Surrounded by seemingly endless economic crises, Argentina has spent decades exporting its best soccer players. As in love with the local crowd, clubs simply never had financial power to compete with contracts offered by large foreign teams.
So when River Plate disbursed $ 10 million to bring back midfielder Sebastián Driussi in January, it caught the eye. And it didn’t stop there: Gonzalo Montiel, the 2022 World Cup hero, also returned to the River; Alan Velasco hit with Boca Juniors; and Facundo Faria went to Estudiantes. In addition, foreign players from Spain, Brazil, Colombia and Costa Rica closed contracts with Argentine teams.
Suddenly, more than 20 players are earning at least $ 1 million a year in Argentina, a number that until a few years ago was no more than 10, according to specialized vehicles.
This phenomenon is the “Milei effect”. With 15 months in office, libertarian president Javier Milei adopted an aggressive austerity policy that stabilized the weight, making it the coin stronger in almost a decade, according to the Argentine Central Bank. This gave Argentines more purchasing power, allowing from international travel to hiring stars that were previously unreachable.
Weight stability also explains why Milei is still popular despite tough tax adjustment measures – and even after a recent scandal involving cryptocurrencies.
Opportunity or risk?
For economists, the recent wave of hiring in Argentine football reflects a larger phenomenon: weight appreciation can endanger Milei’s own plan to stabilize the economy. While the government keeps the exchange rate under control, allowing only small daily devaluation, increasing imports and abroad spending can harm the country’s accounts.
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“Weight is clearly overvalued,” warns Aldo Abram, an economist at Freedom and Progress Foundation. According to him, this situation can lead to a new currency crisis, such as those that have already devastated the Argentine economy in the past.
Malei and his economic team reject these concerns. For them, maintaining a stable exchange rate is essential to defeat inflation – and the country has enough reservations to support this policy. When economists criticize his strategy, the president does not hesitate to respond. He recently fired the Argentine ambassador to the OAS after his father, former Minister Domingo Cavallo, said the weight was overly valued.
Clubs still have limits
Even with the appreciation of the weight, Argentine clubs still cannot compete for the main stars in the country. Lionel Messi and Julián Álvarez are still unreachable, and Boca Juniors could not close with Leandro Paredes, who will remain in Roma, Italy.
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In addition, Argentine clubs are prohibited from paying salaries in dollars. Thus, contracts are closed with a fixed amount in dollars, but paid in weights over time. The risk? If weight devalues sharply, clubs will have to spend much more to honor their salary commitments.
“You always have to be aware of the currency risk,” says Hernan Lacunza, vice president of Racing Club, one of the main teams in the country. Lacunza, an economist who was once an economy minister of the country, was surprised when she took office at racing late last year and found that most local soccer teams did not properly analyze her ability to support weight declines. He immediately started running these calculations in the racing, which brought three players abroad last year and another since he entered.
“What seems affordable in dollars today may not be tomorrow,” said Lacunza. “You have to get an idea what the team’s balance exchange rate is.”
