by Facundo Iglesia and Estefanía Pozzo

Economy Minister Luis Caputo’s Thursday announcement that the new deal the country is negotiating with the International Monetary Fund (IMF) would be worth US$20 billion did not calm Argentine markets. Turbulence and volatility continue to be the name of the game amid rumors over the finer details, which continue to be unknown.

One of the main questions market sources are asking is whether the US$20 billion would constitute fresh funds or if that amount includes the refinancing of the country’s existing debt with the lender. So far, the administration has not provided any clarity on that matter.

Two sources in the economic cabinet told the Herald the US$20 billion would be “extra” funds. Another source, however, said that this issue is actually still part of the negotiations. Following Caputo’s statements, La Libertad Avanza deputy José Luis Espert said in an interview that only US$6 billion would constitute new funds. The remaining 14 billion, he added, would be destined to refinancing what Argentina must pay back in the next four years.

A broker who supports the Milei administration told the Herald that they need “certainty” in order to become a “buyer.” “So far I don’t understand what [the Fund] gave [the government].”

Argentina owes around US$45 billion to the Fund. This year, they will pay interest for US$3.5 billion over that amount. The country must pay the Fund around US$12.7 billion between principal and interest in the remainder of the Milei era. It will begin paying principal back to the lender next year.

Thursday marked the ninth consecutive day that the Central Bank sold dollars, amounting to US$84 million — US$1.4 billion since March 14. Gross international reserves sit at US$26.2 billion, the lowest since January 2024. 

The informal “blue” dollar fell by 10 pesos since Wednesday and closed at AR$ 1,300, but the drop did not reverse the hike to the previous day’s value. The MEP and the blue chip swap exchange rates had marginal drops.

Several analysts accused the administration of “burning” international reserves in the secondary bond market to contain the financial exchange rates.

“Definitions are still pending — the focus remains on the speed and timing of the disbursements, as well as the transition to a more flexible exchange rate regime, two closely related aspects that, in our opinion, are still under negotiation,” Alejo Rivas, strategist at the Balanz brokerage, told the Herald. 

“For now, the market remains expectant for further details.”

The S&P Merval index started the day with a rise of up to 1.1%, but closed with a 1.1% drop. Argentine companies on Wall Street, which trade through American Depositary Receipts (ADRs), fell by up to 3.2%, with Grupo Supervielle, Banco Macro, and Grupo Financiero Galicia taking the biggest hits. Sovereign bonds, on the other hand, closed with gains of up to 1.5%, although the BONAR bonds had some marginal losses.

The administration currently keeps a 1% monthly devaluation of the peso’s official rate. Analysts have noted that a more flexible exchange rate regime, like the one the IMF is suggesting, would mean a devaluation that could fuel a consumer price hike. 

For Pablo Repetto, head of research for Aurum Valores brokerage, the government’s announcements will “no longer have the effect they had before” until a new exchange rate scheme is revealed. He said that expectations became unanchored and that “the market needs facts more than words.” He added that Caputo tried to reverse the devaluation expectations, but that he did not achieve it. 

Repetto said that if the US$20 billion were made up entirely of new funds, he would be “very worried” due to the interest hike the country would have to pay the Fund.

“I don’t see a permanent halt to the expectation of an exchange rate adjustment, and futures are going to continue to be in demand, causing foreign currency sales,” he said.