Buenos Aires – Argentine financial markets presented a mixed picture on Wednesday, , as the government navigates labor reforms and seeks to solidify its return to international debt markets. While domestic bonds saw gains, Argentine ADRs (American Depositary Receipts) listed in New York largely declined, and the country’s risk premium remained elevated.
Debt Roll-Over and Central Bank Intervention
The government successfully renewed all its maturing debt obligations in a Wednesday auction, placing $9 trillion pesos in new bonds, representing a 123% roll-over rate. This exceeded the $7.3 trillion in debt coming due, allowing the Treasury to absorb an additional $1.7 trillion. According to research from Puente, this was achieved without offering a premium on rates, a positive sign after previous auctions. Florencia Blanc, a senior economist at Aldazabal y Cía, noted the result was “a good outcome for the Treasury, given that it achieved a renewal exceeding 100% practically without granting a premium on the rate compared to the secondary market closing.” The auction saw 72% of the placement concentrated in fixed-rate instruments, with the shortest-term bond, maturing in 2026, accounting for nearly 56% of the total. Appetite for dollar-linked bonds remains virtually non-existent.
Contributing to market stability, the Central Bank of Argentina (BCRA) continued its purchases of reserves, a move that has been well-received by market operators. The country’s risk premium held steady at just over 500 basis points, indicating a cautious optimism despite ongoing economic challenges.
Labor Reform Debate and Legislative Scrutiny
The national government presented the final version of its labor reform bill for debate in the Senate. Patricia Bullrich, president of the La Libertad Avanza bloc, announced that the final version incorporates 28 modifications based on consensus. A key change is the elimination of Article 190, which proposed a reduction in corporate income tax for large companies from 30% to 27%. A provision lowering employer contributions to health insurance funds was removed. However, solidarity contributions to unions and employer organizations will be maintained for two years, capped at 2% and 0.5%, respectively.
Wall Street Performance and Telecom Argentina
Argentine stocks traded mostly lower on Wall Street. Telecom Argentina experienced a significant drop of 8.8% following the announcement that its controlling shareholder, Fintech Telecom, intends to sell over 4 million ADRs. Fintech Telecom, owned by Mexican businessman David Martínez, launched a secondary offering of the ADRs, representing approximately 2.3% of its stake, priced at $11.15 per share. The sale is expected to generate around $45 million for Fintech, but will not provide any direct funds to Telecom Argentina itself. Matías Cattaruzzi of Adcap cautioned that the offering could create short-term downward pressure on the stock price due to the increased supply.
Other notable declines included Globant (-7.9%), Banco BBVA (-2.7%), and Grupo Supervielle (-1.8%).
Local Market Trends
The S&P Merval index fell 1.4% to 3,017,641.26 points, while its dollar-denominated counterpart decreased 1.3% to 2,044 points, ending a three-day winning streak. Telecom Argentina also led declines locally, falling 9.3%, followed by Grupo Supervielle (-3.2%). Transportadora de Gas del Norte bucked the trend, rising 3.2% to become the day’s top gainer.
In the broader panel, IEB Construcciones, led by Juan Ignacio Abuchdid, stood out with an 11.5% increase, defying the overall negative trend.
Looking Ahead: Milei’s Economic Agenda and IMF Relationship
These market movements occur against the backdrop of President Javier Milei’s efforts to stabilize the Argentine economy and restore investor confidence. Argentina is preparing for a return to international bond markets, hoping to capitalize on favorable market conditions. As of , the International Monetary Fund (IMF) noted that external debt in U.S. Dollar terms had remained relatively stable between 2021 and 2023. However, the country remains heavily indebted to the IMF, accounting for 34% of the Fund’s total outstanding credit – approximately $65 billion including interest – far exceeding that of any other borrower, including Ukraine.
The IMF, under Managing Director Kristalina Georgieva, has publicly endorsed Milei’s economic policies and approved a new $20 billion bailout package, despite Argentina having yet to repay a single dollar of the original $45 billion loan issued in 2018. The success of Milei’s reforms, including labor market adjustments, will be crucial in determining Argentina’s ability to navigate its debt burden and achieve sustainable economic growth. Legislative elections scheduled for , will be a key test of public support for his agenda.
