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With negative international reserves, inflation over 100% and tight capital controls, Latin America’s third largest economy faces fresh uncertainty ahead of October’s presidential election.
Below are comments from investors and analysts:
PAUL GREER, PORTFOLIO MANAGER, FIDELITY INTERNATIONAL, LONDON:
“The first obvious conclusion is that Argentines want to get rid of the government. They want something different. It’s just that the type of difference we might get is more extreme that what we have expected.”
“Whoever wins is going to have a really difficult job, especially now that it feels as if the population is even more fractured than we thought before.”
FERNANDO SEDANO, LATIN AMERICA ECONOMIST, MORGAN STANLEY, BUENOS AIRES:
“While the results do suggest high demand for policy change, the probability of the bull case scenario that sees a macro adjustment and reform outlook backed by strong political capital has fallen. In other words, the uncertainty and risks around the execution of the policy change scenario have increased.”
MARIANO MACHADO, PRINCIPAL AMERICAS ANALYST, VERISK MAPLECROFT, MALAGA:
“The three-way split heightens uncertainty on both the outcome of the first round in October and the expected run-off in November. Which two candidates eventually enter the second round depends on the effectiveness of the party machinery of each one of the top three contenders. While the two established coalitions have this machinery, yesterday’s result demonstrated that Milei’s direct appeal to disgruntled voters can defy the odds.”
“Milei’s lack of executive experience increases the risk of a disorderly economic adjustment, including a possible major social crisis post-December.”
BRUNO GENNARI, EMERGING MARKET STRATEGIST AND SALES, KNG SECURITIES LLP, LONDON:
“This is a negative surprise for the market, but not as shocking as the 2019 primary vote. Investors were expecting a better performance for the Together for Change coalition and the result increases uncertainty on the political scenario.”
“The uncertainty remains high towards the October vote because Milei has not a consolidated political structure, and his aggressive rhetoric is a negative factor for a potential government.”
SERGI LANAU, DIRECTOR OF GLOBAL EM STRATEGY, OXFORD ECONOMICS, LONDON:
“The big risk now is how do people in Argentina react between now and October. Milei said that he wants to dollarize the economy, so if you are an Argentine and have pesos now you start wondering if the peso will further depreciate to 800 to a dollar or 1,000 pesos to a dollar. There is no clue on what is going to happen — so that means people will be willing to pay even more pesos in the parallel market to get dollars.”
KIMBERLEY SPERRFECHTER, LATIN AMERICA ECONOMIST, CAPITAL ECONOMICS, LONDON:
“Our sense is that the prospects of a more market friendly government – combined, (Javier) Milei and (Patricia) Bullrich received almost 50% of the votes – may be welcomed by investors. After all, their economic policy platforms address many of the areas needed to fix Argentina’s economy.”
The strong-showing for Milei “suggests that there is popular appetite for a shock-therapy style approach to deal with the economy’s problems.”
