Argentina’s industrial output (non-seasonally adjusted) fell by 8.7% year-on-year in February. This was down from a 3.2% decline in the previous reading.
The result shows a sharper contraction in industrial production compared with the prior period. It indicates weaker output than a year earlier.
Given the sharp acceleration in the decline of Argentina’s industrial output, we see this as a strong signal of a deepening economic contraction. This trend suggests increased stress on corporate earnings and overall economic activity. Traders should prepare for heightened bearish sentiment surrounding Argentine assets.
The weakening economy will almost certainly put downward pressure on the Argentine Peso (ARS). We anticipate further currency devaluation, making short positions on the ARS attractive. This could be executed by selling ARS futures or purchasing put options to speculate on its decline against the US dollar.
This industrial slump will directly impact the Merval stock index, as many of its largest components are industrial companies. We believe there is a strong case for buying put options on the Merval index or on ETFs that track Argentine equities. This strategy would profit from the expected downturn in the stock market over the next few weeks.
Recent data confirms this is not an isolated issue, as construction activity also posted a year-on-year decline of over 24% for February 2026. This broad-based weakness reinforces the view of a severe recession. The government’s austerity measures, a core policy since the reforms initiated in 2025, appear to be contracting the economy more than anticipated.
Despite the recessionary data, we just saw March’s monthly inflation come in at a stubborn 15%. This puts the central bank in a difficult position, making it unlikely to cut interest rates to stimulate growth. This policy bind will likely extend the economic pain and asset price depreciation.
The risk of sovereign default is rising, with Argentina’s country risk premium now hovering near 1,900 basis points, a significant increase over the past quarter. This makes buying credit default swaps (CDS) on Argentine government bonds a prudent move to hedge against, or profit from, increasing credit risk. This is a level not seen since the debt restructuring fears of early 2024.
Overall uncertainty creates a volatile environment, suggesting that options premiums will likely rise. We see an opportunity in strategies that benefit from large price swings, regardless of direction. Establishing long straddles on the most liquid Argentine assets could be an effective way to trade the expected turbulence.
