Milei’s FX reforms spur worst corporate default wave since 2020

Javier Milei’s reforms have brought stability to Argentina’s chaotic foreign exchange market and praise from investors. But the overhaul is also fuelling the worst streak of corporate defaults since the pandemic.

Local borrowing costs are soaring, especially for peso-reliant companies, with many of them struggling with tight cash flows and high levels of debt after President Milei removed most exchange controls for individuals.

Over half a dozen firms have either defaulted or entered debt talks this year, including utility Grupo Albanesi, as Milei’s changes caught them in an already weak financial position. That pressure is expected to continue, with balance sheets in sectors like agriculture, energy and manufacturing already showing signs of stress, according to Ezequiel Fernández, head of credit and equity research at Balanz Capital. 

“If Argentina wants to turn the macro page around, a certain level of ‘creative destruction’ at the micro level needs to happen,” Fernández said. “After all, regime changes do create winners and losers.” 

Behind the increase in defaults is a financing strategy that’s no longer working. Before Milei, companies took advantage of currency controls by issuing bonds denominated in dollars that settled in local currency, also known as dollar-linked bonds. In doing so, many of them were able to lock in negative rates as investors sought protection from soaring inflation and currency depreciation.

Average interest rates for dollar-linked bonds rose to 11 percent in the first quarter of 2025, more than double the five percent seen in the same period last year, according to a report from Moody’s Ratings. In response, sales of dollar-linked bonds dropped to just US$2 million during the first quarter, down from US$165 million over the same period in 2024. 

Meanwhile, companies raised US$1.1 billion in dollar-denominated bonds, more than double the amount issued during the prior-year period, as average interest rates remained stable at six percent, as per the report.

“In 2025, we are experiencing the highest number of defaults since the pandemic,” said José Antonio Molino, associate director at Moody’s Local Argentina, a unit of Moody’s. “The dollar-linked market has virtually disappeared.” 

There have been eight defaults since November, including missed payments or restructurings, he said. The tally treats the three companies in Grupo Albanesi as one group.

Milei’s austerity campaign is also crimping margins, including in the manufacturing sector. Companies are battling higher operating costs, diminished purchasing power and heightened competition from abroad as the peso’s jump left it broadly overvalued. Argentina’s Economy Ministry didn’t respond to a request for comment.

Companies rated as A+.ar and below on Moody’s Local Argentina scale — typically mid- to small-sized firms — currently face the highest refinancing risks, according to Molino. Within the scale, an A.ar rating indicates “above-average credit quality relative to other Argentine issuers,” with A+.ar marking the upper end of the category.

“Refinancing risks remain high for the next 12-18 months due to low liquidity in the local market for mid- to small companies,” Molino said. “We are observing a large degree of flight-to-quality in the local market.

‘Bifurcation’

Meanwhile, issuers with access to global markets will likely be able to manage, said Luis Olguin, a portfolio manager at William Blair Investment Management in London.

“It’s a bifurcation in credit issuers,” he said. “Companies that do tap international-size markets usually have a longer track record, and transparency with international investors.” Olguin’s firm doesn’t have exposure to Argentine corporates right now because yields are too low, he said. 

Companies like YPF, Pampa Energia and Telecom Argentina successfully tapped investors in recent months. Others haven’t been as lucky. In May, two subsidiaries of utility Albanesi missed an US$19.5-million interest payment, triggering a reorganisation. Albanesi in a statement said it is analysing its options, planning to present concrete proposals in the near term and reaching a “reasonable” solution.

Also in May, pulp and paper maker Celulosa Argentina SA announced it would miss payments on local law dollar bonds. In June, energy firm Petrolera Aconcagua Energia said it was restructuring its financial debt.

Aconcagua said it defaulted on debt tied to an agreement with Vista Energy and Trafigura Group. To avoid enforcement, both companies offered to take over the company, assuming that its debt is restructured and the due diligence process yields satisfactory results. YPF, Pampa, Telecom Argentina and Celulosa Argentina didn’t respond to requests for comment.

“Many of the companies that defaulted were already running on borrowed time thanks to the FX controls,” Balanz’s Fernandez said.