The country risk of Argentina could plummet if President Javier Milei secures reelection in 2027, while a defeat for the ruling party could send the indicator soaring to the 1,600 basis points zone, according to scenarios developed by Cohen Aliados Financieros.
For the continuity scenario, Cohen projects a drop in country risk to 260 basis points, using the average level of Latin American markets as a reference. Other market projections even place country risk around 217 basis points, converging towards the EMBI Global.
The hypothesis assumes that a reelection of Milei would eliminate much of the uncertainty associated with a potential economic shift after 2027. "If continuity wins, Argentina no longer has a reason to outperform the region," explained Justina Gedikian, Fixed Income strategist at Cohen, to the media.
Javier Milei, Axel Kicillof, and Cristina Kirchner
With this compression of country risk, long bonds would have significant upside potential. The report estimates a profit potential of up to 19% compared to current quotes.
Kirchnerism wins and country risk triples
The opposite scenario envisions a severe destruction of Argentine assets. A defeat for Javier Milei's government and a potential victory for kirchnerism would send country risk soaring to 1,600 basis points. In that case, some bonds could lose more than 28 points of parity.
To establish that reference, Cohen referred to the precedent of 2019. "In 2019, when the market finished discounting that Macri would not be reelected, country risk moved between 1,470 and 1,990 before the restructuring appeared," Gedikian explained.
Axel Kicillof
The expectation of continuity is also reflected in current prices. The median of the bond curve analyzed by Cohen assigns a 72% probability to Milei's reelection and a 28% probability to a defeat. The percentage, however, changes according to the maturity: the GD30 discounts an 83% chance of continuity, while in long-term bonds like the AE38 and GD46 it is around 68%.
The financial firm concluded that as long as the electoral definition remains open, this uncertainty acts as a limit to the recovery of bonds, especially until the market is sure that kirchnerism does not manage to return to power.
