by Jorgelina do Rosario
BUENOS AIRES (Reuters) – Ultra-liberal economist Javier Milei’s landslide victory in Argentina’s presidential election is likely to put downward pressure on the peso but could be better received by bondholders, analysts say .
Argentinian markets are closed this Monday due to a public holiday and the impact of Javier Milei’s victory will not be fully felt until Tuesday. However, sovereign bonds listed abroad and certain stocks will be traded on Monday, mainly in Europe and the United States.
“In the short term, bonds will react positively but we expect pressure on the foreign exchange market due to the uncertainty that reigns until December 10,” said Juan Manuel Pazos, economist at TPCG in Buenos Aires, in reference to the date Javier Milei took office.
The anti-system candidate, who pledged to close the central bank and abandon the peso in favor of the American dollar, won the second round of voting against the outgoing Minister of the Economy, the Peronist Sergio Massa.
During his first speech as president-elect, Javier Milei, however, took care to adopt a more measured tone.
He promised rapid reforms to restore an economy mired in crisis and where inflation reached 143%. But he also thanked his main conservative supporters, Mauricio Macri and Patricia Bullrich, with whom he concluded an alliance between the two rounds.
“The fact that Javier Milei said he was ready to broaden his political support and that he also thanked Macri and Bullrich is positive,” observes Martin Castellano, head of Latin America research for the Institute of International Finance ( IIF).
“This will help stabilize market sentiment in the coming days.”
Former television presenter, Javier Milei, 53, has little political experience. During the presidential campaign, he brandished a chainsaw for a long time in his electoral rallies to illustrate his desire to cut public spending, an “accessory” that he then left aside to give himself a more moderate image.
For Walter Stoeppelwerth, strategist at the management company Gletir, Javier Milei should remain in his position, despite voters’ real fears regarding the consequences of an austerity plan.
“The determining factor is fiscal commitment. If Milei can convince the market that chainsaw (fiscal discipline) is the heart and soul of his presidency, bonds will recover,” he said. “If it moves towards currency unification, that is also a positive point. It cannot be equivocal.”
Javier Milei won the presidential election with a higher score than expected but once inducted, he will have to deal with a very fragmented Congress, where no political bloc has a majority.
“The implementation of a comprehensive stabilization plan will be urgent for the new administration while the ‘honeymoon’ could be shorter than usual in the delicate context and when broad political support will be necessary,” underlines economist Gustavo Ber.
(Jorgelina do Rosario report; with contributions from Walter Bianchi, Jorge Otaola and Hernán Nessi; Blandine Hénault for the French version)
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