Argentina's industrial collapse deepens as commodity boom leaves domestic economy behind

Oil pushed above $100 a barrel this week for the first time in months, dragging global markets lower — Wall Street shed between 0.5% and 0.8%, Europe fell more than a point — but Argentina, far from being pulled along, rode the tide: YPF priced an international bond yesterday for $1.2 billion at nine years, the largest Argentine corporate issuance in eleven years, with demand nearly doubling supply and a spread of 300 basis points over U.S. Treasuries, the tightest in the company's history. YPF shares, which trade on the NYSE, rose 3% in New York to $54.79, on a day when the S&P Merval strung together its third consecutive gain, rising 1.1% to close at 3,110,164 points. The JP Morgan country risk index shed four units to 491 basis points, still benefiting from the rise in U.S. Treasury yields — which climbed to 4.85%, a nearly three-year high — lifting the denominator of the comparison.

The picture that emerges this Thursday is of an Argentina swimming against the current of global jitters, but doing so with a deeply divided domestic economy. U.S. Treasury Secretary Scott Bessent was explicit at an event at Southern Methodist University: he cited Argentina as the inaugural case of his doctrine of deploying the Treasury's balance sheet as a foreign policy tool, acknowledging that intervention to stabilize the peso during the 2025 midterm elections was deliberate and calculated. Bessent's praise was read in Buenos Aires as political backing ahead of the 2027 presidential vote, and served as implicit cover against turbulence in developed bond markets.

Against that backdrop, Minister Luis Caputo's team is building a financial cushion for maturities in the coming months. The Ministry of Economy is negotiating a guarantee scheme with CAF — which has already approved a $250 million backstop — and with Fonplata, of which Argentina is a member alongside Brazil, Bolivia, Paraguay and Uruguay, to access private bank credit lines of up to $800 million in total. On Friday, the Treasury will also call a tender seeking to roll over 8.1 trillion pesos in local-currency maturities, with a basket that includes Lecaps, CER-adjusted instruments and dollar-linked notes. Meanwhile, the BCRA has accumulated purchases of $14.196 billion since January — well above the annual $10 billion target — with gross reserves at $50.617 billion, though daily purchases remain marginal against abundant supply: Vice President Vladimir Werning revealed that of the $20.2 billion issued in corporate negotiable obligations this year, $4.4 billion still needs to be settled. Add to that the imminent debut of the province of San Juan, with a $600 million bond, its first-ever international issuance.

The wholesale dollar closed Wednesday at 1,513.50 pesos, with a cumulative rise of just 4% in 2026, while inflation for the year is estimated at around 30%. Today at 4 p.m., INDEC will release the August CPI, which private consultancies project in a range of 1.4% to 1.7% monthly — potentially the lowest print since the start of the Javier Milei administration. The City of Buenos Aires reading already came in at 1.7% in August, a sharp deceleration from 2.9% in July. If INDEC confirms a similar or lower number, the real exchange rate will continue to appreciate, a phenomenon that an IERAL report quantified bluntly: Argentina remains the most expensive country in 7 out of 10 consumer durables against a basket of ten economies that includes Brazil, Chile, the United States and China, though the multilateral real exchange rate stands just 5% above the level of November 2023.

That appreciation has concrete costs that July's data brought back into sharp relief. Manufacturing industrial output fell 4.9% year-on-year and 5% from June on a seasonally adjusted basis — the biggest drop in sixteen months, according to Ámbito — while construction contracted 4.5% year-on-year and 4.6% month-on-month. Consultancy I+D projects the loss of 3,300 industrial firms and 100,000 direct and indirect jobs this year. The UIA's Industrial Performance Monitor stood at 40.4 points, with every sector in contraction territory. The textile sector has racked up a 24.4% drop in the first half and is closing around 30 firms per month, according to the Federation of Textile Industries. The auto sector has 135,000 unsold units piled up — the equivalent of three months of registrations — with domestic sales of locally produced vehicles down 40% year-on-year. Motorcycles, paradoxically, are up 41.2%. Gustavo Weiss, president of the Argentine Chamber of Construction, was blunt: the industry has lost 120,000 jobs in three years and several firms are in the process of closing.

Delinquency runs through every layer of the economy. Corporate credit non-performance has quintupled in less than two years, from 0.7% to 3.7%, according to consultancy Equilibra, with the number of delinquent firms doubling to 37,482. Household delinquency hit 12.8% in May — a two-decade high — before easing marginally. Jorge Brito, chairman of Banco Macro, was more upbeat: "We touched red and came back to yellow," noting that more recent loans show lower delinquency, attributable to the tariff adjustment and the triple-digit rates of the fourth quarter of 2024. In response, Banco Nación lowered its refinancing rate for delinquent borrowers from 35% to 29%, and the government launched the first tender of ANSES's FGS — 200 billion pesos — to fund UVA mortgages, which has already prompted rate cuts at Banco Galicia (from 9.5% to 7.5%) and Banco Patagonia (from 9.25% to 8.5%).

The most human drama of this juncture is playing out at Granja Tres Arroyos, once the country's largest poultry company, whose subsidiary Wade SA filed for creditor protection with an estimated debt of $350.9 million. The Capitán Sarmiento plant, in a town of 15,000, lost 700 of its 1,000 employees at the company, devastating a community that depended on it for one in every ten jobs. The energy and mining hub, meanwhile, is moving in the opposite direction: thirteen oil companies operating in Vaca Muerta agreed with the Neuquén government on a $154.5 million trust to pave 160 kilometers of roads. YPF also announced it will submit two new projects under RIGI, which would lift its total commitments under that regime to $154.1 billion together with its partners. Fourth-quarter hiring expectations improved 10 points according to ManpowerGroup, though the jump reflects fewer projected layoffs more than a genuine expansion in hiring.

What will set the tone for the market in the coming hours is the August inflation print. If INDEC confirms a figure below 1.7%, it will signal that disinflation is advancing toward the 1% monthly threshold the REM projects for December. That would align conditions for eventual FX flexibilization — the wholesale dollar is 25% below the top of the band — and provide electoral support for the government heading into 2027, when REM analysts project year-on-year inflation will fall to 20%. The underlying question, which July's data raised with renewed urgency, is whether disinflation can be sustained with industry in contraction, consumer credit expensive and a widening gap between the export sectors and the rest of the economy.

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