War in Middle East brings Argentina record exports and a higher fiscal bill

The war in the Middle East has left Argentina with a two-sided equation. Brent crude has traded above US$100 a barrel for more than a month, pushing exports to record levels. But the same price shock has made imported fuels more expensive and forced the government to absorb higher energy subsidies to contain residential tariffs, at a time when household consumption is showing signs of weakness and inflation at the start of the year exceeded official forecasts.

April data, released last week by the Economy Ministry and Indec, clearly show that tension.

On the external front, exports neared US$9 billion in April, a historic high, with a 33.6% year-on-year increase, equivalent to an additional US$2.24 billion. The fuel and energy segment was the second-largest contributor to that increase: it grew 86% from April 2025, added US$718 million and also reached a record, thanks to the combined rise in volumes, up 53%, and prices, up 21%. Overall, the segment accounted for 30% of the total export increase.

Imports, meanwhile, fell 4% year on year in value and 8% in volume. The sharpest decline was in fuels and energy, down 45%, reflecting greater domestic self-sufficiency. The result was a trade surplus of US$2.8 billion in April and US$8.3 billion in the first four months of the year. Consultancy LCG projects that the surplus will exceed US$20 billion for all of 2026.

The fiscal cost of the energy shock

The domestic front showed a more complex dynamic. For the first time this year, primary spending rose 2% in real terms in April and did not move in line with the decline in revenue, marking a shift from previous months, when both variables had followed the same direction. The accumulated primary surplus over four months is equivalent to 0.5% of GDP, below the 0.6% recorded in the same period of 2025 and the 0.7% posted in 2024.

The main factor behind the pressure on spending was economic subsidies, which jumped 87.8% in real terms in April, with energy subsidies in particular up 150%, after several months of steep declines in the same comparison.

Over four months, subsidy spending has accumulated 0.27% of GDP, according to different measurements, above the level recorded in the first four months of 2025. “This is one of the points that was underestimated in the local impact of the energy shock and that is also putting pressure on the fiscal result,” consultancy Outlier said.

Econviews, led by former finance secretary Miguel Kiguel, said part of the April jump is explained by the payment of overdue March bills, meaning it would not be appropriate to describe it as a change in trend.

The increase in subsidies was offset by a deeper cut in the rest of spending: primary spending excluding subsidies was equivalent to 3.7% of GDP over four months, 0.4 percentage point below 2025 and 1.5 points below the 2016-2023 average.

“Over four months, subsidy spending totals 0.26% of GDP, above the accumulated figure for the same months of 2025. Higher energy prices and a delay in implementing the tariff increase path explain the growth. It was offset by a more intense adjustment in the rest of spending,” LCG said.

The fiscal target for 2026, set in the budget, is a primary surplus of 1.5% of GDP, slightly above the 1.4% referenced in the latest IMF staff report.

Analysts see the target as achievable, but warn about the paths needed to get there. “To sustain the target, revenue performance will need to improve, there will need to be new explicit spending adjustments and/or new extraordinary sources will need to be added,” Outlier said. The consultancy noted that the area with the most room for further cuts is social programs, since economic subsidies are constrained by the global energy crisis.

In that context, the government also moved ahead with a new reduction in export taxes. Speaking at the Buenos Aires Grain Exchange, President Javier Milei announced a two-percentage-point cut in export duties on wheat and barley, bringing them to 5.5% — compared with 12% at the start of his administration — and said that export taxes on petrochemicals and the automotive sector would gradually be brought down to zero.

The following chart tracks monthly Argentine wheat export volumes over the last three years, based on container throughput data compiled by Datamar:

Wheat Exports | Argentina | Jan 2023 – Mar 2026 | TEUs

Source: DataLiner (click here to request a demo)

The fiscal cost of the measure is limited, Econviews said: the affected products paid around 600 billion pesos in taxes in 2025, equivalent to 0.07% of GDP.

By Sofía Diamante for La Nación

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