IMF approves Argentina disbursement as political doubts eclipse macro gains

The staff of the International Monetary Fund reached a technical agreement with the Argentine government on Tuesday to complete the third review of the Extended Fund Facility program, paving the way for a disbursement of approximately $900 million that must be ratified by the Fund's Executive Board, expected in early December. The news arrives at a peculiarly awkward moment for Buenos Aires: the IMF is praising the program's results — a primary surplus of 1.4% of GDP, reserve purchases of nearly $16 billion so far in 2026, decelerating inflation — while sovereign bond markets are pricing Javier Milei's re-election odds at a mere 50%, down from close to 88% just three months ago. The tension between the macroeconomic solidity certified in Washington and investor skepticism about the program's continuity is today the central contradiction of the Argentine economy.

Country risk illustrates this paradox with surgical precision. JP Morgan's indicator closed around 753 basis points, still the highest level since late October 2025, despite having retreated 12 points from Monday's peak. Fundación Capital, in a recent analysis, attributes the deterioration — a rise of more than 75% from July's low of 403 points — primarily to domestic factors: cooling activity and growing doubts about the Treasury's financing program for 2027. The immediate trigger was the re-election of Luiz Inácio Lula da Silva in Brazil, which on Sunday generated a regional tremor of considerable magnitude: the Bovespa lost nearly 14% in its worst session in more than six years, the real depreciated 8% against the dollar, and Brazilian sovereign risk climbed to 180 basis points from 160 ahead of the runoff. Tuesday brought partial relief: Argentine bonds recovered as much as 1%, the wholesale dollar eased three pesos to 1,538 pesos — breaking a seven-session upward streak — while the contado con liquidación dollar retreated from Monday's highs of 1,683 pesos. The MSCI Merval, however, fell 2.4% in pesos to 96,831 points, unable to sustain morning gains in the face of yet another negative close on the Bovespa.

The Brazil effect on Argentine assets does not stem from direct economic contagion, but from an essentially political one. As Pedro Siaba Serrate of PPI noted, bond prices reflect a Milei re-election probability that no longer squares with voting intention polls, which continue to give him between 36% and 38%, with an edge in a potential runoff. The reason is that investors fear Lula's victory, combined with weakening local activity, will erode the Argentine president's political capital and complicate the continuity of the fiscal adjustment. Siaba Serrate also points out that the triumph of a center-left candidate in the region's largest economy shifts perceptions of the Latin American political climate, putting simultaneous pressure on all regional assets. The yield on the US 10-year Treasury, which again touched 5% amid renewed appetite for the artificial intelligence sector on Wall Street, adds a further external headwind: it raises the global cost of capital and lifts the risk floor demanded of emerging markets.

Against this backdrop of financial nervousness, the Central Bank completed two consecutive sessions without FX purchases, an unprecedented situation in 2026. The institution led by Santiago Bausili had been a net buyer in 194 of the previous 199 sessions of the year. The pause is strategic: the BCRA is yielding space to private demand to act as a cushion against the pressure generated by the real's collapse, avoiding direct intervention while the wholesale dollar remains more than 26% below the ceiling of the currency band, set at 1,947 pesos. Gross reserves closed Tuesday at $50.58 billion. The problem, documented this week by Eco Go, is that net reserves stood at just $8.8 billion as of October 16, far below the cumulative annual purchases, given that the Treasury has used foreign currency to repay debt. Next Monday, the government must meet an $800 million interest payment to the IMF, and Treasury deposits at the BCRA barely exceeded that figure — $925 million as of October 22 — narrowing the margin and placing the spotlight on how the payment will be executed.

On the real activity front, the news is no more encouraging. Private estimates from Equilibra and Orlando J. Ferreres & Asociados confirm that the third quarter closed with a contraction, thus completing the technical definition of a recession following the second-quarter decline. Equilibra estimates a year-on-year drop of 1% in September's EMAE, with a seasonally adjusted monthly advance of just 0.5%, insufficient to offset July's collapse. The UIA, for its part, reports a cumulative industrial decline of 2.8% over the first nine months of the year, with the automotive sector at its lowest level for any September in the past six years. Stellantis, which manufactures the Peugeot 208 and 2008 at El Palomar and the Fiat Titano and Ram Dakota pickups in Córdoba, halted the Buenos Aires province plant and does not expect to resume operations until January 18, 2027. Bunge, in turn, permanently closed its Campana plant, affecting 110 employees, discontinuing production of ammonia and ammonium thiosulfate, key inputs for fertilizers. The labor market reflects the same trend: formal private employment has posted 14 consecutive months of decline, with 266,000 jobs lost since November 2023 and the level of registered employment slipping back to May 2014 values, according to UBA's IIEP.

Inflation, meanwhile, continues to resist breaking below the 1.7% monthly floor recorded in August. Consulting firms estimate October will close around 1.8%, a marginal deceleration of 0.1 point versus September, well short of official targets. Pensions and benefits were adjusted accordingly: ANSES formalized a 1.93% increase effective November, bringing the minimum pension to 444,158 pesos, to which an extraordinary bonus of 70,000 pesos is added.

Where the picture does show strength is on the export front. Exports over the past twelve months surpassed $100 billion for the first time, with September setting a monthly record of $10.036 billion, the highest reading in 13 years. Vaca Muerta contributed 698,500 barrels per day of oil in September — 71.7% of national output — and fuel and energy exports totaled $12.452 billion in the first nine months of the year. The cumulative trade surplus now exceeds $26 billion. On that front, the government added this week the RIGI approval for Glencore's Agua Rica mining project in Catamarca, whose total declared investment amounts to $6.394 billion in copper, gold, silver and molybdenum, with construction scheduled to begin in November 2027 and production starting in 2031. The hydroelectric phenomenon also merits attention: the so-called Super Niño drove a 31.8% year-on-year jump in September's hydroelectric generation, displacing thermal plants and triggering a 42.9% drop in the spot price of electricity in a single month.

What will make the difference in the coming weeks is, first, the outcome of the Treasury's debt auction this Wednesday, where more than 10 trillion pesos mature and the market will watch both the rate the economic team accepts and its ability to stretch maturities beyond 2027. Second, the evolution of political risk, which today operates as the most powerful independent variable in the local market: the "electoral risk" narrative has already decoupled from fiscal fundamentals and will depend, to a significant degree, on how Argentina digests the new post-Brazil regional map.