Argentina's Risk Premium Hits Three-Month High While Global Markets Rally

Argentina's country risk closed at 517 basis points on Wednesday, its highest level in three months, and it did so while Wall Street rallied, gold touched $4,500 and bitcoin cleared $69,000: the disconnect between local assets and the improved global mood is the story of the day, and it exposes with unusual clarity the fractures the market is trying to process simultaneously.

The mechanics are familiar but the magnitude is striking. Since JP Morgan's indicator hit an eight-year low of 403 points in early July, it has accumulated a rise of more than 110 units in just over a month. The contrast with the rest of the emerging universe is telling: while the regional average advanced barely five points over that period, Argentina climbed more than 18% in August alone. Analysts at Quantum Finanzas identified the precedent investors have in mind: in previous pre-electoral cycles, dollar demand for hoarding reached $6 billion per month. That historical memory, combined with disappointing activity data, works as a multiplier of risk aversion.

The external backdrop this week didn't help either. The U.S. 30-year Treasury yield brushed 5.34%, its highest since 2007, before partially retreating after the Trump administration's decision to double its buyback of long-dated paper — the so-called Operation Twist, a tool not used since 2011. The move managed to ease pressure on Treasuries and improved global sentiment, but Argentine sovereign bonds were left out of the rebound: Globales and Bonares fell 0.4% on average during the session, accumulating losses of 4% for the month.

What makes the situation more uncomfortable is that the domestic diagnosis leaves no room for complacency. Indec will publish the June activity estimator this Thursday, and projections from consulting firm Analytica anticipate an advance of just 0.3% month-over-month, with the second quarter closing in negative territory. Minister Luis Caputo himself had pointed to June as the starting point of "the best 18 months" in decades; the data to be released in hours will put that claim to the test. Meanwhile, the UTDT's Business Cycle Center measured a recession probability of 81% in July, the lowest of the year but still above the threshold the institution considers significant, with the indicator declining from a peak of 99% in January.

Real economy data is what most worries the market. Auto production fell 5.4% month-over-month in July, cement shipments dropped 4% and new vehicle registrations sank 17.7% month-over-month and 30% year-over-year. Formal private sector wages retreated 0.9% in real terms in June, according to the Labor Secretariat, breaking the November 2023 level for the first time in 20 months. The median wage of the registered private sector stands at around 1.3 million pesos net per month, a figure that contrasts with a childcare basket exceeding 650,000 pesos for a school-aged child and with utilities that already absorb more than 12% of wages, double what they represented in 2023. Roberto Urquía, owner of Aceitera General Deheza and one of the country's wealthiest businessmen, described it without euphemism from Córdoba: "People don't have enough to make it to the 15th of the month." The textile industry embodies the sharpest edge of the strain: IGT33 S.A., the entity behind the Rever Pass and Be Rebel brands with four decades of history, filed for creditor protection with debts exceeding 7 billion pesos and losses of 4.365 billion in the last fiscal year.

Against that backdrop, the government made two bets this week pointing in different directions. The first was raising peso interest rates: overnight repos reached 30% nominal annual on Wednesday's session before easing to 25%, in what the market reads as a deliberate signal to defend the informal ceiling of 1,500 pesos on the wholesale dollar. Central bank president Santiago Bausili confirmed at the FIEL event that monetary policy will maintain "a contractionary bias" until inflation converges to international levels. The second was the approval of RIGI status for the Los Toldos II Este project of Tecpetrol, the oil company of Grupo Techint: $6.4 billion in investment, 70,000 barrels per day of projected production by 2027 and 3,100 direct jobs. It is the largest oil RIGI approved so far for a single project, and it arrives at a politically charged moment given the history of friction between Milei and Paolo Rocca, the group's main shareholder. At the same time, the BCRA formalized Communication A8467, which allows banks to allocate up to 15% of their foreign currency deposits to loans for companies that do not generate foreign exchange, a measure that former minister Hernán Lacunza publicly called "a shortcut that leads to a problem" because of the balance sheet mismatch risk in the event of an eventual FX correction.

The big structural move of the day, however, was the Belgrano Cargas tender. The Economy Ministry published Resolution 1350/2026, authorizing the 50-year concession of 7,594 kilometers of track on the General Belgrano, General San Martín and General Urquiza lines, distributed across 16 provinces and with connections to ports and international crossings toward Brazil, Bolivia, Chile, Paraguay and Uruguay. Mandatory investment is estimated at around $800 million, and those exceeding $200 million in track renewal will be able to access the RIGI. The "anti-China" clause, which excludes companies controlled by foreign states, follows the same criterion applied to the Hidrovía and the AMBA I project, and underscores the Milei administration's geopolitical alignment with Washington at a moment when the United States committed $3 billion to strengthen its critical minerals supply chain — a decision that repositions Argentina as a strategic destination for lithium and copper.

On the FX front, the BCRA strung together 15 consecutive sessions of net purchases, with gross reserves once again exceeding $50 billion for the second time this year. But accumulation slowed noticeably in August, with just $354 million bought during the month, while the monetary authority raises rates to contain the exchange rate close to the informal ceiling. The wholesale dollar closed at 1,497 pesos, barely three pesos away from the barrier the market monitors as an intervention threshold; the blue advanced to 1,560 pesos.

In terms of fiscal policy, the government posted a July primary surplus of 2.96 trillion pesos and a financial surplus of 244.897 billion, even after meeting coupon payments on Globales and Bonares. The seven-month cumulative result stands at 0.9% of GDP in primary terms, still below the 1.4% target agreed with the IMF. The adjustment was real and intense: spending fell 7% year-over-year in real terms in July, with energy subsidies plunging 20% in real terms and transfers to provinces also retreating. A cautionary note came from consulting firm PxQ, which detected in the draft reform of the BCRA's Charter a clause that would allow reserves to be used as collateral for taking on debt in international markets — something that gained relevance precisely in a context of country risk above 500 points.

The reopening of the Cristo Redentor pass, closed for 34 days and which channels 70% of Mendoza's land-based exports — some $1.07 billion annually — was good logistical news in a week loaded with tension. But the noise persists: industrial SMEs will march on Plaza de Mayo this Thursday under the banner "SMEs are also Argentine," with 30,000 shuttered companies since Milei took office as the backdrop, while the sector accumulates 14 consecutive quarters of employment contraction and financial delinquency affecting 27.2% of borrowers in the AMBA. The debate over who absorbs the cost of structural transformation becomes more urgent as October 2027 approaches, and the market is already pricing that risk into bonds.

What to watch: the Indec activity print for June, out this Thursday, which will determine whether the second quarter confirms the contraction anticipated by consultancies and whether it accelerates pressure on the exchange rate; the evolution of country risk in relation to U.S. Treasuries, whose 10-year yield closed at 4.64% after Operation Twist; and the progress of the Belgrano Cargas tender process, which will attract the attention of international infrastructure operators in the coming weeks.

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**Tecpetrol / Grupo Techint (not directly listed on international exchanges; its parent operates through Tenaris, NYSE: TS)** — The government approved the entry of the Los Toldos II Este project into the RIGI, the largest investment in Tecpetrol's history, with a planned disbursement of $6.4 billion in the Neuquén block and production targeted at 70,000 barrels per day by 2027. Over $2 billion will be disbursed before the end of that year, with a 10% stake held by Gas y Petróleo del Neuquén.

**Pampa Energía (NYSE: PAM)** — The company chaired by Marcelo Mindlin placed Class 28 negotiable obligations for $138.4 million at four years and a rate of 5.5% in the local market, with an AAA(arg) rating from FIX SCR, to finance projects in Vaca Muerta and its urea plant in Bahía Blanca — which will require $2.7 billion and will be the largest in the region when it comes online around 2029.

**Globant (NYSE: GLOB)** — The Argentine-born tech company appointed Sarab Narang as CEO of Glob.AI, its AI-native services unit, with previous experience at ServiceNow, Amazon Web Services and KPMG; the move aims to scale the AI Pods model in a global corporate market that the firm's executives describe as being in accelerated transformation.