Hear
The 13th of this month will be chosen by the International Monetary Fund (IMF) to bring to the board the eighth review of the agreement signed with Argentina. Although the date does not yet appear on the organization’s formal agenda, it was communicated to the shareholders, so The Ministry of Economy is already contemplating that this month, they will finally receive the 600 million SDRs (for special drawing rights, the IMF currency, which today are equivalent to about US$800 million), which are pending the signature of the board of directors.. Good news in the midst of a series of misadventures that began to shake even the most palpable achievements of the libertarian administration.
In just under a month, the country risk, which was just above 1,200 points at the beginning of May, climbed to 1,585 points, while the exchange gap widened to almost 50%. Argentine bonds and stocks did not fare better, with declines of around 10% in the same period. The markets, in fact, the real investors who closely follow the news from Argentina, who had been accumulating strong profits during Javier Milei’s administration, began to get worried. Not so much because they do not trust that the President, a proven rock-star among investors, is going to go off course, but because they are beginning to see the limitations of a government that arrived without any type of political ceiling and almost without equipment to execute its plan.
In the business world, anxiety is palpable. Versions that circulated in Macri plants even speak of a recent meeting between Techint’s number one, Paolo Rocca, and former president Mauricio Macri. In the private sector they are still excited about the possibility of an alliance – at least, that provides technical staff – of La Libertad Avanza with the Pro. But not only does Milei not give in, but Macri’s administration is also beginning to have other reservations.
Some old market connoisseurs interpret the declines of recent days as profit-taking – bonds and stocks have accumulated increases of more than 80% so far in 2024 – but they also recognize that investors’ patience is beginning to be tested. . In the coming days, the definition of what happens with the renegotiation of the swap (loan) with China could be key. If there is no agreement, Argentina will have to pay US$2.9 billion at the end of the month and US$1.9 billion at the end of July. Negotiations continue, government sources say.
It is true that Milei’s strength in the polls is as relevant to sustaining investment morale as it is to counteract the political weakness of the Government itself, which preserves its social capital like few others. But it is also true that markets often anticipate, and by far, social changes. They do not warn in advance when this happens.
Maintaining a good investment mood is essential for an Argentina that, beyond the chainsaw, requires a strong injection of fresh funds to be able to get out of years of stagnation. There are plenty of attractive projects. But without financing (or with too high a country risk) they become unviable.
Politics does not seem very up to par with a country that urgently needs to show a radical change in the rules of the game. He still does not seriously discuss a labor reform, and postpones the discussion of the Bases Law and the fiscal package, which have become an emblem that any liberal project can be viable in an Argentina that in recent decades turned its back on capital. . Without a Base Law, it is likely that the unrest in the markets will increase, although with that rule alone the success of the libertarian proposal is not guaranteed either. Chapters such as those of the Large Investment Incentive Regime (RIGI) are fundamental for the mining, oil and even fishing industries. Only the Tecnovax company has an investment project of US$400 million to develop the salmon industry in the provinces of Santa Cruz and Chubut.
While YPF depends on the RIGI to be able to advance, first, in the construction of the pipeline that goes from Neuquén to the Port of Punta Colorada, in Río Negro – a port that, being deep water, has a greater attraction, given that it can be the exit door for large ships to the Asian continent – and, later, in the gas pipelines that could follow the same trajectory or go to the port of Bahía Blanca to finally be able to export gas to the world.either. The construction documents for the pipeline – an operation estimated at around US$2.2 billion – were made available to interested parties on Wednesday. The idea is for local operators to participate, but also to be able to seduce international operators such as Energy Transfer, a monster based in the United States, which has built 135,000 kilometers of gas pipelines in that country. A company of such magnitude could then build and participate in the three gas pipelines that would be needed to transfer gas from Vaca Muerta to the port of Rio Negro or Bahía Blanca, as it ends up being defined. YPF, in turn, depends on the RIGI to be able to carry out the investment by the Petronas company in a gas liquefaction plant so that it can be exported by ship. Basically, the flagship company, which Kirchnerism boasted of recovering, has an ambitious development plan tied to the approval of the Bases Law. Maybe now Kirchnerism should think about giving it the tools to take off.
As part of its plan, the new management of YPF anticipated that it plans to sell a series of assets that are not profitable or that are not a central part of the business. At the end of the month, they hope to submit to the board’s consideration the sale of the 50% they own in Refinor, the refiner with a strong presence in the north of the country. This Friday, meanwhile, is the deadline to make binding offers for the 55 conventional areas in Chubut, Santa Cruz, Neuquén, Mendoza, Río Negro and Tierra del Fuego. Companies such as Pecom, Capex, and the Neuss Group are considering presenting offers, but also new players, such as the former mayor of Capitán Sarmiento Javier Iguacel, who would go hand in hand with a national group. Others, like the former CEO of YPF Pablo Iuliano, who created his own company, Tango Energy, this year, would have simply bought specifications but would not end up bidding, according to what was said by the former executive of the state company.
If the Bases Law comes out, there are those in the Government who are excited about the possibility of moving forward with a package of good news that will help reverse the recent investor malaise. For now, in Economy they took care of deactivating any hint of debt restructuring by any Argentine province. Already at the beginning of the year, Economía had advanced the co-participation funds to some provinces such as Chaco so that they avoid default. Now, Minister Luis Caputo would be facilitating the conditions for both Chaco and Entre Ríos, among others, to borrow in pesos in the local market, to then be able to buy dollars to cover their maturities. A good one: the possibility of a sub-sovereign default in the short term is receding.
Another good thing that Economy evaluates is that of showing a fiscal result in June that is better than expected. Milei already stated this Thursday that in June, for the first time, a fiscal deficit could be recorded due to the payment of bonuses and adjustments in retirements. However, those who closely follow the fine numbers do not rule out that by postponing for a few days the payments that Cammesa, the state energy company, must make to the generators to cover the cost of producing electricity, the necessary magic will be done. “With some postponements of payments, it is sustainable to reach fiscal balance even in June,” they explain. Obviously, Cammesa is in the crosshairs. We will have to see how much delay the generators are facing,” he said. Just when it was thought that the conflict with the generators was closed… Anything is possible.
In Cammesa, however, they are almost more attentive to the movements of the Supreme Court than to those of the Treasury. There is a case pending resolution by the highest court that could not only put Cammesa’s accounts (and the State that finances them) in check, but could also generate the conditions for a freeze on the rate increases announced by the Government. The case arose as a result of an injunction initiated by a Villa Gesel cooperative in the Dolores court, where – they say – Judge Juan Ramos Padilla still exerts his influence, demanding a payment plan. The precautionary action later became a collective action, given that all the cooperatives in the province of Buenos Aires and many in Patagonia joined in. They managed to get the judge – from the same court that at the time stopped Macri’s rate increase – to order a review of the payments they made to Cammesa since 2002 and prospectively, and also created an umbrella of protection against any claim for payment of part of the State. Cammesa appealed the ruling, but the Mar del Plata Court of Appeals confirmed it. Since December he has been in the Supreme Court, but those who know about the matter assure that he began to move. Will cooperatives suffer the same fate as Mr. Tobacco? It seems that what works best so far is the Court. It is not going to be that the eventual entry of Judge Ariel Lijo will change it.
