This week, Argentine assets will be influenced by the latest political developments. The Chamber of Deputies has given half sanction to the Bases Law project on Friday, however, several points will still need to be debated in the upcoming days.
The market is keenly observing the parliamentary negotiation process and analyzing the details of the recent staff report from the Monetary Fund. This is being done to get insights into Javier Milei’s future actions, particularly on the exchange front.
Pablo Repetto from Aurum Valores does not anticipate an immediate reaction in Argentine asset prices to the news of the half-sanction of the Omnibus law.
Repetto suggests that the effects could be relative as the voting result was anticipated to be positive. The potential surprises from the individual voting and tax-related negotiations could have a more significant impact. However, the process still has to go through the Senate and depending on the changes there, may require another vote in the Chamber of Deputies.
The market this week could be driven by the details of the latest IMF staff report, especially since the fiscal chapter of the Bases Law was not included in the approved project.
During the week, fiscal changes were combined in the Omnibus Law, resulting in a fiscal gap close to 1% of GDP. The IMF continues to stress the importance of the fiscal anchor to regain market access towards the end of 2025.
Investors are scrutinizing how the Government will achieve its zero deficit goal. Martín Polo, from Cohen, indicates that the market is operating with caution until the situation becomes clearer.
The IMF report outlines steps for exchange rate unification, which is expected to begin in the middle of the year. The Central Bank has not shown signs of increasing its daily rate of devaluation and there are concerns over the competitiveness of the exchange rate of $830 amidst soaring prices.
Repetto warns that if the current levels of devaluation and interest rates persist, there could be risks of increasing instability. The IMF staff report also highlights the need for a tighter monetary policy and a competitive exchange rate.
Following the placement of series 1 of Bopreal, a bond the Government hopes to use to settle the debt with the importing sector, the Central Bank will start bidding for the second series of this instrument this week.
The CCL closed at $1,288 and the MEP ended up 5% weekly on Friday. The gap with the official dollar has returned to 55%. Santiago Lopez Alfaro, from Patente Valores, believes this was expected and suggests that a normal gap in this program should be in the area of 30-40%.
