Core Viewpoint - Argentina's President Milei has implemented aggressive fiscal tightening and free-market reforms, but following a significant local election loss, the foreign exchange market has become volatile, leading to a sharp depreciation of the Argentine peso against the dollar and declines in bond and stock markets [1][5]. Group 1: Economic Measures - The Argentine government has temporarily eliminated export taxes on grains, beef, and poultry to encourage exporters to bring more dollar income back to the country, aiming to stabilize the peso [3][4]. - The export tax on soybeans has been reduced to 26%, while the tax on its by-products is now 24.5%. Beef and poultry export taxes have been cut from 5% to zero [3][4]. - The government requires exporters to settle at least 90% of their foreign exchange in the market within three working days of submitting their export sales declaration [3]. Group 2: Political Context - The recent election results showed a significant loss for Milei's party, with the opposition receiving 47% of the votes compared to Milei's 33%, raising uncertainties ahead of the upcoming midterm elections [6]. - The political landscape is increasingly challenging, with expectations of continued volatility in foreign exchange and asset prices leading up to the elections [8]. Group 3: Financial Stability - The Argentine government is rapidly depleting its foreign exchange reserves to support the peso, with a record sale of $678 million in a single day, the highest since October 2019 [6][7]. - Economists warn that maintaining the current exchange rate could lead to a return of hyperinflation, jeopardizing Milei's reforms [7]. - The government has submitted a budget proposal for 2026, projecting an inflation rate of 10.1% and a dollar value of 1423 pesos [8]. Group 4: International Support - The U.S. Treasury has expressed support for Argentina, which has positively impacted local dollar rates and boosted stock and bond markets by 20% [9]. - The nature and scale of U.S. financial support will be crucial for the sustainability of Argentina's asset price recovery and Milei's political prospects [9].

Core Viewpoint - Argentina's financial markets are in a state of crisis, exacerbated by President Milei's recent admission of market panic and the political setbacks affecting his reform agenda [1][6]. Group 1: Market Conditions - The Argentine peso has depreciated over 10% against the US dollar in the past month and more than 34% over the past year [1]. - Argentine bonds and stocks have seen a significant decline, with capital outflows accelerating [3]. - The Central Bank has reportedly used $1.1 billion in just three days to defend the peso, raising concerns about the sustainability of its foreign reserves, estimated to be below $20 billion [5]. Group 2: Political Landscape - President Milei's reform agenda faces strong political opposition, with recent defeats in Congress regarding controversial spending cuts in education and healthcare [6]. - The leftist Peronist opposition's victory in Buenos Aires has further unsettled investors, as Milei's party received only 34% of the votes, trailing by 13 percentage points [6]. - The political uncertainty is expected to lead to increased volatility in foreign exchange and asset prices ahead of the upcoming midterm elections [7]. Group 3: Future Outlook - The outlook for Argentina is increasingly pessimistic, with expectations of continued volatility in foreign exchange and asset prices [7]. - The government is reportedly developing strategies for debt repayment next year and may be negotiating financial assistance with an overseas institution [8].

Core Viewpoint - Argentina's central bank has conducted its largest single-day dollar sale in nearly six years, selling $678 million to support the peso amid political instability and high demand for dollars from institutional investors [3]. Group 1: Central Bank Actions - The recent intervention of $678 million marks the largest single-day sale since October 2019, bringing the total sales over the past three days to $1.1 billion [3]. - The central bank aims to manage liquidity within its floating exchange rate range, with the peso hovering at historical lows [3]. - Economic Minister Luis Caputo stated that the central bank will sell every dollar in reserves at the upper end of the exchange rate range [3]. Group 2: Market Reactions - The official exchange rate for the peso closed at 1474.75 per dollar, near the upper limit of the exchange rate range, while the parallel market saw the peso drop to a historical low of 1520 per dollar, reflecting a weekly depreciation of over 6% [3][5]. - Analysts estimate that if the current pace of dollar sales continues, reserves could decrease by approximately $10 billion before the elections, which is about 70% of the funds already disbursed by the IMF [5]. Group 3: Economic and Political Context - The deteriorating market environment raises investor skepticism ahead of the critical mid-term elections in October, which may affect President Javier Milei's ability to secure necessary congressional support for his reform agenda [3]. - The "country risk" indicator has risen to its highest level since August 2024, hovering around 1500 basis points, with off-market bonds averaging a decline of 1.4% and a cumulative drop of 9.2% for the week [5]. Group 4: Political Implications - President Milei emphasized the importance of stabilizing the peso, stating that he will do everything possible to protect the quality of life for Argentinians [7]. - The government's recent electoral defeats have raised concerns among investors, as they are seen as a precursor to the upcoming congressional elections [9][10].