Argentina’s country risk breaks this Friday October 25 the psychological level of 1,000 units and is located in the 995 basis points. This index pierces that key level for the first time since August 12, 2019, after the presidential PASO of that year, which established the presidential formula of Alberto Fernández and Cristina Fernández de Kirchner as the winner.
It was difficult for the Government to overcome the resistance and not getting the Argentine risk to break through 1,400 points just a month and a half ago and, although the Minister of Economy, Luis Caputo, said that he was not worried about this information because he had the money to meet his obligations until 2026.
Argentina I needed him to drill the 1,000 units to start unblocking access to the international debt market, a step that, As Caputo anticipated a few days ago, it will occur in mid-2025, prior to the July debt maturities for US$5,000 million, precisely, in order to raise funds to comply with those obligations.
After flirting with that limit many times, this Friday, he finally did it. Today’s fall occurs in response to the encouraging signs about the near future of the domestic economy, announced by the Minister of Economy, Luis Caputo. Given this news, the index prepared by the American bank JP Morgan falls 41 units to 995 basis points.
Recent agreements with international organizations and banks remove concerns about upcoming sovereign debt maturities, while the commitment of the libertarian government of Javier Milei to maintain the fiscal surplus helps an optimistic climate. And the market sees signs of an economic rearrangement and a financial relief that removes pressure on upcoming debt maturities.
It happens that this occurs after the Minister of Economy, Luis Caputo, will announce the financing commitment for Argentina for US$8.8 billion by different credit organizations (Inter-American Development Bank, World Bank and International Finance Corporation) within the framework of their tour of the United States to participate in the annual meetings of the International Monetary Fund (IMF) and the World Bank (WB).
It should be noted that these dollars will not arrive instantly to Argentina and are intended for different programs that were agreed upon with the organizations that committed them. However, these announcements generated a good impression in the market, which has been demanding that the Government for months now obtain fresh funds to give a more accurate picture of when the exchange rate can be lifted.
“Although the timing of the arrival of these disbursements is not clear, which may take up to six or seven years to be fully realized, the news is good,” summarizes Haroldo Monatgu, former vice minister of Economy during Martín Guzmán’s administration at the helm. of the Palacio de Hacienda and current director of the consulting firm Vectorial. And the visit of the economic team to the International Monetary Fund (IMF), that is, with Gita Gopinath and Kristalina Georgieva, also stands out as a positive element, which opens the window to the possibility of a new agreement that includes disbursements.
There are plenty of promises for now within the framework of an Argentina that shows certain weakness, but the market is driven by expectations and it is clear that, as the market analyst suggests, Leonardo Svirsky, “the news that comes from outside regarding Argentina They are encouraging and this causes the markets to react positively.” And he anticipates “it is very likely that a rally in bond prices will follow.”
Mateo Reschini, Senior Research Analyst at Inviu, agrees with the announcements that were made, but also adds the rumors of a possible REPO, “which were known in recent days.” “I think that drives the bonds up, although the committed funds are not going to go only to the State, but many are directed to the private sector, but all this gives the indication that the pending maturities of the year will be met. next,” he says.
This is key in a context in which the market had woken up in recent days the specter of a possible debt exchange or restructuring. In fact, a representative of the financial sector had suggested in a recent conference that the Government was going to have to implement an operation of this type and this week the risk rating agency Moody’s also announced that it anticipated a scenario of reprofiling of the obligations that Argentina maintains with external creditors before or after the legislative elections.
But this trend did not happen overnight. “For more than a month we have seen a change in trend in the capital market and it responds, on the one hand, to the fact that money laundering began to generate an interesting flow of dollars and, on the other, now some money from outside is added that is going to start coming. These elements justify the reduction in country risk that is seen these days, at least in the short term,” he tells Scope he Eco Go economist Sebastián Menescaldi.
The analyst points out that what is happening is that the market is beginning to see that “a story is being put together” in which it is possible to maintain the flow in a positive way. This is combined with the fact that the “carry trade” encourages exports to be brought forward. in a context of postponement of payment for imports and there is a succulent interest in dollars that fuels the game, promoted by a low rate in pesos and a crawling-peg that is at 2% monthly “If this continues, everything is going well. , but if it reverses, I don’t know what will happen,” he says.
Along the same lines, stock market advisor Marcelo Bastante points out that this rise “is due to a combination of factors.” “First, the fiscal solidity shown by the Government, month after month, reconfirms the fiscal and financial surplus, and cleared up some doubts regarding the Government’s ability to face the 2025 maturities,” he analyzes.
On the other hand, he highlights that there is also the good news that Argentina avoided entering the gray list of the Financial Action Task Force (FATF) in the fourth round of the organization’s mutual evaluation. “In other words, the evaluation concluded satisfactorily for our country,” summarizes Bastante.
And, thirdly, he adds as an element “the data that comes from abroad, since, in general, the presentation of the balance sheets of Argentine companies listed in the United States have been positive,” to which he adds that yesterday the local markets rose strongly and today continue the positive trend.
In short, as a report by the consulting firm SBS maintains, optimism in the financial sphere drove new highs in the price of public securities. “Bonds in dollars, that is, those that pay capital and interest in this currency, such as Globales (with foreign law) and Bonares (with Argentine law), have registered an average increase of 60% so far in 2024 “, they point out.
Source: Ambito
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