They maintain that the president-elect only shelved his intentions to dollarize. Increased coverage and volatility are expected. The Treasury awarded $30 billion more.
It could be said that Argentina is a strange case in which the majority of people are happier to the extent that the candidate they just voted for the position of president moves away from what he promised during the campaign. It is paradoxical but Javier Milei achieves greater margins of credibility for the markets when it sends signals of moderation in the face of the crisis.
The person who said that was Lucas Llachthe former vice president of the Central Bank during the administration of Federico Sturzeneggerin the government of Mauricio Macri. “If dollarization is shelved, Argentina will come out quickly. If it is not archived, everything is more complicated. Of course, I could be wrong, this is not science.”, he noted in his account Llach was active on the networks in support of who is now president-elect.
With this context, the Ministry of Economy carried out the second round for the Market Makers of the bidding for Treasury bills and bonds and managed to add another $30,115 million to what was achieved on Tuesday. In the first call after the elections he obtained net financing of $233,473 million. In the first round he was able to raise $1.76 billion via debt in pesos, while the banks dismantled positions in Leliq of the Central Bank.
The markets are much calmer with the first signals that the president-elect is offering, but the trust is not 100%. Facimex Valores assures in a recent report: “Although the fact that Milei has not mentioned dollarization in her speech could help decompress certain pressures, we believe that it is a risk to consider it ruled out.” The report adds: “It is still the most probable path given her diagnosis regarding the need to go for drastic solutions.”
Hedging demand and volatility
The possibility of a radicalization of economic policy towards the pro-market side is what keeps operators on guard.. Jaime Reusche, Mr. Credit Officer of Moody’s Investor Service warns that the measures proposed by Milei, such as cut spending by 15 points of GDP, “if enacted as described, they would cause an abrupt and profound economic adjustmentcollapsing domestic demand and threatening financial stability.”
“I have been arguing for some time that dollarization under current conditions is impractical. It seems good to me that today they are turning to stabilizing the economy and that would be left for a second stage if necessary. “Once you have a healthy economy, why get into the trouble of dollarization,” said financial analyst Christian Buteler.
Most of the Traders agree that hedging demand and volatility will continue to dominate investor decisions in the coming months, to the extent that the fiscal adjustment is developed. The Governance will be one of the key points that operators will look at. Javier Timerman, partner at Adcap Grupo Financiero, pointed out that “for the private investor, the economic plan is as important as the ability to execute it over time.” “Governance; Sustainability over time is the main obstacle that Argentina has today in executing an economic plan. They don’t believe we can do it,” he explained.
Source: Ambito
