Austral Insights #12

Welcome to Austral Insights, your go-to source for understanding Argentina's key developments. Each week, we bring you concise, business-focused insights into the country’s politics, economy, and strategic sectors—providing the local perspective you need to make informed decisions.

Argentina by the numbers:

*_{Emerging Markets Bond Index (JP Morgan)}
**_{The S&P MERVAL Index tracks the largest, most liquid stocks on Argentina’s exchange, meeting size and liquidity requirements}

This week’s highlights:

• Austral Perspectives: We spoke with Macarena Michienzi, Strategy & Business Development Manager at the Argentina-Texas Chamber of Commerce, about Argentina’s successful participation in the OTC 2025 in Houston.

• GeoPark’s USD 1bn Vaca Muerta deal faces uncertainty due to stalled approval in Neuquén, highlighting the importance of understanding provincial dynamics in Argentina.

• Local elections in four provinces reaffirm incumbent strength, demonstrate Milei’s gains, and deepen Peronism’s electoral challenges

• Fitch upgrades Argentina’s rating to CCC+, citing IMF support and FX reforms; but major policy setbacks or instability following the October midterms could introduce new political risks.

• Inside Congress: The interpellation session for Economy and Justice Ministers was suspended due to their lack of attendance confirmation; they were summoned to testify regarding their involvement in the $Libra crypto scandal.

Austral Perspectives

From May 5 to 8, Houston hosted the Offshore Technology Conference (OTC), the world’s leading offshore energy event, featuring over 1,000 companies from 40+ countries.

This year, Argentina stood out with over 70 participating firms and received the OTC’s Best Booth Award. To better understand the context and takeaways of this participation, we spoke with Macarena Michienzi, Strategy & Business Development Manager at the Argentina-Texas Chamber of Commerce (ATCC), a key player behind this success.

Vaca Muerta

This week marked a year since GeoPark announced the acquisition of Phoenix Resources’ assets in Vaca Muerta, covering areas in Río Negro and Neuquén. While the transaction was approved in RN, it has yet to be authorized by Neuquén’s provincial government. As of this week, either party now has the option to walk away from the deal, putting at risk an initial investment package projected at USD 1bn.

The reasons behind the lack of approval remain unclear, with speculation on social media pointing to potential political interests, either at the provincial level or from the national government. Regardless of the cause, this situation illustrates the structural challenges Argentina presents to foreign investors. Understanding provincial political dynamics, identifying key veto players, and crafting a sound engagement strategy with local stakeholders are essential components for navigating the local landscape effectively.

Election Watch

On May 11, four provinces held local legislative elections: Jujuy, Salta, San Luis, and Chaco. Here’s a breakdown of the results and some key takeaways:

• Jujuy: The incumbent Frente Jujuy Crece (cooperative with Milei) won with 38%. La Libertad Avanza made a strong debut, while Peronism trailed with 11%.

• Salta: The ruling party (close to Milei) retained a stronghold, securing 11 out of 12 Senate seats and 20 of 30 in the lower chamber. La Libertad Avanza scored a significant win in the provincial capital.

• Chaco: The incumbent party, backed by La Libertad Avanza, led with over 45%, pushing Peronism into second place with 33%.

• San Luis: The governing party won 47% of the vote. La Libertad Avanza did not field a candidate, a move that should be understood as tacit support for the incumbent.

Key Takeaways:

• Incumbents continue to dominate locally, suggesting that national-level anti-incumbency sentiment doesn’t necessarily carry over to provincial races.

• Milei’s La Libertad Avanza made gains, particularly in capital cities, reinforcing its growing national presence.

• Peronism remains in retreat, consistently underperforming even in traditionally strong territories.

• In key mining provinces like Salta and Jujuy, pro-mining parties held control. This indicates both regulatory stability and public support for the sector.

Markets

Fitch Ratings upgraded Argentina's Long-Term Foreign-Currency and Local-Currency Issuer Default Rating (IDR) from ‘CCC’ to ‘CCC+’. The agency cited the IMF agreement and recent liberalization of the FX regime as key factors contributing to improved external liquidity and the perceived durability of President Milei's economic stabilization program.

However, Fitch also emphasized the potential risks ahead, particularly the October midterms and the possibility of “policy setbacks” or political instability. These developments could negatively impact macroeconomic stability and, in turn, lead to future downgrades.

Inside Congress: your weekly legislative monitor

After last week’s defeat of the “Clean Record” bill—and the political fallout it triggered, particularly between President Milei and former President Macri—this week in Congress unfolded with less intensity.

Several commissions held meetings on a range of issues, but the legislative spotlight was once again drawn to the ongoing $Libra crypto scandal. A planned interpellation session for Economy Minister Luis Caputo and Justice Minister Mariano Cúneo Libarona was suspended. The ministers had been summoned by the Lower House to testify about their potential involvement in the scandal. However, the session was de facto canceled due to their failure to confirm attendance.

Opposition parties are now weighing alternative strategies to move the inquiry forward, as the government continues to deflect institutional scrutiny.

Are you interested in the risks and opportunities that Argentina presents? Is there an issue you’d like to discuss or understand in greater depth? Reach out for a free 30-minute talk at [email protected].

See you next week with more insights!