Jumofo

📰🧵🇦🇷 ALL OF THIS HAPPENED IN @JMilei's ARGENTINA THIS WEEK! 1️⃣ ARGENTINA'S ECONOMY GREW 4.4% IN 2025 — BUT THE RECOVERY IS INCREASINGLY K-SHAPED Argentina posted full-year GDP growth of 4.4% in 2025, capping a turnaround from recession under @jmilei_english. But Q4 growth came in softer than expected: +0.6% QoQ vs. the 0.8% economists had forecast, and +2.1% YoY. 📊 What drove it: • Exports led the quarter: +5.0% QoQ • Private consumption contributed: +1.7% • Government spending fell 1% • Capital investment dropped 2.8% ⚠️ The K-shape: Energy, mining, and agriculture are booming. Manufacturing and construction recovered only slightly in 2025 after a sharp decline in 2024, and, overall, retail is struggling due to real wage decline. Other warning signs: Year-over-year growth rate dropped from 6.4% in the second quarter to 2.1% in Q4, as rate volatility and elections weighed on activity and delayed investment decisions. 💬 Milei's response: Speaking at the Córdoba Stock Exchange, the president pushed back on criticism of the uneven recovery. "It's idiotic to believe everything can grow in a balanced way. When you implement structural reforms, do you think there won't be changes in resource allocation? In relative prices?" On mining: "Chile, with the same Andes mountain range, generates 30x what we do. All because we've been clinging to extreme environmentalist idiots." He was referring to the 2010 Glaciers Law, which restricts mining and hydrocarbon activity in glacial and periglacial zones. On inflation: Milei reiterated he expects monthly CPI to "start with a zero" by August. On country risk: "It will collapse. Inevitably." 📈 2026 outlook: Economists surveyed by the @BancoCentral_AR project 3.4% GDP growth this year. 2️⃣ UNEMPLOYMENT ROSE TO 7.5% IN Q4 2025 — ABOVE ESTIMATES AND PRE-MILEI LEVELS — AS JOBS AND WAGES TOP ARGENTINES' CONCERNS Argentina's unemployment rate ended 2025 at 7.5%, according to INDEC — up 1.1 percentage points from 6.4% a year earlier and above the 5.7% recorded when @JMilei took office in late 2023. The reading also exceeded the 6.7% that economists in the @BancoCentral_AR's REM survey had projected. 📊 The breakdown: • Activity rate: 48.6% • Employment rate: 45.0% • Informal employment: 43% (up from 42% YoY) • Underemployment: 11.3% (up from 10.9% in Q3) 📍 By region: Gran Buenos Aires 8.6%, Pampeana 7.7%, Cuyo 4.9%, Patagonia 4.8%, Northeast 5.6%, Northwest 4.2%. 📉 Consumer confidence falling: The UTDT Consumer Confidence Index fell 5.3% in March to 42.03 points — its lowest since September, before the government's October midterm rebound. The index is down 9.75% from its January peak and 4.73% YoY. The decline was sharpest in Greater Buenos Aires (-9.35%) and Buenos Aires City (-6.99%), while the interior rose 1.26%. Low-income households saw a steeper drop (-6.91%) than high-income households (-4.71%). 📊 What Argentines are worried about (QMonitor poll): • 35% cite real wage increases as their top concern • 24% cite job creation as a concern • 69% say prices rose "a lot" or "quite a bit" in the past month • 74% say they had to cut spending to make ends meet • 66% didn't buy clothing or footwear in the past month; 86% avoided appliances. Positive perception of the economy fell from 42% (December) to 25% (February). But "regular" perception rose from 14% to 38% — suggesting fewer people see things as outright bad, but fewer see them as good either. ⚠️ Political signal: Milei's voting intention fell to 40% from 45% in January, per QMonitor. But the opposition isn't capitalizing: 74% disapprove of its performance and 53% consider it "not at all prepared" to govern in 2027. 3️⃣ TRADE SURPLUS NARROWED IN FEBRUARY — BELOW ESTIMATES — AS MILEI PITCHES VACA MUERTA TO EUROPE Argentina's trade surplus came in at US$788 million in February, according to INDEC — well below the US$1.155 billion median estimate compiled by Bloomberg and down sharply from January's US$2.189 billion. 📊 The numbers: • Exports: US$5.962 billion (-2.9% YoY) • Imports: US$5.174 billion (-11.8% YoY) • Trade exchange: US$11.137 billion (-7.2% YoY) 📦 Top exports (Jan-Feb): Agricultural manufactures (31.1%), primary products (29.1%), industrial manufactures (28.0%), fuels & energy (11.8%). Top products: wheat, gold, soybean meal. 📍 Destinations: Brazil (11.8%), US (10.4%), China (8.1%) 📍 Import origins: China (26.5%), Brazil (20.4%), US (8.7%) 🇭🇺 Milei in Hungary: The president closed the week at CPAC Hungary — the first official visit by an Argentine head of state to the country — pitching Argentina as a reliable energy partner for Europe. "Argentina is in a position to guarantee Europe's energy security," Milei said. "We're experiencing a gold rush in energy investment. By 2030, we'll be exporting over US$30 billion a year." He met with PM Viktor Orbán and President Tamás Sulyok, accompanied by Karina Milei and Foreign Minister @pabloquirno. The delegation highlighted the EU-Mercosur agreement as "an important opportunity to boost bilateral trade." Milei also took aim at Europe's economic model: "They think the economy is a pie — focused on deciding who gets which slice instead of making the pie grow. That's why Europe has been stagnating." 4️⃣ INTEREST RATES ARE PLUNGING — A SIGNAL MILEI MAY BE PRIORITIZING GROWTH OVER INFLATION CONTROL Argentina's short-term reference rates have collapsed to around 20% this month — down from 50% at year-end and over 100% in October. The drop puts rates below inflation, a rare move globally as most EM central banks lean toward hikes amid the Iran-driven oil shock. 📉 What's driving it: The @BancoCentral_AR is buying dollars daily to rebuild reserves — injecting pesos into the system, expanding money supply, and pushing rates down. The government is choosing not to sterilize those purchases, letting rates fall. For investors and analysts, it's a signal: two years into his term, the government may be focusing on reviving economic activity at the micro-level. María Minatta (Map Latam): Such "economic activity is now the main concern. For the government, that means normalizing monetary policy, setting a reasonable interest rate, and reducing peso reserve requirements so the economy can recover." 📊 The context: Unemployment is up, industrial production and construction are weak, and a recent unemployment has surpassed inflation as Argentines' top concern. Lower rates could boost credit, support consumption, and help the sectors on the losing end of the K-shaped recovery. ⚠️ The tradeoff: Lower rates undermine the case for holding pesos — potentially weakening the currency and reigniting inflation, which is still running at 31% annually. Carry trade is becoming less attractive. @GabCaamano (Outlier): "FX stability expectations still support the carry trade, but risks are increasing as the dollar strengthens globally and peso rates fall rapidly." 📈 Reserve accumulation continues: The BCRA has been buying dollars in every session since early January. @Kicker0024 at Argentina Week: "We'll buy reserves as long as people demand pesos." The peso has strengthened nearly 7% since October's midterm elections, supported by reopened external debt markets and solid export inflows. 5️⃣ CABINET CHIEF ADORNI UNDER JUDICIAL INVESTIGATION OVER TRAVEL EXPENSES It certainly hasn't been the best week for the Milei administration. @madorni , cabinet chief and once-untouchable spokesperson, is now at the center of two overlapping scandals that have prompted judicial investigations and a rare public apology. ✈️ Incident 1 — Punta del Este (February): A video went viral showing Adorni and his family boarding a private jet for a Carnival weekend in Uruguay. Estimated cost: US$7,000-10,000. Judge Ariel Lijo is investigating whether Adorni paid for the flight himself or whether it was covered by a production company with government contracts — which would constitute the crime of receiving improper gifts (dádivas). Adorni initially said he paid with savings. He has since gone quiet on the matter. ✈️ Incident 2 — Argentina Week (March): Adorni traveled to New York for the investor roadshow on the ARG-01 presidential plane — accompanied by his wife, Bettina Angeletti, who holds no public role. The optics clashed directly with the administration's "no hay plata" austerity message. Making matters worse: Clarín reported that just 15 days earlier, Adorni himself had signed a resolution banning family members from official missions to cut costs. His defense has shifted over time. First, he said his wife was "invited by the President." Then he admitted it was a "terrible decision" and apologized — though he maintained "not an extra dollar was spent" since the plane was flying regardless. ⚖️ The investigations (as of Sunday): • Judge Lijo ordered the lifting of banking secrecy on Adorni and his wife's accounts • Lower House lawmaker @Marcelampagano — a former government ally — filed a complaint citing a property in a gated community and expenses allegedly not declared in Adorni's sworn affidavit. • Prosecutors are examining whether payments came from companies receiving official advertising contracts (pauta oficial). Adorni maintains the allegations are a "political operation" to undermine him. But his public apology marked a turning point — the first time he acknowledged a serious ethical lapse. 6️⃣ MILEI PUSHES NEW REFORM PACKAGE — INCLUDING FRESH ATTEMPTS TO MODIFY DISABILITY AND UNIVERSITY FUNDING LAWS Seeking to regain control of the political agenda amid the Adorni travel scandal and new revelations in the $Libra case, the government announced a new legislative package this week. 📜 What's in it: • Criminal Code reform focused on tougher sentences • Property protection laws: Expropriation Law, Land Law, Fire Management Law, and a land regularization regime for urban integration • Glaciers Law (easing restrictions on mining in glacial and periglacial zones) • Modifications to the Disability Emergency Law and University Funding Law — "to make them compatible with fiscal balance" ⚠️ The controversial push: The disability and university funding laws were passed by Congress in 2025 and upheld after Milei's vetoes were overridden. The government tried to modify them via the 2026 Budget bill in December — unsuccessfully. Now, following the labor reform victory in February, the administration is trying again. On university funding, the new bill aims to "harmonize the financing needs of national universities" with "the real financing possibilities" of the 2026 Budget. 📊 Fiscal impact estimates (OPC, for 2025): • University funding law: ~0.23% of GDP • Disability emergency law: 0.22%-0.42% of GDP The disability law was finally implemented in early February after a court ordered its immediate enforcement. 💵 The fiscal anchor holds — for now: The government posted primary and financial surpluses of 0.4% and 0.1% of GDP respectively in the first two months of 2026, despite seven consecutive months of real declines in tax revenue. The key: primary spending was cut 8.8% YoY in real terms in February. @_equilibra consultancy: "With no prospect of a significant recovery in tax revenues — which will worsen once the FAL (severance fund) from labor reform kicks in — the key to hitting the 1.5% of GDP primary surplus target will be continued spending cuts and abundant extraordinary resources (sale of state assets)." FAL contributions are tax-deductible for employers — similar to how contributions to retirement funds work. So as companies shift from the old system to the new one, they'll be deducting these contributions from their taxable income, reducing the corporate income tax base. 7️⃣ BLACKROCK AND WELLS FARGO WEIGH IN — "STEPS IN THE RIGHT DIRECTION," BUT SUSTAINABILITY IS THE KEY TEST Two interviews this week @BloombergLineaA: BlackRock and Wells Fargo — both constructive on Argentina's trajectory, but with clear caveats on what comes next. 🏦 BlackRock's Francisco Rosemberg (head of wealth and family capital for LatAm), speaking to me at the IEFA Latam Forum in Buenos Aires: "It's not so much whether the direction is right — we believe very important steps have been taken — but whether they're sustainable over time." He cited the fiscal surplus, inflation slowdown, reserve rebuilding, and labor reform as evidence of progress. But he drew a sharp distinction between short-term capital and what he called "structural capital" — investments in the real economy or private markets with 10-20 year horizons. Global investors, he said, demand clear rules before committing that kind of money. On 2027: "Even before that, there are variables to monitor — reserve accumulation, growth, the social thermometer, and acceptance of the current administration." BlackRock ($BLK) opened offices in Argentina in 2019 but closed them in 2021 after Macri's electoral defeat. 📉 Wells Fargo's Brendan McKenna (EM economist and FX strategist): McKenna said Argentina should have issued NY-law sovereign debt in the months after October's midterms, when country risk compressed to 479bp — the lowest since the Macri era. "When you have that opportunity to access capital markets, you should probably take it. It would have been a real credibility-building exercise." Since the Iran attack on February 28, country risk has climbed above 600bp — vs. a LatAm average below 300bp. McKenna said convergence to regional levels now looks less likely than it did in January: "Getting to 300-350bp would require a path free of speed bumps — no new domestic or external shocks." On Caputo's financing strategy (surplus, local placements, repos, asset sales): "Understandable, but risky. There's always the possibility of an external shock. You have a Fed that's tightened. You have geopolitics that are always complicated." On the peso: "Slightly too strong," but fundamentals are much more solid than when capital controls were first lifted. "You could see a weaker currency, but you wouldn't see a 50% depreciation like we saw back then." On reserves: "A bit concerning" that there's still no net accumulation despite record gross purchases — but he sees progress. On unemployment: A key variable for 2027. If joblessness remains elevated and households are financially weaker by then, it could hurt Milei's reelection chances. 8️⃣ COUNTRY RISK BACK ABOVE 600BP — AND DESPITE A 50-SESSION BCRA BUYING STREAK, GROSS RESERVES ENDED THE WEEK LOWER Argentina's country risk climbed back above 600 basis points this week, with mid- and long-dated global bonds now yielding above 10% — despite 24 months of primary surplus in the last 26 and a commanding midterm victory in October. 📉 Why are bonds under pressure? A report from consultancy 1816 identified several factors: • EM headwinds: Country risk was ~480bp in late January. The Iran conflict pushed global credit spreads higher from historically low levels, while US 10-year yields rose ~30bp in a matter of days. • The Trump factor: If US Treasury support functions as a "safety net" for Argentina through 2027 volatility, the performance of the Trump administration in November 2026 midterms matters. A prolonged conflict could dent his standing — with knock-on effects for Argentina. • Technical position: Argentine bond valuations are up 60%+ since late 2023. Exposure in international portfolios has grown significantly without new external borrowing. Further spread compression would require a shift in the investor base — real money funds replacing distressed investors. • Macro concerns: Inflation has been rising since May 2025 without a corresponding pickup in activity. Household loan delinquencies have hit levels not seen in 20+ years. "It's reasonable for the market to ask questions about support for the ruling coalition," 1816 concluded. • Political noise: The Adorni travel scandal and new $Libra audio revelations dominated the agenda. 💵 BCRA buying streak continues — but reserves aren't rising: The Central Bank extended its streak to 50 consecutive sessions of dollar purchases this week, accumulating over US$3.4 billion in 2026. Yet gross reserves ended the week lower, slipping below the US$44 billion mark — well off the US$46.9 billion peak reached at the end of February. What's draining reserves: • Debt payments: ~US$1 billion in Bopreal maturities, ~US$473 million to multilaterals (BID, World Bank) • Gold price drop: down 7%+ from its late-February peak • Dollar deposit outflows: private-sector dollar deposits fell after the Bopreal payment as holders withdrew funds 📈 What could compress country risk? Facimex Valores argues that prefinancing 2027 maturities would avoid using reserves for principal payments, strengthen the BCRA's ability to defend the FX regime, and signal solvency — potentially triggering a "virtuous circle" of lower risk premiums, more investment, and stronger activity. @LuisCaputoAR has said the government has identified financing for upcoming maturities and doesn't plan to tap international markets — suggesting bilateral or alternative sources may be in play. 9️⃣ MIXED NEWS ON LITIGATION FRONT — YPF DISCOVERY SUSPENDED, BUT NEW UK CLAIM FILED OVER GDP-LINKED BONDS A week of contrasts for Argentina's legal battles abroad: a major procedural win in the YPF case, but a fresh US$1.8 billion claim in London. ✅ The win — YPF discovery suspended: A US appeals court granted Argentina's request to halt all discovery proceedings in the US$16.1 billion YPF expropriation case until the main appeal is resolved. The ruling freezes Burford Capital's contempt motion and cancels a hearing Judge Loretta Preska had scheduled on alleged Argentine non-compliance. The government called it "a historic and unprecedented decision." Sebastián Maril @SebastianMaril (Latam Advisors): "My read is that the primary appeal will come out much faster than everyone expected." He noted the court is simplifying matters by pausing four secondary appeals that all depend on the primary ruling. Former deputy Treasury Attorney Sebastián Soler: The suspension "puts an end, at least for now, to the endless and disproportionate information requests from Burford, whose objective at this point seemed to be harassment rather than the search for attachable assets." ⚠️ The setback — new UK claim over GDP-linked bonds: A group of bondholders called Argentina Exchange Bondholders filed a new claim in British courts seeking €1.58 billion (~US$1.82 billion) for payments allegedly owed for 2017, 2021, and 2022 under GDP-linked warrants. This comes on top of the ~€1.6 billion (~US$1.84 billion) Argentina already owes from a 2013 UK judgment that remains largely unpaid. The bondholders argue Argentina's GDP data methodology doesn't comply with court orders, with 2013 figures starting 12.5% below the tribunal-determined level. Major holders in the group include HBK Investments, Monarch Alternative Capital, Paloma Partners, Pharo Management, Redwood Capital, and VR Capital. 📋 The backdrop: New Treasury Attorney Sebastián Amerio — described by local media as close to presidential adviser Santiago Caputo — has just taken over Argentina's international legal defense. In his first days, he announced a settlement with remaining 2001 holdouts and filed to dismiss a separate Aurelius-led GDP bond claim in New York. The US Department of Justice also filed a memo supporting Argentina's emergency motion in the YPF case. That's it this week folks, all Likes and RTs greatly appreciated!

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