Bonds and the MEP dollar largely depend on investor perception. The billionaire Druckenmiller inadvertently sent a warning signal.
Milei’s best kept secret is not a secret, but it will change the political and economic dynamics with which the Casa Rosada has been governing. On May 25, the 2023 budget ends, that is, the extension used for this year. From there, several diagonals can be launched, which reach up to the MEP dollar.
From that moment on, the president – together with his chief of staff – will begin to govern with greater discretion (even). The mechanics are well known: Each additional budget item will have to be authorized. Although it is true that the person who designs the National Budget is the Minister of Economy, the person responsible for its execution is the Chief of Staff.in accordance with what the 1994 National Constitution says.
As can be understood, this will imply greater friction with those most in need, who will be pushed to knock on “the gates of heaven.” One of these groups are the provinces and those who must command them, the governors. It is one of the great arguments that will lead many provincial leaders to approach the renowned May Pact.
The logic behind anger: a hypothesis
It is known that this Pact was born from the coupling of two historical pamphlets: the Pact of Olives and, think, the Washington Consensus. They are the supposed “tables of the law” for Milei, but we will have to think a little more. As it is not binding – ultimately it is a set of good intentions towards the national government – many provincial leaders will be tempted to default on the invitation. Some will counter with a “Federal Pact”, which with forceps will ‘get’ them out of that trap. Others will attend with the hope of discretionary turns and some resumption of public works in their district. The truth is that, as if it were the parable of the prodigal son, The lack of a 2024 budget could make them return to Balcarce 50.
This entire picture of the situation already permeates the decisions of the senators. We talked about the draft Base Law and the Government’s possibilities of getting it afloat. The Casa Rosada needs the law for political reasons, since it must demonstrate that it can obtain parliamentary support under the watchful eye of the IMF and the “market.” For the Fund, the project is relevant because it has been asking for a long time to improve the “quality” of the adjustment, that is, not stopping the entire surplus equation in the starvation of retirees and pensioners. Thus, Milei’s letter to induce all governors to exert pressure on the Senate is clear: without the Bases law there will be no resources.
A token to Argentina: ADRs, bonds and MEP dollar
On Wall Street, for example, they still cannot believe the magnitude of the adjustment made: They distrust the “showman” as he referred to Milei Stanley Druckenmillerthe billionaire former partner of Soros who this week, in words to the American press, applauded Milei’s changes, said that it was an “experiment” and even smiled a little at the Argentines who still support him in the polls for the president and He subordinated the fate of the economic plan a little to the metaphysics that surrounds the president, and a little to the loss of the spell that, for him, means the reluctance of an important sector of society to vote for Peronism again at this time. It was the Minister of Economy Luis Caputo who uploaded a video to his X account with an excerpt of the interview with the billionaireperhaps without realizing that, in the middle of the speech, Druckenmiller reduced the president to a “showman” and tied the fate of the economy to a future with random touches.
The search for the 700 country risk points
Much of the fate of bond prices in dollars and, therefore, of the country risk that the Government looks at every day in the hope that it will allow it to start borrowing in the market depends on investors like Druckenmiller, who also shared the way in which he made his bet in Argentina after listening to Milei in Davos: “I opened Perplexity (artificial intelligence) and told him ‘give me the five most liquid ADRs in Argentina’. Gave me enough of an overview to follow Soros’ rule of ‘invest then research’, I bought them all. We did some work on them and I increased my positions and so far it’s been great, but we’ll see.” The Government is betting that the country’s risk will enter the area of 700 points, today still very far from that mark. Will the MEP dollar touch that same value again? It seems difficult, although some graphs that come down from the Palacio de Hacienda play with that fantasy. It would be going against what the field is asking for. Furthermore, in the EMBI+ area, the 700 country risk points are the promised land that Caputo is waiting for to return to the ring. Of course, you will first have to convince the IMF.
Source: Ambito
