Another week passed focused on political issues, with the event of the general approval in the Senate of the “Bases Law” and the fiscal package promoted by the ruling party, which meant a signal in pursuit of the governability that was assumed with measured optimism in the financial circuitwith improvements in the prices of stock assets and a brake on the rise that the alternative prices of the dollar had been exhibiting.
The libertarian president Javier Mileiwho traveled to Europe to participate in the G7 Summit, managed to have his measures approved even with modifications to validate his proposals, although they must be reviewed again by the Chamber of Deputies after the changes.
The index S&P Merval of the Buenos Aires Stock Exchange culminated in the 1,582,372 pointswith a weekly gain of 4.2% in pesos and 7.9% in dollarsaccording to the “contado con liqui” price implicit in the Argentine ADRs on Wall Street.
Meanwhile, dollar bonds rose an average of 9.2% in the case of Bonares with Argentine law. In this segment, the 10.8% gain in Bonar 2030 (AL30), which concentrates the operated volume. Global bonds with foreign law advanced 8.2% on average.
In line with this rebound in fixed income, the risk country JP Morgan discounted 200 units for Argentina, in the 1,982 points basics.
For the experts of Consultatio Financial Services, “one of the best weeks in a long time for the government ends, which secured five victories on five fronts: 1) the Bases Law was approved in the Senate; 2) an agreement was reached with China to renew the swap; 3) the IMF unblocked the delayed disbursement and announced the negotiation of a new agreement that could include fresh funds; 4) the Treasury tender was successful; 5) the inflation data for May was the lowest since January 2022.
“The market reaction was generally positive, although the euphoria was not excessive and global dollar prices continue below the highs recorded this year,” they summarized from Consultatio.
On the other hand, the data of May inflation which was released on Thursday by the statistics agency Indec confirmed the downward path of this indicator, the main objective of economic management in the short term. The CPI marked an increase of 4.2% for the CPI in May, the lowest since January 2022, and a decrease in year-on-year inflation to 276.4%, the first reversal since July 2023.
The wholesale dollar ended at $903.50, to accumulate an increase of 4.50 pesos or 0.5%, a gain that exceeded the adjustment of 3.50 pesos in the first week of June, but was below the 5 pesos of the correction of the last week of May. With a free dollar that rose 15 pesos or 1.2% since Friday the 7th, to 1,280 pesosthe exchange gap remained at 41.7 percent.
In the weekly balance the Central Bank ended with a neutral balance for the first time in the Milei era, after sales on Monday and Tuesday – for USD 9 million and USD 31 million, respectively -, purchases on Wednesday and Thursday – USD 24 and USD 137 million -, and sales for USD 121 million this Friday. On the other hand, the Gross international reserves, at USD 29,166 million, lost USD 131 million throughout the last week.
“Progress is evident in some variables, although it is not free of uncertainty regarding the future. “The market will continue to incorporate the advances in the real economy and in the political sphere – with the Bases Law to take an example – to decide whether to sustain or boost the prices of Argentine assets,” he indicated. TSA Stock Market.
“In the coming weeks, the market will closely follow both political and economic/financial issues. Politically, we continue to wait for the final development of the Bases Law and the fiscal package, with the latter key to the intentions of consolidating public accounts with a little more force,” reported the SBS Group.
“After the strong fiscal adjustment of 2024, with a preponderance of liquefaction of salaries and retirements and strong cuts in public works and transfers to provinces, in addition to the reduction of spending on rate subsidies, the great challenge for 2025 is to maintain fiscal balance even with a possible elimination of the PAIS tax, and with an adjustment in spending that relies more on long-term state reforms,” indicated a report from the IERAL of the Mediterranean Foundation.
“It must be remembered that the PAIS tax – for the purchase of foreign currency – provides resources for 1.5% of GDP in 2024, but it was established in an extraordinary manner, loses validity at the end of the year, and is highly distorting and incompatible with a possible exit of the exchange rate,” explained IERAL.
“The administration of Javier Milei’s government resembles the game of Jenga, where every decision and move must be carefully considered to avoid collapse. With a fragile foundation, lack of legislative support and an unbalanced focus on external promotion over internal management, the Government is facing a major economic depression with no clear signs of recovery,” he estimated. Marcelo Trovatodirector of Stock Market Forecasting.
“The current financial turbulence can delay the recovery of economic activity, because the uncertainty that is being generated in the market does a lot of damage to the activity, and to investments since it generates doubts in companies,” said the economist. Miguel Kiguel, director of Econviews. “It will be a slow exit, which will occur as people’s purchasing power improves, as there is more purchasing power, and credit reappears,” he added.
