Following Javier Milei’s presidential election win in Argentina, the country’s stock market experienced a significant surge.
On Tuesday, November 21, the Merval index, Argentina’s main stock market benchmark, jumped by 21.23% to 782,027 points.
This rise marks a strong investor response to Milei’s victory, with the libertarian candidate securing 55.69% of the votes, 11 percentage points ahead of Sergio Massa.
Milei, set to assume office on December 10, plans to streamline the government by reducing the number of ministries.
His economic approach, characterized by privatization and market liberalization, has sparked optimism among investors.
However, the optimism is tempered with caution. Economist Gustavo Bertotti from Messem Investimentos warns that the market’s positive reaction could be an overstatement.
Milei’s ambitious plans, such as dollarizing the economy and major privatizations, require congressional approval, which he currently lacks.
Milei’s party holds a minority in Congress, making legislative support crucial for his policy implementation.
He could achieve a majority if he gains support from the Juntos por el Cambio coalition.
Milei’s intention to exit Mercosur also raises trade uncertainties, especially with Brazil, a key trading partner.
Argentina’s financial landscape remains challenging. The country faces high inflation, with slowing rates in October but still significant annual figures.
The national debt-to-GDP ratio is nearing 90%, adding to economic pressures.
Goldman Sachs predicts a contracting economy for Argentina in 2024.
They highlight issues like overvalued exchange rates, critical international reserve levels, and limited access to international markets.
Milei’s administration will have to navigate these economic challenges while implementing his proposed changes.
The initial market response, though positive, indicates both investor enthusiasm for change and the complexities of the path ahead.