eleconomista.com.ar
The data from the EMAE (Monthly Estimator of Economic Activity), showing that the economy did not finally fall into recession, but, on the contrary, expanded, served as a “icing on the cake” for the ruling party. Adding to the financial “summer” is that the level of activity, at least in part, did not suffer from political noise. It attracted attention because all of the advisors had a negative variance. Even Indec had to explain the changes it made backwards.
In any case, the fact that the economy may end this year with a growth rate of 4.5% cannot be neglected at all in the midst of the political whirlwind that shook the government of Javier Miley.
The debate about the impact of this type of (highly heterogeneous) growth is latent: industry and construction are still low compared to the 2023 average, at 9% and 22% respectively. But consultants hope that there will be some indirect effects that may at least, sooner or later, stabilize these labor-intensive sectors. The recent layoffs and company closures, with Whirlpool in the typical case at the forefront, are not of concern to the ruling party. An official source said: “It is logical and expected that some sectors will have to re-transform. It is healthy for this to happen. At the end of the road, it will be better for Argentina,” without highlighting the layoff of more than 200 workers. “This happens everywhere,” he said as he walked by.
look forward
The government is looking forward, not backward, and is enthusiastic. “The economy would have gone through the pre-election tensions and the period of high interest rates better than expected, although data for October is still missing, as a slight decline could be recorded. After the election, leading indicators and high-frequency information, together with a near-normal level of interest rates, point to a more assertive reactivation, so the fourth quarter is likely to be more dynamic than the third quarter,” CMF Bank emphasizes.
According to IGA-OJF for October, it grew by 0.7% compared to September. In this way, the activity index shows year-on-year growth of 4.6% as of October. Looking to 2026, CMF expects growth close to 3% with a return to credit growth and “improvements in lagging sectors, especially industry, construction and trade.” We’ll see.
Meanwhile, the market continues to expect Luis Caputo to return to international markets, something that is now in question with country risk not falling below 650 points. The debate about whether or not to wait until the window opens further has already been settled.
Caputo’s plan A is to launch a tender offer (debt exchange) before expiration on January 9, and the other plan is to use a REPO for US$5,000 million to pay. But they won’t take any more because the official obsession is to show Argentina can walk without Scott Besant’s walker.
There is something Caputo is monitoring: the potential demand from local investors for issuing dollar debt. Corporate and CABA transactions saw a strong presence of investors from Argentina, both from the retail sector and FCI, banks and insurance companies. “There is a huge demand from Argentine investors who can help with a potential deal. The economic team knows this,” said the commercial director of AlyC, which has worked with the latest exporting companies entering the international market.
With the wind in favour
In the peso world, the Treasury also continues to enjoy tailwinds. They faced $14.5 billion in special maturities, changes in reserve requirements and a return to the securities roll with less than three months of term remaining, which allowed Treasury to achieve a very close to 100% rollover without having to offer large premiums in respect of the subordinated note.
The next auction, the last in calendar 2025, will be on December 11 and the Treasury will face private maturities of about $13.1 trillion (maturities total $40 trillion, but BCRA and FGS together are estimated to own 50% of TZXD5 and about 90% of T15D5).
The government still has no plan to buy reserves and the process of “buying ants” continues. According to consulting firm 1816, the Treasury bought about US$40 million in the exchange market on Wednesday the 19th and raised US$90 million between Tuesday and Wednesday of last week.
The statistical series of the Daily Monetary Report indicates that “other operations with the National Treasury” expanded the monetary base by $63 billion, an amount similar to what the government’s peso deposits at the Brazilian Central Bank fell and the Treasury’s dollar holdings rose on that day. 1816 warns: “Counting the operations of last Tuesday and Wednesday, in the first 13 rounds of a record month with respect to corporate and provincial debt issuances abroad, the Treasury would have purchased about US$220 million in MULC (not counting what it bought from the BCRA).”
Although it is still far from the IMF’s reserve target (which it will not be able to achieve), the government can demonstrate a situational increase in reserves. On Wednesday, it rose $700 million due to dollar income from Buenos Aires bonds. “We keep them in dollars in our account at Banco Ciudad. The rule states that we have 6 months to sell because it talks about committing to sell before paying the coupon and paying after 6 months,” sources in Buenos Aires indicated.
In fact, total reserves have increased. When the dollars come in, Banco Ciudad freezes them (it doesn’t lend them because they are in the city government’s demand account), and hands them over to the central bank as reserves. The reserve requirement is 100% and gross reserves increase, not net reserves which play to see if BCRA gets closer to target with the IMF. In practice, nothing has changed for the central bank because the dollars belong to the city and will remain owned by the city until they are liquidated between now and the next six months.
The government reaches the final month of the year with the dollar disappearing from the headlines and with the economy rebounding that would have been unimaginable just a few months ago. This is not bad if we take into account that everything shook after September 7th.