Argentina's Shifting Economic Paradigm and Sectoral Impact: Assessing Long-Term Investment Risks and Opportunities in Construction and Manufacturing Under Milei's Libertarian Reforms

Argentina's economic landscape is undergoing a profound transformation under President Javier Milei's libertarian reforms, which prioritize fiscal austerity, deregulation, and market liberalization. While these policies have stabilized inflation and restored fiscal discipline, they have also triggered significant sectoral disruptions, particularly in construction and manufacturing. This analysis evaluates the long-term investment risks and opportunities in these sectors, drawing on recent data, policy developments, and market responses.

Construction Sector: A Tale of Short-Term Pain and Long-Term Promise

The construction industry has borne the brunt of Milei's austerity measures. By November 2025, construction activity had plummeted by 4.1% month-on-month, marking the largest decline of the year, driven by halted public works and pre-election material stockpiling by firms anticipating inflationary pressures. This downturn reflects a broader shift away from public infrastructure investment, a cornerstone of Argentina's previous economic model.

However, the RIGI (Régimen de Incentivos para Grandes Inversiones) framework, introduced in 2024, offers a counterbalance. This regime provides 30-year tax stability, customs exemptions, and currency flexibility for large-scale projects, attracting foreign capital to infrastructure and energy sectors. For instance, the Vaca Muerta Sur pipeline-a 437-kilometer oil conduit- secured a $2 billion syndicated loan under RIGI, signaling renewed investor confidence. Such projects, while extractive in nature, could catalyze long-term construction demand through associated infrastructure development.

Long-term projections remain cautiously optimistic. Despite the 2025 contraction, the construction sector is expected to grow at a compound annual rate of 6.6% from 2025 to 2029, driven by fiscal easing and renewed investor interest in public-private partnerships. Yet, this recovery hinges on sustained policy continuity and the government's ability to address structural bottlenecks, such as rigid labor laws and high tax burdens.

Manufacturing Sector: Structural Challenges and Missed Opportunities

Milei's import-focused policies have exacerbated challenges for Argentina's manufacturing sector. Annual manufacturing output fell by 8.7% in November 2025, with five of the last six months recording contractions. The administration's preference for imports over local production in less competitive industries has led to factory closures and job losses, undermining the "Made in Argentina" narrative.

The RIGI framework, while designed to attract investment, has disproportionately benefited extractive industries. For example, copper and lithium projects under RIGI have drawn $30 billion in commitments, yet these investments bypass local supply chains, limiting downstream industrial development. Critics argue that this approach reinforces Argentina's role as a raw material exporter rather than fostering value-added manufacturing.

Despite these challenges, niche opportunities exist. The steel industry, for instance, is poised for a rebound in 2026, supported by infrastructure projects in Vaca Muerta and housing initiatives. However, broader industrial diversification remains elusive without reforms to labor and fiscal policies.

Risks and Opportunities: Balancing Volatility and Potential

The primary risks for long-term investors include political uncertainty and unimplemented structural reforms. While Milei's midterm victory in October 2025 strengthened his congressional majority, reliance on emergency decrees raises questions about policy durability beyond 2027. Additionally, unresolved labor and tax issues could deter sustained investment.

Conversely, Argentina's economic stabilization-marked by a 14-year fiscal surplus and inflation dropping to 2.1% monthly-has improved its creditworthiness. The partial lifting of capital controls and RIGI's regulatory stability have attracted $2.5 billion in foreign investment since 2025. For sectors like construction and energy-linked manufacturing, these developments present opportunities for firms willing to navigate short-term volatility.

Conclusion: A Calculated Path Forward

Argentina's economic transformation under Milei represents a high-stakes gamble. While the construction sector faces immediate headwinds, RIGI-driven infrastructure projects and long-term growth projections offer a path to recovery. The manufacturing sector, meanwhile, requires strategic interventions to shift from extractive dependency to diversified industrial output.

For investors, the key lies in balancing short-term risks with long-term potential. Sectors aligned with RIGI's priorities-such as energy infrastructure and mining-present compelling opportunities, but broader industrial revitalization will depend on Milei's ability to address structural bottlenecks and maintain policy continuity. As Argentina navigates this paradigm shift, the interplay between austerity and innovation will define its economic trajectory in the years ahead.