JP Morgan lights the alarms: adverse, latent risk of a storm

The last report of Latin America Economic Research of JP Morgan exposed what many investors already suspected, the defeat of the ruling in Buenos Aires not only erodes the political governance of Javier Mileibut also installs a new financial risk scenario that the market cannot ignore. The bank warns that the combination of descending trade balance, a fiscal “artificially sustained surplus” with indebtedness and a recessive economy leaves the Argentine weight in a situation of extreme vulnerability.

The exchange operators have already taken note, on Monday dollars were allocated in a desperate intervention of the treasure, with the exchange rate dangerously approaching the upper part of the exchange band. The question that reveals savers in pesos and dollars is not whether there will be turbulence, but when the next shake will come.

JPMorgan believes in his latest Latin America Economic Research report, which the mid -term elections in the province of Buenos Aires showed a very negative result for the Milei government, which is It generates doubts about its ability to obtain a positive result in the national elections of October and puts the agenda at risk of reforms for the second half of the mandate.

It is surprised by the failure of suffering a difference of 13% (it is actually 13.57%), exceeding the previous forecasts they made in their latest report.

The difficult road to October

Recognizes the overwhelming victory of “Kirchnerism” (qualifies) in the regional elections, and indicates that it is a challenge for the government in its attempt to obtain a good result in October. He states that, without a doubt, the dynamics of the next national elections will be very different. He expresses that the Milei government is likely to intensify its antikirchnerist speech after these results. In addition, spoiled discreetly that, “five weeks after the national elections, The government could emphasize its political strategy to correct the mistakes made in recent months”Explains that Milei said that the results demand a deep reevaluation of the political strategy and promised to carry out a constructive self -criticism already correct past errors to prevent them from repeating.

Asevera (actually proposes) that, despite the adverse results, the government is expected to maintain fiscal discipline as a fundamental pillar, even before the complex parliamentary dynamics of recent weeks. He emphasizes that Milei said that the course chosen in 2023 will remain and reinforce, despite the electoral defeat. Listed the key pillars of the policy: defense of fiscal balance and monetary containment; maintenance of the current exchange rate regime; and continuity of deregulation policies. In JPMorgan’s opinion, the persistent high -risk differential assets of assets make it suboptimal for the Government to respond only with higher real interest rates. Almost 50 days after the legislative elections, The weight remains vulnerable to greater devaluation, despite the intervention of the treasure in the currency market (which last week amounted to about 500 million dollars, according to estimates). If the exchange rate approaches to the upper limit of the band ($ 1,479.77 and $ 1,495.54 for September and October, respectively), the BCRA would be forced to reduce currency reserves to absorb the excess weights. Estimate the gross liquid reserves in U $ s 15.8 billion. They believe there will be recessionThey speak of a prolonged period of high political risk will probably affect economic activity.

With respect to The high real interest rates suggest that they could press public accounts by increasing treasure financing needs.

It is explained very lucidity and removing the veil that kept the government hiddenwhich is crucial Distinguish between financing needs and fiscal balance, since most of the affected public debt is discount debt, with service costs capitalized and registered out of balance. JPMorgan calculations suggest that if current real rates persist until November (approximately 2.4% monthly, according to the average of the last 10 days), the financial load could reach 0.4% of GDP (or 0.2% if only the private sector debt service is considered). Cushion the impact of your vision indicating that, Inflation expectations, according to the BCRA survey, increased slightly in Augustalthough attenuating that the increase was modest compared to the expectations of previous months. He finishes pointing out that this environment of high political risk will probably require a more competitive real exchange rate (Come like necessary a devaluation) to support a greater commercial surplus and contain the demand for household foreignship, thus protecting the debt service in early 2026. It concludes, stating that the combination of policies adopted in The next few days and weeks To address the high political risk It will be essential to model the expectations of medium -term inflation and, ultimately, for the success of the stabilization program.

JP Morgan, in a diplomatic but unequivocal tone, suggests that Argentina travels a narrow corridor where political risk, exchange tensions and a public debt converge whose true cost remains hidden in accounting margins. With liquid reserves estimated at just $ 15,800 million and a real rate that, if maintained, would devour 0.4% of GDP to November, next months of 2025 could become a anguish prelude.

The unknown is no longer only electoral, the central question is whether the economic team will resist wear and if the market actors will tolerate the fiction of a non -existent surplus. If exchange pressures continue to climb, the risk of abrupt and messy adjustment stalks as a tangible possibility. For savers, the message is clear: the current calm could hardly be the prelude to a storm that has not yet been unleashed.