Six Wall Street financial entities identified Argentina as one of the most exposed emerging economies to an external shock, such as rising oil prices due to the Middle East conflict. Economy Minister Luis Caputo urged entrepreneurs to deposit dollars into the financial system at a forum in Mendoza. These vulnerabilities include low reserves and dependence on external financing.
Documents from Citi, JP Morgan, Morgan Stanley, Barclays, Wells Fargo, and Bank of America agree that Argentina faces high vulnerabilities to an external shock, amid rising oil prices due to the Middle East conflict. They point to weaknesses such as an appreciated exchange rate, low foreign reserves, dependence on external financing, uneven economic sector growth, and difficulties in reducing inflation.
Citi stated: “We expect the oil crisis to drastically unanchor internal inflation expectations in emerging markets.” It added that countries with low reserves, like Argentina, Sri Lanka, Pakistan, and Turkey, face risks of capital outflows and currency depreciation. Wells Fargo views Argentina and Turkey as the most vulnerable emerging markets due to their debtor profiles and reserve levels, potentially leading to balance-of-payments crises or debt market tensions.
Morgan Stanley stressed the need to rebuild reserves and normalize the currency market. JP Morgan estimated the Central Bank's liquid reserves at US$18,500 million, but net reserves negative by US$2,400 million.
Meanwhile, at the 7th Investments and Business Forum in Mendoza, Economy Minister Luis Caputo urged entrepreneurs to deposit dollar savings into the financial system. “You are losing money, you have the dollars in your homes, but the one who loses the most is the country,” he said, facing debt maturities without guaranteed forex. He praised the labor reform, which keeps employer contributions with companies for a Labor Assistance Fund, at 1% for SMEs and 2.5% for large firms, reducing the 0.37% of GDP allocated to social security.
Caputo defended the Fiscal Innocence Law as legal protection for bank deposits and called for rebuilding trust: “Argentina will do well inevitably, but the speed at which we grow is important.” Positive factors include inflation slowdown, energy exports, mining growth prospects, and fiscal discipline.
