A consensus took hold in the market: the financial program the Government presented last July to get through the election year has become obsolete. The assumptions about how many dollars the Treasury would raise and with how many reserves it would enter 2027 were not fully met, and that certainty turned into nervousness that is reflected in the price of Argentine bonds.
The country risk — the indicator that measures the extra spread investors demand to lend to Argentina instead of to the United States — closed on Friday at 830 basis points. When Economy Minister Luis Caputo announced his plan, it stood at around 400 points, the lowest level of the year. In four months it doubled, with a peak of 939 points on the 6th of this month.
External factors pushed it up, such as Luiz Inácio Lula da Silva's victory in Brazil and the Democratic victory in the United States elections. But the main noise is local. "A financial program had been planned that seemed very reasonable three months ago," said Fernando Sedano of Morgan Stanley last week, for whom that scheme "has become somewhat obsolete."
The plan assumed the Treasury would raise US$6 billion this year through the placement of dollar bonds under local law and another US$5 billion in 2027. However, since August the AO29 — the bond that was meant to complete that target — has not been placed, and about US$800 million is still missing to reach it, according to the consultancy Invec…
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A consensus has taken hold in the market: the financial program the Government presented last July to get through the election year has become obsolete. The assumptions about how many dollars the Treasury would obtain and with how many reserves it would enter 2027 were not fully met, and that certainty turned into nervousness that is reflected in the price of Argentine bonds. The country risk — the indicator measuring the extra rate investors demand to lend to Argentina instead of to the United States — closed on Friday at 830 basis points. When Economy Minister Luis Caputo announced his plan, it stood at around 400 points, the lowest level of the year. In four months it doubled, peaking at 939 points on the 6th of this month. External factors pushed it up, such as Luiz Lula da Silva's victory in Brazil and the Democratic win in the United States elections. But the main noise is local. "A financial program had been planned that seemed very reasonable three months ago," said Fernando Sedano of Morgan Stanley last week, for whom that scheme "has become somewhat obsolete." The plan assumed the Treasury would obtain US$6 billion this year through the placement of dollar bonds under local law and another US$5 billion in 2027. However, since August the AO29 — the bond that was meant to complete that target — has not been placed, and about US$800 million is still missing to reach it, according to the Invecq consultancy. With country risk at these levels, going out to seek that financing is considerably more expensive. Kristalina Georgieva and Luis Caputo; in July, the IMF chief said the country did not need more financingX@LuisCaputoARThe other assumption that has fallen far short is the cash cushion. The program anticipated that the Treasury would end the year with US$3.7 billion deposited in its account at the Central Bank, a buffer to start 2027 with more room. Today those deposits stand at US$59 million after the latest interest payment to the IMF. And in January a maturity of some US$4.5 billion comes due with bondholders. The privatizations, another source of dollars in the plan, are also moving more slowly. Before presenting the program, the Government had already obtained US$707 million from four Comahue hydroelectric plants and US$356 million from the sale of its stake in Transener. In July, it estimated that US$800 million would come in this year and US$1.5 billion in 2027. Since then, the best offer for AySA was US$340 million, below the US$450 million the Economy Ministry had expected. The remaining tenders, such as those for AMBA I, the Belgrano Cargas, and the power plants, have been delayed. In the market, no one doubts the Government's commitment to pay its debts. What is debated is where the dollars will come from to do so. According to Sedano, the country will need to obtain at least US$10 billion during 2027. Officials, the economist recounted, assured him that the program "is already closed" and that there are alternative sources of financing. "If that is the case, it is one less problem," he noted. Asked by LA NACION, the Economy Ministry did not respond to whether it plans to present a new financial program. Concentrated maturitiesArgentina does not have a big debt problem. According to official data, it represents less than 70% of GDP. The difficulty lies in the calendar. In 2027, the Treasury and the Central Bank together must pay US$21.3 billion in foreign currency to private creditors and the IMF, and US$27.7 billion in 2028. And the country has still not regained access to international credit markets, one of the goals the Government had set when it took office. There is also no room left on the IMF side. The organization has already lent Argentina more than US$57 billion, and the country is its largest debtor. Last July, during her visit, the Fund's managing director, Kristalina Georgieva, said she did not see it as necessary for Argentina to request additional financing. Therefore, if the Treasury does not return to placing bonds in the local market, the adjustment variable will be dollar purchases from the Central Bank. According to Portfolio Personal Inversiones (PPI), in that scenario they would have to rise from the US$4.9 billion envisaged in the program to US$13.1 billion. Argentina does not have a big debt problem, but it does have a demanding calendar; debt maturities according to 1816To all this is added the dollarization of savers. According to market estimates, in 2027 individuals would buy about US$2.6 billion per month, which would amount to US$32 billion in the election year. The reference is what is already happening without elections in play. In August, individuals bought US$2,853 million in bills and in September, US$2,896 million, according to the Central Bank's Foreign Exchange Balance. It is a demand that competes with the Treasury for the same dollars. For former Central Bank president Martín Redrado, the ideal would have been to seek financing abroad in early July, when country risk was around 400 points. "That opportunity was lost," he said. What is striking is that, while country risk doubled, the dollar barely moved. The retail official rate remains at 1,570 pesos at Banco Nación and has risen just 6.1% so far this year, against accumulated inflation of 26.3%. From the 1816 consultancy, meanwhile, they pointed out that it is not usual for bonds and the dollar to follow such divergent paths. One explanation is that those selling Argentine bonds are mostly foreign investors operating from Wall Street, and those dollars do not pass through the local market. The other explanation lies with the Central Bank. So far this year, it has bought more than US$16 billion in the foreign exchange market to build up reserves and, at the same time, kept the amount of pesos in circulation under control, which left less room for savers to switch to dollars. But so far in November the pace of purchases has slowed. For Invecq, the key in the coming weeks will be the response of the economic team. As long as electoral uncertainty lasts, the consultancy warned, investors will continue demanding a premium to lend to Argentina beyond 2027. By Sofía Diamante