elected president of ArgentinaLibertarian Javier Miley, to name the head of the central bank he promised to shut down and hire a minister overseeing one of the world’s most stressed economies. Investors are watching the country closely.
The group chosen by Millay will shape the politics of South America’s second economy in the coming years, while the political newcomer faces inflation that has exceeded 140%, net reserves in the red and persistent capital controls.
The country, where four out of 10 people live in poverty, is also the biggest debtor International Monetary Fund (IMF).
Although Milei is surrounded by a small group of economic advisers, a recent alliance with the dominant conservative coalition that helped him win the second round of elections could lead to negotiations for higher posts.
A bigger-than-expected victory with 56% of the vote would be bold mercyHe promised to quickly end capital controls, cut public spending and eventually dollarize the economy.
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“Miley received a strong mandate to change the current economic model”said Armando Armenta, Latin American fixed income and currency market analyst at AllianceBernstein in New York.
“Who is appointed… as Fed chairman, economy secretary, and details of an emergency economic stabilization plan that lacks a majority in Congress will be key for asset prices in the coming days” he added.
The economy ministry has always been a key post as Argentina has defaulted nine times on its debt and has been stuck in a decades-long boom-and-bust cycle.
However, the major grain exporter is facing one of its worst economic crises, with a recession just around the corner.
Millay will take office on December 10, defeating the Peronist ruling coalition’s economy minister. Sergio Massa.
Hans Humes, chief investment officer at Greylock Capital Management, which owns Argentina’s sovereign bonds, backed Miley more than people expected.
“A lot of people don’t believe dollarization is possible. I think it will take a little work.”Humes said. “I hope (your) group is already created” he added.
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Uncertainty of the future
Miley, whose surprise victory in the August primary elections rattled markets, is among his economic advisers former deputy economy minister Carlos Rodriguez, former central bank chief Roque Fernandez and financial services director Dario Epstein.
Worked by Emilio Ocampo Wall Street For more than two decades, he became a key advisor on dollarization.
But Millay’s recent endorsement by business tycoon and former conservative president Mauricio Macri could add some market-friendly names to the cabinet from his PRO party and the Together for Change (JxC) coalition.
Juan Manuel Pazós, chief economist at TPCG in Buenos Aires, said Miley’s first post-election speech on Sunday was e.“The Right Tone” and sent “The Right Message”With a view to widen the alliance while cementing the alliance with the PRO.
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“Miley said he was going to restructure the central bank instead of blowing it up or shutting it down. “That detail is important.”Passos said Argentina’s sovereign bonds should perform better with Miley’s stronger-than-expected win.
A new program must be negotiated with the new economy minister FMI am “relatively fast” to avoid arrears with the agency, Morgan Stanley said Monday.
The country has a $44 billion plan with the Washington-based lender beginning in 2022 to refinance a failed 2018 loan.
“Both sides can argue for a fresh start and abandon current policies that derail the current plan.”The economist wrote Morgan Stanley Fernando Sedano.
Massa, who won only more votes than Miley in the provinces of Buenos Aires, Santiago del Estero and Formosa, said on Sunday that it was Miley’s responsibility to provide certainty. “From tomorrow”.
“We hope he does.”he added.
Local markets are closed on Monday due to a national holiday in Argentina.
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