The external context is a headwind for Javier Milei’s government. Not only the depreciation of the real and the price of the Soybeans at historic lows make it difficult to diagram a plan, but also adds the possible scenario of a “stock market crash”, imagined after Black Monday, which worsens the chances of a key objective: refinance the debt of 2025.
The government says it has successfully weathered the fall that occurred after the Bank of Japan’s decision on interest rates and the fear of a recession in the US – the Nikkei index lost 13.5% and the S&P500 3% in one day. The world markets registered mobilizing declines, but Argentina did not suffer a strong blow thanks to the “economic plan” and the “maintenance of the exchange rate restriction”.
In turn, market sources understood that, on this occasion, the exclusion of Argentine assets from the indexes that suffered large cuts “It was relatively positive”, since the effects at the local level were softened. “We are not part of the global leverage, we are the ones who are bought”“, they explain ironically to this medium.
However, the City’s warnings are not about this particular episode, but about the uncertain future.Was it a technical correction without consequences?Could it be a regional or corporate crisis? particularly technological ones? The global markets will they be hit by another dark day again?
Even though there is a possibility of some “financial accident“or a stock market crash” is not the most likely scenario at present, local analysts see it as a risk in the face of the effort to refinance 2025 liabilities in the international credit market.
According to the consultant’s calculations Criteriabetween the second half of 2024 and the first half of 2025, they will have to face maturities of around US$12 billion.
How Argentina should arrive in 2025
If Argentina does not pay off its debt with its own resources, which is not usual anyway, it will eventually have to access the international market to refinance it. It has a problem: While the average yield of speculative-grade emerging countries is around 9.5%, the country manages with rates above 17%.
“We have to comb our hair and make ourselves pretty for the photo in 2025. Argentina must reach at least that percentage to refinance its maturities with the market,” explains a stockbroker. Otherwise, the possibility of making a repayment will appear on the scene. restructuring. For this reason, the local market is closely watching how the dynamics of global markets are leading.
“A financial accident that results in a loss on the banks’ balance sheets, therefore an outflow of deposits and the ‘fly to quality’ to US Treasury bonds, will increase the financing rate, not only generating a greater recession in the United States, but also removing Argentina’s chances of reducing its interest rate.“, warns a market source.
The question is what concrete possibilities exist for this scenario. A priori, the US economy showing signs of recession increases the risk.
For the financial analyst Christian Buteler“Any complication in the stock market will remove the country’s chances of refinancing the debt or even requesting a REPO.”. Regarding the latter, a rumour has emerged in the last few hours regarding the fact that Argentina would be negotiating a loan through the Santander bank for US$1,000 million through this mechanism.
Impact on the real economy
However, if the chances of an eventual US recession are confirmed, “I would be more concerned about the impact on the real economy than on the financial economy“since it would generate a drop in the prices of the commodities that Argentina exports and greater pressure on the exchange rate when it appreciates against Near devaluationssuch as that of Brazil or other business partners.
For Andres Reschiniowner of F2 Financial Solutions, “It is not clear that this will happen”, he even finds it “too hasty” to analyze it. In any case, if a “stock market crash” occurs, for the analyst it would be “In the event of a drop in liquidity”, different from what was seen in the pandemic with the Federal Reserve (FED) injecting liquidity and lowering rates.
Something similar is maintained by Reschini in the latest report of his consultancy firm: “There is a chance that the storm clouds that turned into storms will not end up being a devastating cyclone, far from it.. There are many who doubt that the US economy might take a recession. The recurring question is whether the deterioration of the international scenario will worsen, and this possibility is impossible to rule out.
Meanwhile, Criteria’s latest market news survey maintains that the Sahm Rule “warns of a higher probability of recession in the US“If this financial scenario deepens, it will be more difficult to sustain the current policy.“, the report warns.
For the moment, the market observed a giant portfolio rearrangement, a kind of “reset” stock market. For how long and to what extent remains a question.
Source: Ambito
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