Argentina’s investors are celebrating Javier Milei’s surprising victory in the recent presidential election and his ambitious plans to revolutionize the country’s economy. The economist’s triumph has led to a positive impact on Argentina’s most liquid foreign bonds, which rose in early European trading. The potential for significant policy changes and a fresh start for the nation has bolstered their performance as well. His proposals to overhaul government policies and tackle severe economic challenges have been well-received among investors.
Despite initial concerns, Milei’s victory has led to an increase in the value of bonds due 2035 and 2041. These emerging market securities, while still trading below 30 cents on the dollar, have seen an upward trend following the election. Jorge Piedrahita, founder of Gear Capital Management in New York, remarked, “This is the opportunity for a new beginning.”
Milei’s plans to replace the peso with the dollar have already impacted the currency’s value in parallel markets. The peso has weakened, falling to about 1,000 per dollar on local cryptocurrency exchanges. Experts like Leandro Galli, a portfolio manager at JP Morgan Asset Management, anticipate continued pressure on the peso and potential acceleration of inflation.
The economist’s assertive campaign promised transformative solutions to address the country’s economic instability. His pledge to reduce public spending and shut down the central bank has appealed to bond investors, who foresee potential benefits from these actions. Despite uncertainties regarding the transition and implementation risks, JP Morgan Asset Management’s Galli believes Milei’s policies could offer support for dollar bonds.
Following his victory, during his speech on Sunday night, Milei refrained from discussing his radical proposals and instead emphasized the urgent need for change in the economy. The economist aims to bring about a prosperous era for Argentina by implementing measures that are rooted in proven, successful economic strategies.
Although Milei holds limited seats in congress with his La Libertad Avanza party, he has won favor among investors for his commitment to reshaping the country’s economic landscape. However, market experts like Patrick Esteruelas, from Emso Asset Management, remain cautious about potential execution risks and the political stability needed to implement these sweeping reforms.
Bloomberg’s economists anticipate a period of uncertainty leading up to Milei’s inauguration and emphasize the impact of his cabinet announcements and market reactions on the economy. Additionally, some investors remain optimistic about Milei’s potential to revitalize the economy, despite the challenges and skepticism surrounding his ability to enact significant changes and reforms.
–With assistance from Srinivasan Sivabalan.
(Updates prices in second and third paragraphs, adds investor comments starting in sixth paragraph.)
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