2023-11-20 22:06:12
TheArgentine companies praise the victory of the far-right Javier Milei on Wall Street. His reaction was highly anticipated in the neighboring country because the Buenos Aires Stock Exchange was inactive due to today’s holiday in the country (Sovereignty Day). Energy companies have benefited the most in the markets: YPF gained 36% in the first 40 minutes of the session, Transportadora Gas del Sur rose 22% and Pampa Energía has increased its value by 7%. In the banking sector, Grupo Financiero Galicia registered an increase of 23%, Banco Macro of 19%, Cresud of 21%, BBVA Argentina of 16% and Grupo Supervielle of 12%. Other firms, such as the cement company Loma Negra, rose to 12%, the steel company Tenari up to 1.8% and Telecom Argentina up to 4%.
Due to the holiday, there are no operations in banks and exchange houses in Argentina until Tuesday, but the looks are set in the “dollar-bitcoin” behavior. Since Milei’s victory became known on Sunday night, the price has begun to rise strongly, even exceeding 1,000 pesos per unit. For their part, Argentine bonds listed abroad have also reacted positively, all of them above 4%. The GD46 bond, maturing in 23 years, leads the rise with 6.38%, followed by the GD35 (6.11%) and GD41 (5.70%).
Markets anticipate a future rise in the price of the dollar as a consequence of the president-elect’s proposal to dollarize the economy at an uncertain conversion exchange rate. It should be noted that the victory of the far-right has surprised analysts, who until last week were predicting a Government led by the Minister of Economy, the Peronist Sergio Massa, whose proposals did not immediately include substantial modifications in exchange rate policy.
Of course, the result does not mean that everything is easy for the new Argentine president. “We believe that Milei’s current lack of majority in Congress represents a challenge and highlights the importance of his alliance with part of the PRO party. It also needs to announce a credible economic team as soon as possible,” explains Alejandro di Bernardo, emerging markets debt fixed income manager at Jupiter AM.
Privatizations and dollarization of the economy
Milei has wasted no time on his first day as president of Argentina. Early in the morning, she said in an interview on Radio Miter that would privatize YPF, Public Television, National Radio and the Téla news agencym. When asked about what will happen to the state oil company, he responded that “everything that can be in the hands of the private sector will be in the hands of the private sector,” although “YPF has to be recomposed first.”
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The rest of the measures have not yet been revealed, but the La Libertad Avanza candidate has highlighted several during his electoral campaign. In economic matters, his star measure is dollarization and the elimination of the Central Bank. He also advocates “progressively” reducing social assistance plans and cutting pension and retirement funds. Milei has promised, at the same time, a “deep adjustment” that the public sector will pay for and ending the exchange rate in just three months.
“We anticipate that Milei will probably adopt a more pragmatic approach, moderating some of its proposals, especially regarding dollarization,” says Di Bernardo. Before he takes office on December 10, the main factors to monitor will be the application of fiscal adjustments and a credible stabilization plan. “However, given the context of limited international reserves, significant fiscal deficits and a delicate transition phase, the execution risk is extremely high. We will continue to monitor the situation for clear indications about the new Milei cabinet, as well as its efforts for seeking technical support from the PRO party,” adds the emerging markets debt fixed income manager at Jupiter AM.
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