Argentina's credit default crisis reaches one-third of borrowers, exploding internationally

Credit delinquency in Argentina reached a scale this week that transcended the boundaries of domestic debate and landed on the pages of the Financial Times, where nearly 5.8 million borrowers in irregular status—almost a third of all the country's borrowers—laid bare the most visible social cost of Javier Milei's adjustment. That figure, reconstructed by the consultancy Equilibra, is not new in itself, but the international coverage turned it into a first-order image problem for a government that, fourteen months out from its reelection bid, needs to prove that macroeconomic stabilization translates into household well-being.

The official response, at least so far, has been consistent: delinquency is "a problem between private parties." But that stance began to spring leaks this week under the weight of the evidence. The Central Bank, headed by Santiago Bausili, circulated advice for borrowers as if the responsibility fell exclusively on debtors, while former minister Hernán Lacunza publicly questioned that posture with the line "leaving so many people by the roadside is not an option." Bausili responded with irritation—"weak sauce, Hernán"—in what was the most revealing public exchange of recent days, because it illustrated the extent to which the government lacks an articulated response to a problem that already positions Argentina as the country with the highest delinquency ratio in Latin America: 7.3% of the banking loan book in irregular status, according to the Latin American Banking Federation, more than triple the regional average. Personal loan delinquency reached 16.4% in June, and the UIA reported that the delinquency rate in the industrial sector multiplied more than fivefold in just a year and a half, going from 0.7% to 3.8% between December 2024 and June 2026, affecting some 4,300 companies.

It was precisely in that context that Minister Luis Caputo called a surprise press conference on Wednesday morning, just before the Lower House session that would approve two significant institutional reforms. The announcement—a $2 trillion program from Anses's Sustainability Guarantee Fund to finance mortgage loans through bank auctions—had no direct connection to the delinquency crisis, as the Ministry itself was careful to clarify. But the decision to communicate it on that particular day reveals the economic team's logic: in the face of the political impossibility of bailing out debtors, redirect the narrative toward the expansion of mortgage credit as a gesture of "social justice," appropriating a concept that historically belonged to Peronism. The initiative, cautiously welcomed by banks and construction firms, caps rates at UVA plus 7.5% and, if it works, could add some 18,000 additional mortgages in a market that has run through 2026 with a 39% contraction versus the prior year.

The more relevant question, however, is not whether the mortgage program will work but whether the government can keep sustaining supply-side growth while domestic consumption collapses. The data are clear: mass consumption fell 3.7% year-on-year in the second quarter, with the Buenos Aires metropolitan area showing a 6.8% contraction; fuel sales posted their worst year-on-year drop in two years in July, accumulating six consecutive months of decline; and economic activity, according to private estimates from Equilibra and OJF, fell between 0.5% and 0.9% in seasonally adjusted terms in July, interrupting June's positive run. Growth exists—the year-to-date figure remains positive at around 1.7% year-on-year—but it isn't reaching workers. UBA's IIEP documented the loss of 241,000 formal private-sector jobs since November 2023 and a cumulative 40.5% drop in the real minimum wage. Nearly seven out of ten young people between the ages of 18 and 25 are inactive, unemployed, or hold informal jobs, according to UCA.

The other axis of the week was legislative. The Lower House approved, in a marathon session, the reform of the Central Bank's Charter—with 144 votes in favor and 102 against—along with the second version of the Fiscal Innocence Law, the Mercosur-Singapore agreement, and the Patent Cooperation Treaty with the United States. The BCRA reform, which awaits Senate treatment, expressly prohibits financing the Treasury via money issuance, sets preservation of the currency's value as the institution's sole mandate, and raises to two-thirds the majority required to remove its president. Milei celebrated the outcome as "a fundamental step to eradicate inflation." The opposition took particular issue with Article 13, which allows the BCRA to use reserves as collateral in central bank operations. The reform will not move forward if the Senate does not back it, and the political timing there is another story.

On the currency front, the wholesale dollar closed Thursday at $1,512, two pesos below the previous close, breaking a four-session streak of gains that had pushed it above the $1,500 threshold for the first time. The correction was linked to Wednesday's fixing of the dollar-linked D31G6 note, which set the reference exchange rate at $1,514.16 to settle maturities equivalent to USD 2.595 billion in pesos. Gross reserves stand at around USD 50.783 billion, a peak for the Milei cycle, although the pace of BCRA purchases in August slowed markedly. Country risk hovers above 500 basis points, resisting the decline despite improvements in the credit rating and positive fiscal results. The Merval index strung together five positive sessions but pulled back slightly on Thursday, and Argentine ADRs traded with mixed signals, with Globant gaining 3.7% and Banco Supervielle giving up 3.3%.

On the external front, the energy sector produced the strongest signals. Southern Energy is nearing the close of a USD 900 million syndicated loan led by Citi, JP Morgan, Itaú, and Santander to build the pipeline that will connect Vaca Muerta with the Atlantic coast, in what would be the country's first large-scale LNG project, with exports to Europe of USD 7 billion projected for 2027. Compañía Mega received RIGI approval to disburse USD 365 million on the expansion of its industrial complex, which will lift its natural gas liquids processing capacity by 27%. The RIGI, in total, now has 22 approved projects with committed investments of USD 47.073 billion and an execution horizon stretching to 2055. The flip side is that this energy and mining dynamism concentrates in a handful of provinces and generates little linkage with local industry, while wheat reached its highest price in two years—USD 268 per ton—benefiting exporters, and beef generated USD 2.768 billion in foreign exchange in the first seven months of the year, with a 41.8% rise in value. Nevertheless, Washington excluded Argentina from its new extraordinary quota of 300,000 tons of tariff-free imports, precisely because the country already has its own quotas, with Brazil the main beneficiary.

What lies ahead is dense. The Treasury faced maturities of $12.6 trillion in Thursday's rollover, betting on very short-term instruments to guarantee the roll-over without validating a rate hike that would add further pressure on productive credit. The AySA privatization was postponed to September 15 at the request of the bidders themselves. The Super RIGI is navigating a complex negotiation in the Senate, with a possible floor vote on September 10. And Fiscal Innocence Law II will have to clear that same upper chamber on the promise of mobilizing the USD 170 billion that, according to official estimates, Argentines hold outside the formal system. In that crossover between a macro that works and a micro that creaks, the government has less and less time before the electoral cycle begins to dominate the markets' horizon.

**Mastellone Hermanos (no direct international listing; controlled by Arcor and Danone shareholders)** — Arcor and Danone will inject USD 30 million into the owner of La Serenísima through an irrevocable contribution against future share subscriptions, aimed at cancelling bank debt. The transaction follows a net loss of $4.79 billion in the first half and a prior disbursement of USD 70 million by Bagley Argentina, as part of the reorganization of the dairy business that Arcor and Danone have led since acquiring 51% of the company in March.

**Southern Energy / Pan American Energy (not publicly listed; Pan American Energy is private)** — Citi, JP Morgan, Itaú, and Santander lead a consortium of 10 to 12 banks structuring a loan of approximately USD 900 million for the pipeline that will link Vaca Muerta with the Atlantic coast of Río Negro, with closing imminent. The project, with total investment of USD 1.3 billion, would position Argentina as a first-tier LNG exporter, with European contracts of USD 7 billion projected for 2027.

**IRSA (NASDAQ: IRS)** — The company led by Eduardo Elsztain is moving forward with a USD 220 million investment in Distrito Diagonal, a masterplan in La Plata whose first stage—a 22,000-square-meter shopping center with roughly 100 stores—will open in mid-2027, in the company's first development of this kind in eleven years.