Austral Insights #13

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:

• Rio Tinto’s USD 2.7B lithium project in Salta becomes the first approved under Argentina’s RIGI incentives regime.

• Phoenix withdraws from USD 1B+ deal with GeoPark due to Neuquén’s stalled approval, but confirms new investment plan.

• At the AmCham Summit, U.S. companies demand tax and labor reforms, while Milei pitches Argentina as a “cheap” and high-growth opportunity.

• Milei’s party leads in Buenos Aires City’s local election, deepening his rift with Macri and weakening Peronism despite a divided right-wing vote.

• Inside Congress: Milei’s coalition blocks an opposition-led session on $Libra and social security; commissions advance debate on National Audit Office.

• What do Argentines think about..? A new poll shows 40% of Argentines can’t name an opposition leader; Cristina Kirchner leads among those who can, revealing a power vacuum that benefits Milei’s government.

Mining

During the Arminera mining event, Argentina's Secretary of Energy and Mining Coordination in the Economy Ministry announced the approval of the first mining project under the Large Investments Incentives Regime (RIGI). The lithium project named Rincón in the province of Salta (see map below) involves a USD 2.7bn investment by Rio Tinto to expand production capacity to 60,000 tons of battery-grade lithium annually. Construction of the new plant is set to begin mid-year. The administration views this as a precedent-setting initiative, with three other projects from different sectors already approved, and six additional mining projects awaiting approval.

Oil & Gas

Phoenix Global Resources has decided to withdraw from its agreement with GeoPark to jointly develop four areas in Vaca Muerta, spanning the provinces of Río Negro and Neuquén. The withdrawal stems from the Neuquén government's failure to approve the transfer of a 45% stake in two blocks to GeoPark. The agreement included a clause allowing either party to exit if provincial approvals were not secured. Despite this setback, Phoenix confirmed its commitment to a USD 2bn investment plan in Vaca Muerta over the next five years. As mentioned in last week’s edition, this underscores the need for companies planning to enter or expand operations in the country to know the market, which often means to know the “unwritten rules” and local dynamics.

Business

On May 20, the AmCham Summit convened in Buenos Aires, bringing together key figures from the private and public sectors to discuss Argentina's business climate and future prospects. US companies emphasized the urgent need for reforms to enhance productivity, including tax reduction, regulatory clarity, labor reform, and an overhaul of the education system.

Meanwhile, President Milei addressed the summit, presenting Argentina as an attractive investment opportunity due to its current affordability and potential for significant growth over the next three decades. He highlighted his administration's achievements in reducing public spending without hindering economic expansion.

Politics

Local legislative elections in Buenos Aires City took place last Sunday, characterized by a nationalized campaign tone. The results were as follows:

• Manuel Adorni (La Libertad Avanza, Milei's spokesperson): 30%

• Leandro Santoro (Peronism, backed by Cristina Kirchner): 27%

• Silvia Lospennato (PRO Party, backed by Mauricio Macri): 16%

• Horacio Rodríguez Larreta (former PRO Party, two-time City Mayor): 8%

What does these result mean? A few key takeaways:

• Voter turnout was 53%, marking a record low for the district and indicating widespread apathy. Even after adjusting for foreign residents eligible to vote locally but not nationally, turnout was 12%-15% lower than in 2021 and 2023.

• The campaign intensified tensions between President Milei and former President Macri. Milei's party's strong performance has bolstered his position, potentially influencing negotiations with Macri regarding upcoming elections in Buenos Aires Province.

• Despite expectations, Peronism failed to capitalize on the divided right-wing vote, securing second place but falling short of a win. While Peronism secured some legislative gains (it managed to gain seats), results across districts continue to signal it is struggling to achieve electoral wins. It’s far from dead, but clearly off balance.

Inside Congress 

• The Milei administration secured a tactical win in Congress this week as a May 21 session called by opposition parties collapsed due to lack of quorum. The session had been convened to address politically sensitive issues, including social security and the investigation into the $Libra crypto scandal. The failure to convene effectively blocked debate on topics the government had sought to avoid.

• Meanwhile, several congressional commissions held meetings, including Education, Science and Technology, and Constitutional Affairs; in which discussions on focused on the legal framework and functioning of the National Audit Office.

What do Argentines think about…?

A poll by Pulso Research paints a troubling picture for Argentina’s opposition just months ahead of the October midterms, and even more so looking ahead to the 2027 general elections.

When asked to identify the current leader of the opposition, 23% of respondents said they “did not know”, and 17% said “there is no opposition leader”. That’s 40% of voters unable to name a single figure leading opposition to the government.

Cristina Fernández de Kirchner remains the most recognized opposition figure, with 24% identifying her as the leader. She is followed by Buenos Aires Province Governor Axel Kicillof, who is currently at odds with CFK, at 9%, and Mauricio Macri at 5%.

This lack of leadership represents a significant advantage for Milei and La Libertad Avanza. With no clear opposition figure to hold the government accountable, political missteps go largely uncontested, creating a scenario where the administration can consolidate power without facing serious political costs.

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!