Argentina's country risk rises about 30% in October as the central bank acknowledges a recession

The spread ended near 787 basis points. Economy Minister Luis Caputo has delayed consumer relief until March and is adding subsidies to slow utility increases, while former minister Domingo Cavallo calls for $15 billion in reserve purchases.

Argentina's sovereign spread over US Treasuries, known locally as country risk, rose about 180 basis points in October, roughly 30%, and closed near 787 points, the highest level of the year. Cuba's state agency Prensa Latina also reported the October close near 800. At that level, borrowing on international markets at low rates is not available to President Javier Milei's government.

Ámbito reports that Economy Minister Luis Caputo is meeting the Argentine Industrial Union (UIA) with few policy options. The Central Bank of the Argentine Republic (BCRA) has acknowledged that the economy is in recession, and the exchange rate is again a concern for business owners. Brazil's sharp devaluation makes Argentine manufacturers less competitive against their largest trading partner. According to Ámbito, the ministry does not plan new measures. Perfil reports that the government has delayed measures to support consumption until March.

Inflation is not falling much further. Clarín reports that both Milei and the central bank have explained in the past 48 hours why disinflation has slowed, and the government now warns that beef, regulated utility rates and gasoline will add pressure until year end. Caputo is also using fiscal room to soften the effect. Electricity and gas rates will rise again in November but by less than planned, because the ministry is increasing subsidies, as it already did for bus fares.

Domingo Cavallo, the former economy minister whom Milei has criticized, published a new analysis warning of external risks before 2027. He argues that the central bank should buy $15 billion in reserves and that the government should remove the currency controls (the "cepo") that still apply to companies.

Part of a tracked trend

Dollar Scarcity Returns to South America

Economies with thin reserves and managed exchange rates will keep facing recurring pressure as a strong dollar, oil costs and neighbors' devaluations drain foreign currency. Governments will repeatedly choose between recession, devaluation and controls.

What this means

Argentina is trying to hold down inflation and the exchange rate together without enough reserves, and the new subsidies weaken the fiscal surplus that the program relies on. Cavallo's critique states the core problem. Without reserve accumulation, each external shock, such as Brazil's devaluation or higher oil import costs, has to be absorbed through recession or a weaker peso. Holders of Argentine dollar bonds face the most exposure, because refinancing 2027 maturities depends on country risk falling. Industrial exporters to Brazil also lose. Sellers of dollars to the central bank would gain from Cavallo's approach. The consensus credited Milei with having stabilized the economy. October shows that the stabilization depends on external conditions that are now turning against it. The likelier outcome over the coming months is pressure to let the peso weaken faster against the real, and a debate over whether to loosen the remaining controls. The read depends on reserves continuing to stagnate. If the government secures large reserve purchases or new external financing, country risk could fall back quickly, as it did after earlier support packages.

What to watch

Whether the central bank begins regular dollar purchases to build reserves, which is the central demand of Cavallo's critique and of bond investors.
The November monthly inflation figure, because the government has already warned that beef, utility rates and fuel will push it up.
The peso-real exchange rate, because further real weakness would deepen the competitive loss for Argentine manufacturers.

Argentina's country risk rises about 30% in October as the central bank acknowledges a recession

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