In the aftermath of the defeat of the ruling party in Congress and amidst market uncertainty following the fall of its first law, major Wall Street banks are set to embark on a trip to Argentina starting tomorrow. The visit will be led by representatives from Barclays, Bank of America, Citigroup, Goldman Sachs and HSBC, along with a group of clients (mostly investment funds) to meet with government officials and discuss Javier Milei’s program, the prospects of bonds and possible investments.
The banks’ research departments have organized the trip in hopes of meeting with key government officials such as Minister of Economy Luis Caputo, Secretary of Finance Pablo Quirno, Head of Central Bank Santiago Bausili and Vice President Vladimir Werning. However, some sources maintain that the trip is within the framework of visits that are organized every year to different countries in the region.
Investors will come to “monitor” sovereign bonds that several funds bought last December. With Milei’s rise to power and her promises to advance a shock plan, dollar titles rose up to 14%, but last week they fell to almost 7% after the setback suffered by the omnibus law and the war unleashed with governors. BlackRock bought last week US$ 1.8 million of the Bopreal dollar bond, with which the government seeks to regularize commercial debt of companies.
However, recent developments suggest that investors are cautious about investing in Argentine bonds due to concerns about political stability and inflation rates. JP Morgan estimated double-digit inflation until at least Q1 2023 while Goldman Sachs predicted a 15% increase in inflation rates over this period. Furthermore, JP Morgan also warned that “the lack of support from Congress suggests that The administration should recalculate its political strategy,” opening up a more difficult period that could lead to greater volatility which could impact exchange rate gap.
In conclusion, it remains uncertain whether these banks will be able to secure investments or if their visit is purely for research purposes. Despite their interest in rediscovering Argentina with caution, investors still see many risks associated with investing in Argentine bonds such as political instability and high inflation rates.