Market bets on Argentine recovery while factories empty out

Argentina's country risk brushed 400 basis points this week — a floor not seen since April 2018 — and that figure, more than any other, encapsulates the moment the Argentine economy is going through: a government that has just demonstrated it can pay, and is now trying to convince the market it can also grow. But the week also left an underlying tension that no financial program can resolve: market optimism coexists with a real economy still mired in industrial contraction, record credit delinquency, and a fractured productive geography split between sectors breaking records and sectors barely surviving.

The political-financial milestone of the week was the presentation of the 2026-2027 financial program by Economy Minister Luis Caputo, coupled with the effective payment of USD 4.2 billion in principal and interest on Bonares and Globales. The gesture is no small matter for a country that has racked up more defaults than payments. The market response was immediate: the S&P Merval index gained 2.5% on the week, ADRs of Grupo Galicia and Banco Francés rose as much as 9% and 8.9% respectively on Wall Street, and sovereign dollar bonds posted an average gain of 1.5% over the week. JP Morgan called the program's assumptions "feasible" for the remainder of 2026, though it made 2027's success contingent on the government's electoral performance. The IMF, for its part, welcomed the greater transparency of the framework and endorsed the reform of the Central Bank Charter that the Executive is preparing to send to Congress, whose aim is to formally prohibit monetary financing of the Treasury.

The program's challenges, however, are considerable. Consultancy 1816 warns that the Central Bank will need to buy more than USD 10 billion in the FX market during the remainder of the Milei administration to avoid losing net reserves, in an election year when demand for FX hedging historically spikes. Invecq describes the program as "demanding but not impossible." Former Deputy Minister Joaquín Cottani flagged a structural "FX weakness" and questioned whether the BCRA will be able to accumulate reserves, service its own debt, and finance the Treasury without pressuring the exchange rate. According to EcoGo, the financial program's margin for the remainder of 2026 is just USD 100 million, leaving no room for surprises. The first market test comes this week with the auction of the Bonar 2029 (AO29), through which the Treasury aims to raise USD 2 billion with no cap in the first round, tapping a portion of the dollars just paid out to bondholders.

The geopolitical backdrop complicates the outlook. The breakdown of the ceasefire between the United States and Iran and the temporary closure of the Strait of Hormuz drove Brent crude up 6.3% in a single session, closing the week at USD 78.86. Oil volatility affects Argentina in two opposite, simultaneous ways: it benefits energy exports — the energy trade surplus reached USD 6.987 billion in the first half, 87% higher than in the same period of 2025, and is already approaching the annual record set in 2025 — but raises the cost of liquefied natural gas imports the country needs in winter and pushes energy subsidies higher, which in June grew 160.8% in real year-on-year terms. Oil production in Vaca Muerta hit a record 628,924 barrels per day in April, 36% higher than a year earlier, and the Pumpco-Bonatti-Contreras Hermanos consortium has just been awarded the construction of the longest gas pipeline in Argentine history — 527 kilometers from Vaca Muerta to Sierra Grande, for USD 1.2 billion — which will transport gas destined for LNG exports driven by YPF, ENI, and XRG, Adnoc's international investment arm.

Soybeans also gained traction on the geopolitical front. Soybean oil in Chicago rose more than 5% on the week, and the nearest soybean futures contract traded as high as USD 441 per ton, a peak since May, according to the Rosario Board of Trade. Chinese demand reappeared forcefully in the North American market and speculative funds doubled their long positions. In parallel, the European Parliament rejected changes to Regulation 807 that would have blocked Argentine soy biodiesel from entering the European market, preserving a business worth roughly USD 350 million a year. However, the 15% reduction in export duties, though it has brought the tax burden to its lowest level in 20 years according to the Instituto Argentino de Análisis Fiscal — 26.7% of GDP projected for 2026 — has yet to produce a decisive jump in grain export volumes.

On the real economy side, the picture is grimmer. Industry has contracted 3.1% so far in 2026 and is operating with idle capacity near 40%. Consultancy I+D projects the loss of 105,000 manufacturing jobs during the year. Peso-denominated credit to the private sector fell in real terms in June, with personal loans retreating 1.1% year-on-year and credit card financing down 4.2%. Bank delinquency reached 12.7% in May, the highest level since the exit from Convertibility, with nearly 7 million people excluded from the formal credit system. Deputy Minister José Luis Daza acknowledged that "many people still don't feel" the macroeconomic improvements and previewed new credit tools to energize the construction sector in particular, which in May rebounded 6.3% month-on-month after April's sharp drop.

What lies ahead is dense. This week the government will send the Central Bank Charter reform bill to Congress in the last working week before the winter legislative recess, and the Senate is scheduled to hold a session on July 16 to take up the Inviolability of Private Property Law. The Bonar 2029 auction will be the first concrete test of investor appetite for local dollar debt following last week's payment. On Tuesday the 14th, June inflation data will be released, which the market projects below 2% — potentially opening the door to prints starting with a "one" in the coming months. And the visit of IMF Managing Director Kristalina Georgieva, scheduled for late July, will symbolically close the cycle of rebuilding Argentina's international financial relationships. The World Cup result also matters: in the economy of expectations, even that match carries political weight.

**MasTec / Pumpco (NYSE: MTZ)** — The consortium led