Argentine markets welcome 2026 budget but expect structural reforms

Despite a moderate effect on asset prices, Argentine markets welcomed the legislative approval of the 2026 budget on Friday. According to analysts, markets were expecting the bill to be passed and are now looking to see how the administration will carry out structural reforms. “The approval of the budget is very important, but it was already expected, hence today’s moderate reaction from financial assets,” independent financial analyst Gustavo Ber told the Herald. Similarly, Pablo Repetto, head of research at the Aurum Valores brokerage firm, said the approval did not “move the needle much” as there was “no expectation” that the Senate would reject the bill. Argentine companies on Wall Street, traded through American Depositary Receipts (ADRs), were stable, suffering a few slight losses. Tech firm Mercado Libre was the exception, with a jump of over 10%. Meanwhile, S&P Merval, an index reflecting the performance of the top-tier companies in the Buenos Aires stock exchange, fell by -0.4%. Bonds are trading with mixed results, with gains of up to 0.3% led by the Global 2030, followed by the Global 2035 (0.3%). The Bonar 2035 stood out on the losing end, with a 0.1% drop. JP Morgan’s EMBI index, or country risk, fell to around 571 basis points. A report by the Balanz brokerage firm said that, with the passing of the budget and the Fiscal Innocence Law, the government made a showing of its legislative muscle. The document added that the two laws, plus the ruling party’s victory in the October midterms and the change in the currency bands, “aligned expectations positively for Argentine assets.” “In the early months of next year, [the government] will move forward with structural reforms, mainly the labor reform, with an estimated fiscal cost of 0.4–0.5% of GDP,” the document said, estimating the country’s coffers to have a primary surplus of around 1.2–1.5% of GDP in 2026. Ber said that the market’s focus is on how the government will attain the remaining funds for the US$4.2 billion debt maturity on January 9. Another item to be monitored will be what  financial strategy will be deployed to “achieve a rollover and accumulate reserves,” as well as the legislative capacity to move forward with “structural reforms.” Repetto said that the market valued October’s election results and fiscal discipline, although the promised structural reforms “have already been incorporated as fact” into asset prices. He added that “the big issue” is how the government is going to accumulate international reserves. Repetto added that the monetary scheme announced last month “is already exhausted,” as the peso is “unnecessarily appreciated,” fueling devaluation expectations. “Unfortunately, for all the accomplishments in the fiscal sector, the opposite is happening in the exchange rate area,” he said, adding that the administration is constantly creating vulnerability. “They will always need a bailout — for a year and a half, we have been going from bailout to bailout, and well, you can’t live on bailouts,” Repetto concluded.