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Investors have cheered the victory of radical libertarian Javier Milei in Argentina’s presidential election despite worries about a rocky government transition and huge economic challenges ahead.
Argentine stocks and bonds rose in trading outside the country after the television economist, whose insurgent campaign strategy borrowed from Donald Trump and Jair Bolsonaro, outperformed expectations by winning 56 per cent of the vote in Sunday’s election.
But Milei fell far short of a majority in October’s congressional election and faces 143 per cent a year inflation, crushing levels of domestic and foreign debt and an empty treasury.
“Everything points to this being the roughest [presidential] transition in at least a decade,” said Fabio Rodríguez, associate director at M&R Asociados consultancy in Buenos Aires. “There are many, many problems, and all of them are urgent.”
Milei’s pledges to take a chainsaw to the Argentine state, privatise wherever he can and enact economic shock therapy have delighted investors and businesspeople who have despaired of the country’s inability to capitalise on its vast natural resources.
Before Sunday’s second round vote, Milei retreated on some contentious ideas — such as legalising the sale of human organs. But he declared in his victory speech that there was “no room for gradualism”.
He has previously promised to scrap the peso for the US dollar, abolish the central bank and shrink the number of government ministries from 18 to just eight. Milei has also called for reductions to government spending, currently around 38 per cent of gross domestic product, by up to 15 percentage points of GDP.
Argentina’s dollar bonds rose by around 5 per cent in early trading on Monday to their highest level since September, although they remained far below their face value. Bonds due in 2030 were still only trading at 32.2 cents on the dollar.
The Buenos Aires stock market was closed for a public holiday, but US-listed shares in state-controlled energy company YPF SA — which Milei has promised to privatise fully — rose 38 per cent in early trading. US-listed shares in banks Banco Macro SA and Grupo Financiero Galicia SA both rose more than 20 per cent.
Within Argentina, Milei and his defeated rival, Peronist economy minister Sergio Massa, sparred over who should take responsibility for the broken economy in the three weeks before the December 10 presidential inauguration.
Economists say there is a risk of economic collapse unless measures are taken swiftly to restore confidence. At present, international reserves are exhausted and the government is reduced to borrowing on local markets at triple-digit interest rates.
Milei declined to name an economy minister on Monday, saying it would be tantamount to putting his nominee “in the electric chair”, because of attempts by Massa to blame the country’s travails on the incoming government.
“Milei will take office as the weakest president in Argentina’s history, despite his clear victory in the second round” said political analyst and consultant Sergio Berensztein.
The president-elect’s insurgent party, La Libertad Avanza, will hold just 39 seats in the new lower house out of 257 and has an even worse position in the country’s senate. He himself was only elected to congress two years ago and lacks executive experience.
Centre-right former president Mauricio Macri has offered his support but analysts said Milei will need to reach further across the political aisle to cobble together a legislative majority.
“The first question for governability will be the system of alliances and pacts which Milei will construct,” Berensztein said.
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