten. The latest examples are quite illustrative. In January, River Plate, one of the two great historical clubs in the Argentine league, paid 10 million dollars to attract star midfielder Sebastian Driussi to its country, causing a major surprise.

The million-dollar signings have come one after another: Gonzalo Montiel, the hero of the 2022 World Cup, has joined Driussi at River Plate from Sevilla; Alan Velasco has signed with Boca Juniors, the other great historic Argentine club and River's bitter rival in Buenos Aires, in a transfer that has also been around ten million dollars; and Facundo Farias has landed at Estudiantes de La Plata, another classic team. 'El Pincha', as this last club is also known, now backed by the American businessman Foster Gillet, has been on the lips of all fans for having 'busted' the domestic market by paying around 15 million dollars to Boca for the local player Cristian Medina.

The froth does not stop there. There are even cases of outstanding footballers born abroad - Spain, Brazil, Colombia, Costa Rica - who are signing big contracts. In the Spanish case, the signings of Iker Muniain and Ander Herrera , both true emblems of Athletic Bilbao for years, by San Lorenzo de Almagro and Boca Juniors, respectively, have been quite high-profile. Another well-known player for Spanish fans, the Costa Rican goalkeeper Keylor Navas , formerly of Real Madrid, has signed for Newell's Old Boys, another legendary Argentine club. According to local media, Muniain will earn around two million dollars for the last four months of 2024 and all of 2025. For his part, Herrera will receive an amount close to one and a half million dollars at the 'xeneize' club. Navas will receive around one million dollars a year.

Last January, the Argentine sports media were proud: after years of uncertainty, the Argentine league had taken a leading position (fifth) in the ranking of the leagues around the world that have spent the most on transfers, with 87 million dollars , leaving behind no less than competitions such as the Italian Serie A and the German Bundesliga. A great connoisseur of Argentine football, Diego Lemme gives the key to this football renaissance in a few words: "The stronger weight made us more competitive."

And just to give you an example: last month, the modest club he heads, Defensa y Justicia, signed two players with contracts abroad. For Milei and his collaborators, a stable peso is crucial to their campaign to eradicate inflation . Moreover, they say they have enough dollar inflows to maintain it. But, as always, the scenario is not without risks. Although he has managed to quickly reduce inflation, the annual rate of 23% forecast for 2025 in the central bank's latest survey is still far above the world average. And the longer Milei keeps the peso under control, allowing it to slide only a small fraction against the dollar each day, the more footballers the country will import, increasing the risks.

Argentine teams are prohibited from paying players in dollars. So they pay them the equivalent of a dollar amount in pesos over what is typically a two-year contract. For teams, the risk is that the currency could suddenly plummet, as some analysts fear, forcing them to shell out more and more pesos to fulfill those contracts. “You always have to take into account the exchange rate risk,” Hernán Lacunza, vice president of Racing Club, another of the country’s top clubs, warns in an interview with Bloomberg .

Lacunza, an economist who was the country's economy minister, was surprised when he took over at Racing late last year to learn that most local soccer teams were not adequately analyzing their ability to deal with peso declines. He immediately began making those calculations at Racing, which brought in three players from abroad last year and another since he joined. "What seems affordable in dollars today may not be so tomorrow," he warns. Although the improvement is evident, Argentines will have to continue waiting to see their top stars in their local league, since players such as Leo Messi or Julián Álvarez remain far beyond the economic reach of their clubs.