Argentina's financial markets surged with optimism on Tuesday in response to the resounding election victory of libertarian economist Javier Milei. The 53-year-old self-proclaimed "anarcho-capitalist" clinched a decisive win, leaving the long-dominant Peronist coalition grappling with the consequences of decades of economic decline.
Despite the prevailing uncertainty surrounding Milei's unconventional campaign promises, which included the elimination of multiple government departments and symbolic chainsaw-waving rallies, the stock market demonstrated unwavering positivity. Monday, a public holiday in Argentina, saw delayed reactions, but the opening bell on Tuesday witnessed an immediate 20 percent surge, eventually settling at a notable 14 percent gain.
Argentina, Latin America's third-largest economy, has been battling an annual inflation rate of a staggering 143 percent. The controlled peso and the informal "blue dollar" exchange rate, viewed as a gauge of national sentiment, showed measured increases, with the latter reaching 1,050 pesos to the dollar, nearly three times the official rate of 371.50. Analysts caution that a long-overdue devaluation may be on the horizon.
Milei's victory has sent shockwaves through the financial landscape, with the economist vowing to abandon the peso in favor of the US dollar and shutter the central bank, which he accused of excessive money printing to sustain government overspending and combat inflation.
During his campaign, Milei advocated for significant cuts in state spending and the elimination of around 10 government ministries, sparking controversy and raising questions about the practicality of his proposals. Despite softening some of his rhetoric post-election, uncertainty persists regarding the specifics of his agenda.
Mexican President Andres Manuel Lopez Obrador expressed less enthusiasm about Milei's triumph, likening it to an "own goal" in soccer during a news conference on Tuesday. Obrador emphasized the potential economic pain Argentina might endure in the quest for solutions to its massive problems.
In his first post-election interviews on Monday, Milei outlined a two-year timeline for tackling inflation and detailed plans for state reform. He asserted that private sector involvement would extend to entities such as the state oil company YPF and state media, prompting a remarkable 34 percent surge in YPF shares, with Wall Street-listed shares closing up by 40 percent on Monday.
Milei's commitment to eliminating stringent currency exchange controls resonated in his pledge to challenge the official peso-to-dollar rate, which analysts deem an expensive illusion. When questioned about his dollarization platform, Milei underscored the priority of closing the central bank, allowing Argentines to freely choose their preferred currency.
The financial community closely observed Milei's inaugural meeting with outgoing President Alberto Fernandez on Monday as both leaders initiated coordination efforts for the impending transition. Milei is set to assume office on December 10, amidst heightened anticipation and a wave of transformative expectations for Argentina's economic landscape.
