What is being said at the tables: Flávio Bolsonaro and Scott Bessent give air to Luis Caputo, but the market charges for the activity

The week brought relief from abroad and left questions inside. The surprising victory of Flávio Bolsonaro in the first round of Brazil and the new nod from Scott Bessent helped Argentine assets, after the country risk touched 655 points seven days ago (today it is 10% below that level). But the improvement quickly found a discussion that has been going on for a few months among operators and regained space in recent weeks. To sustain the rebound of the bonds, something more than exchange calm and external support is needed. The question is how the activity starts, because the market is already incorporating into prices the political wear of a recovery that continues to not reach a good part of companies and households.

The official bet was that financial stability would end up infecting the real economy. Relatively stable dollar, lower inflation, and recomposition of credit, consumption, and investment. But in the city, they warn that this sequence can be reversed. If urban activity remains weak and erodes support for the Government, the real economy could end up pressuring country risk. The financial bridge buys time, but it needs more than successive rollovers to sustain itself. Projections also do not help much. The latest REM anticipates a quarterly drop in GDP that would configure a technical recession by the end of the third quarter. For all of 2026, the median expects a growth of 1.5%, while the group of best forecasters places it at just 1.2%. With those numbers, it is hard to find a lasting impulse for the quotes.

November and December could offer a truce. The fine harvest can bring dollars, give the Central Bank room to buy, and improve activity records due to the weight of agriculture. It also helps that the exchange market arrives more orderly and that the REM has again cut the dollar expectation for the end of the year, to $1,614, about 6.5% above current levels. But the examination posed by those managing portfolios is pushed to February and March. There it will be necessary to distinguish how much of the seasonal impulse remains and how much consumption, industry, construction, and credit have improved. A good added data can give air; a more widespread recovery would allow changing the bet.

The diagnosis is not that of an economy that falls evenly. Energy, mining, and agriculture continue to play another game and sustain a good part of the long-term expectation. In the activities more tied to the internal market, on the other hand, rates, costs, and a demand that does not finish responding weigh. Some companies postpone investments due to political uncertainty; others, simply, because they still do not sell enough. A report that circulated among clients focused on that difference. The economy would go through a productive transition in which capital is not reassigned with the necessary speed towards the sectors that grow, and those sectors do not automatically absorb the employment of the rest. **For the bonds, the export promise is worth it. To sustain electoral support, the counter must also improve.

Brazil was one of the major catalysts of the week. Bolsonaro's victory in the first round triggered a repricing of stocks and the real, with investment banks reassessing positions and looking for how much room there is left for the movement. The contagion helped to decompress the local market, where bonds found demand and stocks had a rebound window after three very bad months. The runoff on October 25 is still pending, although the first Datafolha poll showed Flávio ahead of Lula by 52% to 48% in valid votes, with a margin of error of two points. If the result is confirmed, the right will have won nine of the last ten presidential elections in South America, and Milei will gain a significant ally. J.P. Morgan has upgraded Brazil to overweight, projecting a 12% immediate upside for the MSCI Brazil and potential of up to 20%. Their bet combines a possible fiscal improvement with a stronger real, which could facilitate further cuts in the Selic rate.

The number that surprised many was Monday's flow. Foreigners poured about R$10.6 billion into Brazilian stocks, around $2 billion, the largest daily inflow recorded on the B3. The "Bolsonaro trade" caught on among global investors, but there was a counterpoint worth noting. Brazilian institutions sold similar amounts. Outside money bought into the change of scenario, while some local players took the opportunity to offload shares, a difference in positioning that prevents a uniform enthusiasm. Flávio also sought to clear commercial doubts by stating he would work with the United States and China without "choosing sides". For Argentina, the balance has two sides. An appreciated real improves bilateral competitiveness, and political affinity may favor the regional climate. But a larger, more liquid Brazilian bet backed by major banks also competes for the portfolio dollars that Argentine assets need.

Scott Bessent Supports, Though He Has His Own Open Front

The other message that resonated in the market came from Washington. Scott Bessent left the door open for new financial assistance to Argentina if needed. For Luis Caputo's plan, the signal matters because it keeps external political backing available at a time when rates still do not allow a return to international credit. The message can serve as a limit to the bearish bet, although it does not equate to a disbursement nor does it preemptively resolve upcoming maturities. The difference is relevant for pricing. One thing is to operate under the hypothesis that the Government will have to face only potential financial pressure, and another is to incorporate the possibility of a new intervention from the U.S. Treasury.

Bessent, however, has his own showdown. The ten-year Treasury reached levels close to the highs since 2002, making financing in the United States more expensive and raising the benchmark rate for the rest of the world. The escalation took a pause after John Williams and Philip Jefferson conveyed that the Fed has time to assess upcoming data before raising rates again. For traders, there is a distinction that matters. Much of the increase in long-term yields reflects higher real rates, without an equivalent rise in expected inflation. This helps to understand why technology stocks can hold up while other sectors feel the higher cost of money. It also explains why a more benign inflation figure does not necessarily suffice to return bonds to the prices of previous months.

This is the limit of external relief for Argentina. A pause from the Fed may favor a rebound, but it does not guarantee that global financing will become sustainably cheaper. The supply of U.S. debt, the demand for capital for artificial intelligence, and oil conditioned by the Middle East continue to weigh heavily. For those operating with Argentine risk, it is advisable to separate Bessent's backing from the movement of Treasuries. The former may reduce fears of a local episode; the latter modifies the yield required to stay in emerging markets. Argentina may receive good political news from Washington while simultaneously facing tighter financial conditions. Therefore, the nod is useful, but its effect on quotes has a concrete scope.

The Pesos Demand a Premium

In pesos, the electoral calendar also demands payment in advance. It is not enough to bet on a calm dollar for investors to agree to cross 2027 without demanding extra compensation. Parakeet Capital put a number on that distrust. The implied annualized real rate for the segment between the CER bonds maturing in September and December 2027 hovers around 20%, a signal of the premium required to navigate the change of mandate. The firm believes that this punishment deserves discussion because a potential change would find macroeconomic conditions different from those of 2019. But one thing is the fundamentals and another is paying today for that bet. For portfolios that prefer to collect rates without stretching too much, X29E7 and TML27 stand out, with projected yields close to 28% annually under their base scenario. For those who tolerate longer terms and volatility, they find the DICP attractive, with a real yield in double digits.

Delphos adds another warning for those who continue to carry. The market may be buying a disinflation that is too rapid for February and March, and the fixed rate would not offer enough cushion if that forecast fails. Today, the implied expectations for those months approach the most optimistic projections of the REM, while oil at $100 and pending adjustments in fuels may complicate the path. Therefore, they prefer Boncer over fixed rates in the medium segment, with TZX27 and TZXS7 as chosen ones, offering real rates of 4.4% and 5.3%, respectively. The idea is not to bet on uncontrolled inflation but to pay for a hedge that they consider cheap. Continue in pesos, yes, but without giving away protection to add a few tenths of yield.

Alberto Ades Brought the Dollar Debate to Casa Rosada

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The discussion on how to reach 2027 also entered Casa Rosada. Ámbito accessed the presentation that economist Alberto Ades gave this week to the cabinet, where he crossed the opportunities he sees from New York with the urgencies of the program. Argentina can gain ground as a supplier of energy and minerals for the West, but large projects mature after the deadlines that must be faced. In the currency chapter, he left a question that connects with the difficulties of the internal economy. The dollars from RIGI can reinforce the supply of foreign currency and, at the same time, further appreciate the peso, adding pressure on sectors that do not participate in that boom. For Ades, the difference lies in how much investment and productivity accompany it. Counting the dollars that come in is not enough to assess whether the country is gaining competitiveness.

In the menu presented to the cabinet, there was no cost-free exit. More surplus would allow the Treasury to buy dollars with genuine pesos, but it implies another round of adjustment when activity is still seeking a floor. A currency jump would provide initial relief to the most pressured sectors, although it warned that, without moderating domestic demand, that gain could quickly translate into prices and damage credibility. The third way, improving productivity, would allow for a strong peso, but it requires investment, time, and political capital. Here lies the mismatch that any portfolio manager observes. Reforms promise to yield results later; deadlines have dates. Its diagnosis acknowledges a fiscal and external position different from that of 2018, but places the pending vulnerability in reserves and access to financing.

Later, on X, Ades opened three questions that directly touch on portfolios. How much room is there to ease monetary policy, how to move dollars out of the system towards credit, and what would be the balance of a higher real exchange rate? He did this with explicit support for fiscal order and disinflation, but also with a warning about companies that could be competitive and run out of backing before completing the adaptation. It is healthy for the Government to listen to other perspectives, even among those who support the course, to assess what can be adjusted without compromising its fiscal base. The debate has concrete consequences for employment, investment, and asset prices. The bridge to 2027 needs financing, but also companies and households capable of crossing it.

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