Markets in Argentina react negatively to Milei’s setback in Congress

Public securities and shares of companies Argentina fell this Wednesday, while the country risk index grew and the dollar prices increased in a negative reaction from investors to the setback suffered in Congress by the ‘omnibus law’ promoted by the president Javier Milei.

Argentine sovereign bonds in dollars closed with falls of between 2.8% and 5.2%, while Argentina’s country risk index rose to 1,928 basis points.

Meanwhile, the S&P Merval index of the leading shares of the Buenos Aires Stock Exchange fell 5%, to 1,154,805.45 units, with the papers of Transener (-9.62%), Grupo Supervielle (-9.56%) and Transportadora Gas del Norte (-9.41%) leading the losses, a phenomenon that was replicated among Argentine stocks listed on the New York Stock Exchange.

These falls are part of the surprise caused among investors by the setback suffered by Milei’s ‘omnibus law’ project, an initiative that underpins the spirit of broad reforms, mainly economic deregulation, that the new Government intends to carry out.

“The Government adjourned the session in which the omnibus law was discussed, after several points were rejected, and the impact on the Argentine market was noticeable.“said Mauro Natalucci, executive of the Rava stock exchange firm.

This Tuesday, after the article-by-article vote on the project failed in the Chamber of Deputies, the initiative returned to parliamentary committees, evidencing the difficulties of the ruling party – the third minority in Congress – in obtaining the necessary support to carry out the complex law.

“After the fall of the bill, as it was not the most probable scenario discounted by the market consensus, the first reaction of Argentine assets was negative”, observed Maximiliano Donzelli, head of Research at the firm IOL Invertironline.

The expert pointed out that, in both fixed income and variable income, the fall was stronger in assets that had recorded good returns during January, “in line with all the expectations that existed behind this bill, which was presented as the first great political challenge for the new governing administration.”

In the currency market, this Wednesday’s increases in the so-called financial dollars also show greater investor demand for coverage.

The ‘counted with settlement’ dollar (CCL, which consists of buying shares or bonds locally with Argentine pesos and selling them in dollars on Wall Street) rose 1.1%, to 1,263.46 pesos per unit.

Meanwhile, the ‘stock market dollar’ or ‘MEP dollar’ (which is obtained by purchasing assets that are listed in both pesos and dollars, are paid in pesos when purchased and are sold in dollars in the Argentine stock market) rose 0.4 %, up to 1,199.41 Argentine pesos per dollar.

The pressure was greater in the informal exchange market, where the price of the dollar rose 35 pesos this Wednesday, to 1,170 pesos per unit.