Austral Insights #20

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:

• Milei’s administration issues sweeping decrees simplifying mining and infrastructure rules as delegated powers near expiry.

• YPF-led consortium secures USD 2bn loan for the VMOS pipeline, reopening Argentina’s international project finance market.

• Salta advances IDB-backed Route 51 project, critical for lithium and copper exports via Chile.

• Milei skips Independence Day ceremony amid deepening rift with provincial governors over resource allocation.

• Milei’s LLA and Macri’s PRO Party announce a purple-branded alliance for Buenos Aires provincial elections, aiming to defeat Peronism in its stronghold ahead of October midterms.

• Inside Congress: Opposition pushes bills on pensions, health, and education funding, challenging Milei’s fiscal surplus agenda.

• What do Argentines think about..? Milei’s approval remains stable, but economic pessimism and unemployment concerns rise.

Deregulation agenda

Ahead of the expiration of Javier Milei’s delegated powers under the Bases Bill, the administration issued a series of decrees advancing its deregulation agenda on July 7, led by “Minister of Deregulation” Federico Sturzenegger. Key changes included updates to the Mining Investment Law and the National Geological Information Bank, aimed at simplifying procedures, reducing bureaucratic burdens, and reallocating responsibilities for greater efficiency. Additional changes affected the National Agricultural and Industrial Technology Institutes and the National Roads Directorate, triggering public backlash over job cuts and accusations of dismantling institutions deemed strategic for Argentina’s development.

Oil & Gas

A consortium of Argentina’s top energy players—including YPF, Pluspetrol, Pan American Energy, Pampa Energía, Vista, Chevron Argentina, Shell Argentina, Tecpetrol, and Neuquén’s GyP—finalized a USD 2bn syndicated loan to fund the Vaca Muerta Oleoducto Sur (VMOS) pipeline. Led by Citi, Deutsche Bank, and JPMorgan, this marks one of Argentina’s largest private infrastructure project in decades, aiming to transform the country into a major global crude oil exporter. Beyond accelerating a critical project, the financing signals the reopening of Argentina’s international project finance market—dormant since 2019—and demonstrates market confidence in the country’s oil & gas sector despite recent legal setbacks, including the NY court ruling against the Argentine state in the YPF expropriation case.

Mining

Salta officials met with the Inter-American Development Bank (IDB) and the Ministry of Economy to advance financing for National Route 51, a key mining and export corridor linking Argentina’s lithium and copper resources with Chilean ports via the Sico Pass. The Route 51 plays a strategic role in connecting critical mineral production chains with export routes. As the Milei administration deprioritizes federal investment in logistics, provinces are increasingly seeking alternative funding to enhance their attractiveness for large-scale mining projects, while reducing logistics costs compared to routing minerals to Argentina’s distant Rosario port.

Election Watch

After months of negotiations, Javier Milei’s sister and Secretary of the Presidency, Karina Milei, formally announced the alliance under which the libertarian La Libertad Avanza (LLA) will run jointly with the PRO Party (Mauricio Macri’s center-right party) in the crucial Buenos Aires provincial elections in September. This election is the largest subnational contest ahead of the October national midterms. The alliance, named Alianza La Libertad Avanza, will use purple ballots, signaling LLA’s dominance within the partnership. The primary objective of the alliance is to defeat Peronism in one of its strongest districts, particularly as Peronism shows signs of unity following Cristina Fernández de Kirchner’s conviction.

Politics

July 9th, Argentina’s Independence Day, highlighted growing tensions between President Milei and provincial governors. The President canceled his planned visit to Tucumán, officially due to “weather conditions,” though the underlying reason was evident: a majority of governors declined the invitation to attend the ceremony, with participation dropping from 18 governors last year to only three this year. The core dispute remains fiscal, as governors demand a fairer distribution of resources from the federal government.

Inside Congress

This week, the government faced mounting challenges in Congress:

• In the Senate, the opposition has called a self-convened session on July 10 to advance bills on pension increases, a pension moratorium, and a disability emergency declaration, as well as a proposal to automate federal transfers to provinces, all of which threaten Milei’s fiscal surplus strategy. The administration has indicated it will veto these bills if passed.

• In the Lower House, the opposition successfully passed a vote to increase university funding and is planning a special session to address a pediatric health emergency at Garrahan Hospital. Both initiatives are strongly opposed by the government on fiscal grounds.

These developments reflect a persistent executive-legislative standoff that will shape the political landscape in the lead-up to the October midterms.

What do Argentines think about…?

A new AtlasIntel survey—a pollster noted for accurately forecasting Argentina’s recent elections—provides fresh insights into public sentiment:

• Approval: Milei maintains a slim positive approval balance with 44.3% approval vs. 44.1% disapproval. However, evaluations of the administration overall skew negative, with 41.4% rating it “poor/very poor” against 37.6% “good/excellent.”

• Economic outlook: 67% view the current economic situation as “bad,” while 74% say the same about the labor market. Looking ahead six months, 46% expect the economy to worsen (vs. 34% expecting improvement), while 49% foresee a worsening labor market (vs. 30% improvement).

• Top concern: As inflation shows signs of easing, unemployment has emerged as the top concern for Argentines, cited by 44.4%.

• Leadership image: Milei remains the leader with the highest positive image (47% positive, 46% negative), followed by Cristina Fernández de Kirchner and Sergio Massa, both with net negative ratings.

While challenges persist, Milei’s relative positioning remains strong heading into the September Buenos Aires provincial elections and October national midterms.

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!