POS -ELECTORAL SHOCK IN THE “MARKETS”

• The coup that received freedom advances in the legislative elections of the province of Buenos Aires caused a shock in the “markets.”

• The speculators, who won a lot with Milei, began to release their hand on the same Monday after the electoral defeat with a historical collapse in the Merval, the index of the Buenos Aires Stock Exchange.

• The volatility remained all week, so that Merval closed with a collapse of -12 %, measured in pesos, and almost 18 % measured in dollars, when compared to Friday 5/9, prior to the elections.

• The ADR’s of the Argentine companies that quote on Wall Street sank up to 31 % throughout the week: deep falls of the Supervielle Bank, BBVA, Banco Macro and Grupo Galicia were recorded. State bonds also lost up to 12 % of their value.

• This Friday 12/9 there was a new shake: a downward movement was experienced in the Merval that hit most of the key actions such as YPF and other energy companies, as well as punished banks: for example, Patagonia retreated almost 10 %.

• The country risk climbed to finish the week at 1,100 points. Recall that the government sought to reduce until it is below 500 points, in order to access debt markets. This was a key piece on the horizon that Milei imagined.

• There is a strong uncertainty linked to the possibilities that the Government can assume debt payments in dollars.

Dollar: Touching the roof doors

• At the same time, the dollar showed a clear bull pressure. On Friday 12/9, at Banco Nación, it closed at $ 1,465, so that 6% was located above the price of Friday 5/9. In addition, pressures were observed in parallel exchange rates.

• The wholesale dollar, which is used as a reference for the exchange band, closed at $ 1,447, very close to the ceiling of the exchange band agreed with the IMF, which is in around $ 1,470.

• If the ceiling is achieved, the Central Bank would be enabled to intervene with the sale of dollars, expanding the foreign currency bleeding that the government experiences with the interventions of the treasure and other organizations.

• But it is already speculated that after October the economic team could negotiate with the background to abandon the band scheme. If this happens, not only the dollar could hit a new leap, but also the country will have crossed the third exchange rate regime in a year. A clear sign of the lack of direction and improvisations of Milei.

• Letting the dollar climb more after the October elections can make imports and encourage export. This would seek to strengthen the reserves of the Central Bank. In all this, there is a rationality that persists: the ruling party orders the entire economic scheme based on dollars to honor the payments of fraudulent external debt.

Recession

• Everything that was observed these days in the financial world are serious indicators that there is a strong distrust in the economic direction of the Milei government who, despite the electoral defeat, ratified its economic policy, at times that economic activity travels a recession that has been for several months.

• The data that met this week marked falls in industry and construction in July compared to June. That is, recessive trends remain firm.

• The economic establishment consulted in the survey of market expectations carried out by the Central Bank reduced its growth projections for this year: before they talked about just over 5%, now 4.4%, with the months that remain in frank fall. A detail: this REM was made before the elections.

• The greatest devaluation that was observed these days is the faith of the “markets” in the paradise promised by Milei.