Javier Milei, the libertarian outsider candidate with radical solutions to Argentina’s economic crisis, just won Sunday’s presidential election against Economy Minister Sergio Massa.
In a surprise outcome, Massa conceded in a speech to supporters in Buenos Aires on Sunday, before the official results were announced, saying he had called Milei to congratulate him on his victory. The first results, released shortly after Massa’s concession, show why Milei was the winner: with 87% of the vote count, Milei led Massa 56-44%.
Milei, who was interviewed by Tucker Carlson two months ago, has promised to solve Argentina’s perennial economic problems by implementing drastic cuts, replacing the battered peso with the US dollar and closing the central bank.
Episode 24 Argentina’s next president could be Javier Milei. Who is he? We traveled to Buenos Aires to talk to him and find out. pic.twitter.com/4WwTZYoWHs
— Tucker Carlson (@TuckerCarlson) September 14, 2023
Massa, from the ruling Peronist coalition, came first in October’s first round, a remarkable comeback after losing the primaries two months earlier. But the dire state of Argentina’s economy, plagued by 143% hyperinflation and a looming recession, posed a challenge beyond his presidential bid.
Earlier:
Argentines will return to the polls on Sunday, November 19, to elect the next president in a subsequent runoff election. Voters will choose between incumbent Finance Minister Sergio Massa and right-wing libertarian Javier Milei. The election results will shape Argentina’s social and macroeconomic prospects in the coming years.
As Goldman writes in his election note, polls indicate a closely contested race. with a majority showing that Milei has a slight lead in terms of voter preferences. However, a significant proportion (about a third of polls) suggest Massa is in the lead. In general, Polls in Argentina have a poor track record and have systematically failed to capture shifts in voter sentiment in this election process. To add to the uncertainty, Massa was seen as outperforming Milei in the final presidential debate last week.
In the August primaries (PASO), Javier Milei’s La Libertad Avanza party surprised by taking the lead, followed by the centre-right coalition Juntos por el Cambio whose presidential ticket would be led by Patricia Bullrich. Massa’s left-wing Peronist coalition, Unión por la Patria, finished third. In the October first round elections, Massa in turn exceeded most expectations with improved performance, finishing first. Milei came in second with no significant change in support, and Bullrich disappointed, finishing a distant third.
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After the elections in the first round, part of the Juntos por el Cambio coalition, the faction led by Ms. Bullrich and former President Mauricio Macri, announced their support for Mr. Milei. Although the bloc represented by the Radical Party decided not to formally support any of the candidates, some members have publicly sided with Massa.
After Sunday’s results, investors will turn their attention to economic policy announcements. In the short term, the well-managed exchange rate will be a critical variable to monitor. After the August primaries, the government weakened the exchange rate by about 22% to ARS 350 per dollar. The exchange rate was then kept frozen at this level until this week, when the crawl resumed (1.0% so far this week). Nevertheless, the pass-through was high and inflation accelerated significantly after the post-PASO devaluation, resulting in the real exchange rate is now even more overvalued than before the August devaluation.
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In turn, parallel exchange rates continue to trade with a significant spread compared to the official rate (162% for the informal market exchange rate and around 145% for the implied bond (MEP) and equity (CCL) rates) and the futures market. expects a significant depreciation in the coming months. However, pressure on both markets eased after Massa came into first place in the first round elections, having risen significantly following Milei’s outperformance in the August PASO.
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Equally important, significant payments are planned in the coming months to the IMF (approximately $0.9 billion in December and $1.9 billion in January) and foreign currency bondholders (approximately $1.5 billion in interest payments in January) . Meanwhile, the EFF program with the IMF remains off course and, in our view, its realignment will take time.
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Regardless of the election winner, Goldman writes that rapid change in economic policy is imperative. The accumulated imbalances in the economy have become too great and need to be addressed immediately. The bank expects the economy to contract for the second year in a row in 2024, annual inflation is near 150% and expected to continue rising in the coming months, the exchange rate is overvalued and international reserves are at critical levels. net reserves are significantly negative (about $11 billion), budget imbalance persists, government bond trading is at volatile levels and the government has no access to international financial markets. Everything in, If policymakers do not steer macro policy in a more orthodox direction, macro adjustment could sooner or later be forced, resulting in loss of control over the process and even higher social and economic costs.
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