Record YPF profit masks Argentina's deepening macro-financial disconnect.

Argentina's market delivered a paradox yesterday that captures the underlying dilemma of Milei's program: YPF (NYSE: YPF) reported the strongest operating result in its history — adjusted EBITDA of USD 2.804 billion for the second quarter, 150% above the prior year, with net income of USD 1.205 billion — and its shares fell 3.5% on Wall Street, closing at USD 49.16. Simultaneously, Edenor sealed the acquisition of Metrogas for USD 780 million, a transaction that adds another USD 200 million to YPF's balance sheet. That the best quarter in the history of Argentina's flagship company was not enough to hold up its share price precisely describes the current state of the market: corporate fundamentals are solid, but macroeconomics and politics generate a risk premium that crushes them.

The S&P Merval shed 3.2% in Tuesday's session, retreating from the dollar-denominated highs reached so far in 2027 and returning to May levels. JP Morgan's country risk index climbed to 466 basis points, marking the highest level since June 10 and accumulating six consecutive sessions of deterioration. What's striking is that this move no longer responds primarily to the external context — Middle East tensions, Brent crude at USD 89.16 per barrel — but rather reflects a local reassessment: investors have pulled forward the 2027 electoral climate by more than fourteen months. UBA surveys show that 59% of Argentines rate the economic situation as bad or very bad, and political scientist Sergio Berensztein publicly warned that with current approval numbers, Milei would not reach 40% in the next presidential race. The market is listening.

The underlying tension is not between the government and the opposition, but between two objectives the economic team can no longer satisfy simultaneously: keeping the exchange rate below $1,500 — the wholesale dollar closed at $1,490.50, its third consecutive day of declines — and maintaining interest rates low enough for credit to reactivate the economy. Analysts at Portfolio Personal Inversiones put it bluntly: a point comes at which Caputo has to choose. FX containment requires absorbing pesos, which pushes rates higher, which in turn constrains credit, which perpetuates the weakness of domestic consumption. The Invecq consultancy estimates that roughly two-thirds of primary spending is indexed by formula, which reduces room for additional fiscal adjustment, and that reaching the 1.4% of GDP primary surplus targeted for 2026 looks challenging without a clear pickup in activity.

Against this macroeconomic backdrop, the microeconomic picture is one of fragmentation, as economist Mariana Camino, founder of ABECEB, described clearly: export sectors growing 24.4% year-over-year while mass consumption falls close to 3%. SME retail sales retreated 3.8% year-over-year in July, according to CAME, and SME industry contracted production by 11% in the second quarter. Construction has lost between 62,000 and 65,000 formal jobs since late 2023, and sector input sales fell 6.5% year-over-year in July. 78% of Argentine households are concentrated in the lower and lower-middle class segments, with incomes below the average of $2.8 million per month: that distribution explains why declining inflation is not yet translating into a consumption recovery.

The fracture is also expressed in employment: the informality rate climbed to 44.2%, with 379,708 new informal workers over the past year, while formal employment shed 156,786 positions. Layoffs at industrial companies are accelerating: Granja Tres Arroyos let go of 250 workers in Entre Ríos due to the collapse of its poultry exports to China following avian flu outbreaks; Mirgor dismissed 300 operators in Río Grande amid a union conflict; Unilever closed its dehydrated vegetables plant in Mendoza, leaving 60 people without work. The three cases illustrate different vectors of the same phenomenon: the combined pressure of high costs, weak domestic demand, and import competition.

The competitiveness data published by IERAL of Fundación Mediterránea is perhaps the most disturbing for the medium term: 49% of surveyed industrial inputs are cheaper in Brazil, Chile, Paraguay, Uruguay, and the United States than in Argentina, five percentage points more than in the previous reading. The trade opening process, with cell phone imports growing 600% year-over-year and Brazilian cars losing market share, is accelerating the reconversion of the productive structure without credit conditions, infrastructure, and the tax burden allowing local firms to adapt at the same pace.

The government this week launched a tender for a USD 800 million electrical works project in the AMBA — the first major private investment in electricity transmission in two decades — and the Treasury canceled Non-Transferable Letters with the BCRA for USD 781 million, continuing the cleanup of the monetary authority's balance sheet. These are structurally positive signals. But the market this week will be watching the July inflation print — expected to come in near 2.2% nationally, above June's 1.9% — and the Bonar 2029 auction, where the Economy Ministry reduced the amount to be placed to a total of USD 100 million, a signal of caution amid the rising cost of sovereign financing. The success of the rollover and the resulting level of rates will determine whether the FX-monetary tension remains contained or whether it begins to spill over into financial assets with greater intensity.

**YPF (NYSE: YPF)** — The state-controlled oil company reported adjusted EBITDA of USD 2.804 billion for the second quarter of 2026, the highest in its history and 150% above the prior year, with net income of USD 1.205 billion and a leverage ratio of 1.1x, its lowest in more than a decade. In parallel, it agreed to sell its stake in Metrogas and Metroenergía to Edenor for USD 780 million, part of its strategy to concentrate investment in Vaca Muerta, where shale production averaged 213,000 barrels per day, up 47% from a year earlier.

**Edenor (NYSE: EDN)** — The main electricity distributor in the AMBA, controlled by businessmen José Luis Manzano, Daniel Vila, and Mauricio Filiberti, acquired the 70% equity stake in Metrogas — the country's largest gas distributor, with 2.4 million customers — for USD 780 million in a process advised by Citigroup, consolidating in local hands a dominant position in energy distribution across the Buenos Aires metropolitan area.

**Mercado Libre (NASDAQ: MELI)** — The company confirmed a USD 91 million investment to build its first warehousing center in Argentina's interior, located in Estación Juárez Celman, Córdoba, spanning 60,000 square meters with capacity for 6 million products; the project is part of a USD 3.4 billion investment plan in Argentina for 2026.