Argentina's S&P Merval climbed 1.08% to 3,061,512 points Friday even as the economy contracted 0.6% in the second quarter and unemployment hit 7.9%, the highest reading since 2021. The disconnect between market optimism and economic fundamentals underscores investor confidence in structural reforms despite near-term pain.
The broader S&P BYMA general index gained 0.67% on the session. Country risk climbed to 515 basis-point equivalents, its highest level since Aug. 26, while the wholesale dollar eased to 1,510 pesos, down 0.18% from 1,512.75. The parallel rate slipped about five pesos to roughly 1,555.
Mixed Economic Picture
INDEC reported that second-quarter output was still 2.0% higher than a year earlier, but manufacturing output fell 2.1% in the quarter. Public administration declined 1.4%, a sign of fiscal restraint. Fishing rose 44.7%, mining increased 16.4%, and agriculture rose 6.9%, showing strength in export-oriented sectors.
The unemployment data revealed roughly 1.8 million people were out of work. About 10.2 million people were in informal employment, representing about 45% of the workforce. That informal labor market reflects the regulatory burden facing employers and the difficulty of creating formal-sector jobs.
Legislative Wins for Tax Relief
The Senate converted the second inocencia fiscal bill into law by 44 votes to 23. The law raises the threshold at which the tax agency may question undeclared holdings, and the benefits expire on Dec. 31, 2027. It's a pragmatic approach to bringing capital back into the formal economy without punitive enforcement.
A separate biofuels bill won first-chamber approval by 41 votes to 25 and now goes to the Chamber of Deputies. Both measures signal legislative momentum behind market-friendly policies.
Trade and Fiscal Data Ahead
Argentina's August trade figures were due later in the day, with forecasts near US$2.055 billion against a July surplus of US$2.115 billion. A budget balance figure was also due earlier in the afternoon, after a previous reading of a surplus of 2,960 million pesos. The external account and fiscal surplus together showed Argentina could run both at the same time, but the cost was domestic demand.
That trade-off illustrates the challenge facing policymakers. Maintaining twin surpluses requires restraining consumption and government spending, which depresses growth in the short term but builds credibility with international investors.
Market Movers and Regional Context
The day's movers included Satellogic, up 11.3%; Cresud, up 6.3%; IRSA, up 5.6%; and Central Puerto, up 5.5%. Vista Energy fell 1.1% and YPF fell 0.5%. Energy names were the weak spot, while property and agriculture led. Brent had fallen for two sessions as Saudi Arabia worked around its damaged export pipeline.
The regional scoreboard showed every major Latin American index higher on the day. Chile's IPSA gained 1.30%, Mexico's IPC rose 0.58%, Brazil's Ibovespa advanced 0.24%, and Colombia's MSCI COLCAP rose 0.40%. Argentina's gain was the second largest in the region after Chile's. The Argentine peso was among the steadier currencies on the day, easing 0.18% against a dollar that barely moved on the global index.
Why This Matters:
Argentina's market resilience amid economic contraction reflects investor confidence that fiscal and monetary discipline will eventually restore sustainable growth. The twin surpluses in trade and budget accounts demonstrate the government's commitment to living within its means, a sharp departure from decades of deficit spending. But the 7.9% unemployment rate and 45% informal workforce show the human cost of adjustment. The tax amnesty law offers a practical path to formalization without expanding enforcement bureaucracy. Manufacturing's 2.1% contraction highlights the challenge of maintaining industrial competitiveness during stabilization, while agriculture and mining gains show export sectors can thrive with sound policy. The legislative momentum behind market reforms suggests political support for continuing the current path despite near-term economic pain.