AySA sells for 32% below government's floor, exposing privatization pricing pressure.

The award of AySA for just $340 million —32% below the informal floor the Ministry of Economy had set at $500 million— reveals with unusual clarity the central tension that defines Argentina's economy today: a privatization program moving forward with determination but one that does not always secure the prices the government needs, against a backdrop of mounting external financial constraints and with an IMF program pending review.

The consortium led by Rowing S.A., the engineering firm of businessman Walter Román, together with Transclor, Brazilian firm Arcos Saneamento of Grupo Equipav, and the Dutch vehicle PHX Aqua AR B.V., won 90% of the shares of Agua y Saneamientos Argentinos to operate the water and sewage service for 14 million inhabitants of the Buenos Aires Metropolitan Area for at least 30 years. The bid topped the Grupo Roggio proposal of $285 million by 19%. But both figures came in well below official expectations. Sources at the Ministry of Economy told Infobae that the funds will enter the Treasury before year-end and are part of the financial program of Minister Luis Caputo, which envisages overall privatization proceeds of close to $2.3 billion. With AySA awarded, the government now looks to Belgrano Cargas and the 9,000 kilometers of highways concessioned this week as the next milestones in that plan.

The urgency of those resources is no small matter. The economic team faces a twofold problem on the financial front: internationally elevated rates —the US 10-year Treasury topped 5.3% and in Europe French sovereigns are already yielding close to 5%— complicated local debt placements. The Treasury paused the Bonar 2029 auctions before reaching the $2 billion target set for the year, with a shortfall of some $800 million that the Ministry says it can manage with buffers. At the same time, the Central Bank accelerated its purchases in the FX market —$369 million last week and additional purchases this week— though Analytica analysts note that a significant portion of those dollars exits via debt payments before consolidating in gross reserves, which closed Thursday at $49.321 billion.

The official exchange rate reflects that relative calm: the wholesale rate closed Thursday at 1,515.50 pesos, marginally lower, and has risen just 4.2% year-to-date against inflation close to 24%. The gap with the upper band ceiling at 1,927.77 pesos is 27%, the widest since April 2025. The blue dollar converged to the bank retail price at 1,540 pesos. Economist Alberto Ades, invited by President Javier Milei to address the Cabinet, noted that the real exchange rate stands 29% below the historical average of the last 23 years, opening an internal debate on the sustainability of the exchange rate anchor. Ades praised the fiscal order but warned that the ongoing transformation may not be functional for viable firms that fail to survive the transition.

That transition is leaving visible scars on the industrial fabric. Industry has accumulated a 2.7% contraction over the first eight months of the year. In the province of Buenos Aires, the country's most industrialized district, 1,374 factories have closed since June 2023 and 45,115 jobs have been lost, according to the Unión Industrial de la Provincia de Buenos Aires. Nationally, SMEs have shed 181,542 formal jobs since November 2023, an average of 193 jobs per day, according to the Centro de Economía Política Argentina. The contrast with the energy sector is stark: mining output grew 8.4% year-on-year in August, driven mainly by unconventional extraction from Vaca Muerta, which already accounts for about 71% of national crude and could turn Neuquén into the country's top exporting province by 2031, according to projections from Fundación Mediterránea.

Stellantis, whose South America president Herlander Zola acknowledged in São Paulo that it could close one or both of its plants in Argentina —El Palomar and Ferreyra—, crystallizes the dilemma facing traditional industrial sectors in the face of an opening that favors imports. Cellphone imports grew 746% year-on-year cumulatively through August while local electronics production fell 39.7%. The trade deficit with Brazil, although down 90% in September, fell essentially because of collapsing imports —reflecting weaker domestic consumption and heightened Chinese competition— and not through genuine growth in Argentine exports.

Buenos Aires city inflation of 1.8% in September confirms the trend of gradual deceleration that REM analysts project toward a year-on-year level close to 20% by October 2027, just ahead of the presidential elections. Even so, a Moiguer report detected a decline in consumer expectations during the third quarter: pessimistic expectations outstripped positive ones for the first time since 2023, and 54% of Argentines acknowledged having fallen behind or stopped paying some obligation. Credit, which historically financed durable goods, is now used to purchase food in 26% of cases, according to Fundación Pensar.

Against this backdrop, the Central Bank announced an Open Finance pilot to be implemented in 2027, which will allow banks to access, with customer consent, their tax data at ARCA to improve credit scoring. It is a step toward a structural reform of the credit market that economists like Carlos Melconian consider indispensable, if insufficient: "The real reforms are moving very slowly," he said, describing the current program as "contractionary, orthodox, classical, with no expansionary elements."

Minister Caputo will travel next week to Bangkok for the annual IMF meetings, where he will meet with Managing Director Kristalina Georgieva as the government seeks approval of a pending disbursement of around $1 billion in the third review of the agreement. Markets closed Thursday with country risk at 588 basis points, slightly below the recent peak of 655, while Loma Negra ADRs rose 5.1% and Globant gained 4.4% on Wall Street despite the broad declines in tech indices. Next week, the national September inflation print and progress out of Bangkok will largely set the tone for local markets through the rest of October.