Milei’s Argentina win is expected to pressure the peso and buoy bonds. Argentine libertarian on the far right Although it might be more popular with bondholders, Javier Milei’s decisive victory in Argentina’s presidential runoff would probably result in lower currency values for the peso, according to analysts following the results.
Even though the outer radical defeated Sergio Massa, the head of Peronist economics, on Sunday, the president-elect used a measured tone in his carefully considered inaugural speech. The radicals have promised to “burn down” the central bank and dollarize the economy.
Due to a local holiday, the South American markets are closed on Monday and will reopen fully on Tuesday. Trade will occur mainly in Europe and the US for foreign-listed sovereign bonds and specific stocks.
About the day Milei takes office, “In the short term, bonds are going to react positively, but we expect pressure in the FX market due to the uncertainty until Dec. 10,” said Juan Manuel Pazos, chief economist at TPCG in Buenos Aires.
Milei promised swift changes to address an economic crisis during his inaugural speech. A recession is imminent, foreign exchange reserves are harmful, and inflation is 143%. He expressed gratitude to Patricia Bullrich and Mauricio Macri, his mainstream conservative supporters, but he also indicated restraint.
Martin Castellano, head of LatAm research at the Institute of International Finance (IIF), said, “It is positive that Milei said he is willing to broaden the political support and also thanking both Macri and Bullrich.”
“In the next few days, it will aid in calming market sentiment. Although it lacked many definitions, it was a moderate speech.”
With little political background, Milei transitioned from TV punditry to lawmaking. She rode the tide of public ire, at points throughout the campaign promising an ambitious “chainsaw” strategy to cut state spending and government size.
Chief strategist Walter Stoeppelwerth of the financial business Gletir stated that Milei has to be steadfast in the face of genuine voter worry about the agony of austerity, given that two-fifths of the populace lives in poverty.
“The financial commitment is what counts. Bonds will rise if Milei is successful in persuading investors that strict fiscal policy is the cornerstone of his administration,” he stated. It will also be beneficial if he advances toward FX unification. He is incapable of hedging.
After receiving 30% of the vote in the first round of the general election last month, Milei’s unexpected 56% vote total in the runoff will encourage him. Though his Liberty Advances coalition has a relatively modest proportion of members, he faces a split Congress.
“Implementing a full stabilization plan will be urgent for the new administration, within a ‘honeymoon’ that could be shorter than usual given the delicate context and where broad political support will be required,” said Gustavo Ber, an independent economist.