A long transition toward 2027
Although with fits and starts, the agreement reached between the United States and Iran two weeks ago reduced the geopolitical risk associated with the conflict in the Middle East. The gradual reopening of the Strait of Hormuz and the fall in the oil price to levels of USD70 a barrel reduces global inflationary pressures and favored the recovery of risk assets. Conversely, a Federal Reserve still cautious, with inflation data that resist converging to the target and a new Chairman who must earn his reputation, keeps rates high and limits the room for emerging markets.
In this framework, Argentina’s financial front kept catching its breath. The improvement in the credit rating, the compression of country risk toward the 421 basis-point area and the strengthening of the trade balance widened the degrees of freedom of the economic program. Exports are accelerating (+34% in May), imports keep falling (-7% in May) and our 2026 trade-surplus projection is again around USD22,500 million, more than double that of 2025, although with a smaller incidence in the second half of the year.
The greater supply of foreign currency from the external sector, together with debt placements by companies, provinces and the Treasury itself, allowed the Central Bank to buy more than USD11,100 million in the first six months of the year, although only USD1,418 million in June. With the Treasury financing part of its dollar needs in the domestic market, a growing portion of those purchases translates into the accumulation of net reserves. Under the definition of the agreement with the IMF, net reserves improved by close to USD7,500 million and are approaching the new target committed for the year.
At the same time, the Treasury is accumulating dollar deposits of USD3.9 billion (including the latest AO28 auction), approaching the pre-funding of the July coupons. Meanwhile it is advancing in closing agreements with banks to extend the Repo beyond the election, the guaranteed loan from the World Bank/IDB/CAF for USD4 billion, and it obtained authorization to tap the international market, seeking to begin pre-funding 2027.
When the official dollar starts to move faster, as happened in recent weeks (it rose 5.2% in the last month), the BCRA with open-market operations and the Treasury in the auctions both take charge of delivering dollar-linked bonds in the magnitude needed to indirectly ensure that the futures curve sustains the carry. They aim for the return on the synthetic (buy DLK, sell Futures) to stand above the Lecaps rate. The BCRA’s dollar purchases, especially if it also accumulates reserves and lowers country risk, work to extend financial stability, although the scheme is not free of costs. Costs that will have to be managed in a context where the electoral calendar and the polls will move onto the agenda as we approach 2027. At least three costs to manage:
1) The traction from net exports is not enough to ensure the economy’s growth in a context where investment and consumption are not reacting. There seems to be an insufficiency of household income and of corporate profitability (the RIGI deserves a separate chapter), coordinated by the change in relative prices (via the FX anchor) and the import opening, which breaks financial intermediation in a context of negative deposit rates and lending rates that remain very high. Faced with this, the Government is seeking refinancing mechanisms through Banco Nación to compress arrears and is analyzing the possibility of using ANSeS funds to fund credit lines.
2) The sterilization of pesos to avoid a larger drop in deposit interest rates coordinates an increase in the Treasury’s peso debt measured in dollars: it went from USD69 billion in December to an estimated USD92 billion in June (it had reached USD98 billion in May). Although unlike the past use of the BCRA’s remunerated liabilities, this time the Treasury has been doing it with longer maturities, validating the delivery of dual bonds at high rates.
3) The stagnation of the economy, the need to lower export duties in the face of the FX lag coordinated by the resulting dollar inflation, and the reduction of tariffs in a context of a brake on imports due to activity, negatively impacts fiscal revenue and turns fiscal policy extremely contractionary. In June, tax revenue fell again 8% in real terms. The commitment to fiscal order is unwavering, but if tax revenue keeps falling, the capacity to keep reducing spending is approaching a limit.
The financial shock is favorable: more dollars, lower country risk, recovering reserves and greater financing capacity. The real shock, by contrast, remains contractionary: an economy that zigzags with no clear trend, weak consumption and investment, formal employment falling and an increasingly fragmented productive structure with winning and losing sectors.
We maintain a single scenario for 2026, assuming the monetary/FX management will allow them to arrive with a financial program that is somewhat more or less comfortable and with more or less hedging sales for 2027 while controlling the dollar and the rate, and two scenarios for 2027 whose probabilities we will iterate based on the scenario matrix we include in the report, which basically answers the two questions we have been asking since the end of last year: 1) Will there still be a lender of last resort after the elections in the USA in November 2026 (YES/NO). 2) Are there chances of a runoff with what the market considers “the abyss” (NO/YES). Ultimately, it depends on the extension of the horizon and on the transition of demand for peso and dollar instruments and its correlate on the financial/FX/monetary program.