President Javier Milei’s economic shock therapy has stabilized parts of Argentina's economy, but a surge in cheap imports is battering local manufacturers who now face an uncertain future.
Argentina’s auto parts output fell 22.5 percent in the first two months of this year compared to the same period in 2025, according to government statistics agency INDEC, a stark reflection of the pain President Javier Milei’s aggressive reforms are inflicting on local industry. The sharp easing of trade restrictions, a cornerstone of Milei's plan, has helped stabilize a crisis-ridden economy but left manufacturers long shielded from foreign competition struggling to adapt.
"It is a turning point. We very quickly entered a new ecosystem, where the opening of the economy and international trade has put pressure on Argentine industrial companies," Nicolas Ballestrero, the CEO of auto parts maker Grupo Corven, said. His firm has seen both output and exports decline this year.
The data paints a grim picture for the sector. While exports rose just 1.2 percent to $1.28 billion in 2025, imports of auto parts climbed 11.6 percent to $10.32 billion, according to industry group AFAC. The influx was led by China, with imports from the Asian nation jumping 80.9 percent to $1.46 billion. The pressure has been immense for small firms like Suspenmec, a family-run plant outside Buenos Aires that has seen sales drop by around 30 percent this year.
The situation highlights the delicate balance Milei must strike. His administration has celebrated a primary fiscal surplus and a recent credit rating upgrade from Fitch to B-minus. Yet, those macro-level wins are cold comfort for sectors facing collapse. The market’s deep-seated skepticism is reflected in Argentina’s country risk premium, which stands at more than 500 basis points—a stark contrast to neighboring Brazil’s premium of under 200. Investors are demanding higher returns for the political risk, pricing a government bond maturing after Milei’s term ends nearly 350 basis points higher than a comparable bond that matures one year earlier.
Industrial Pain vs Macro Stability
The struggles in the auto parts sector, where vehicle production also fell 19 percent in the first quarter, are a microcosm of a broader trend. Milei’s reforms, including slashing spending and ending controls on rent, have benefited commodity exporters and brought a boom in oil, gas, and mining. Argentina has even become a net exporter of petroleum.
However, the rapid opening of the economy has been a shock for manufacturers. Sweden's SKF and U.S.-based Dana have shut some of their Argentine plants. For local firms, the adjustment has been sudden and painful. "It is worrying. We feel the impact of (duty-) free imports from so many brands," said Lucas Panarotti, a partner at Suspenmec.
The Weight of History
Despite Milei’s accomplishments, the country’s history of economic crises and institutional weakness weighs heavily on the present. Inflation is still expected to finish the year around 30 percent, and the economy is forecast to grow a mediocre 3.5 percent.
This deep-rooted distrust is forcing even those in booming sectors to hedge their bets. Natural-gas exporters are reportedly shifting toward "floating liquefied natural gas" models that have higher unit costs but allow them to move investments elsewhere if the political climate sours, according to the Baker Institute.
This lack of genuine demand to hold pesos or invest long-term in the country remains Milei's greatest challenge. As economist Nicolás Cachanosky noted, the credibility of any peso-based regime is ultimately only as strong as Argentina’s political institutions. Without restoring that faith, the country's comeback may remain stalled, caught between promising reforms and the persistent risk of a return to past failures.
This article is for informational purposes only and does not constitute investment advice.
