Argentina Heads to Runoff as Massa Gains Edge Over Milei

So we’ve been hearing a lot about unity and hard work from Moussa as he’s been speaking. But this is really kind of the most politically polarizing scenario that investors had been hoping to avoid. Yes, Heidi, The scenario between a run off with a Sergio Garcia, the incumbent economy minister, running a system of currency controls and capital restrictions. And the outset or having me, who has a radical proposal to dollarized Argentina’s economy for I think most investors, was a most dreaded, most feared scenario. And we started this morning with a three way race. We’re going to

a head to head battle on November 19th between Massa and Melaye. And really, the story of the day is Massa’s big comeback and the August primary vote. His coalition finished in third place. He surged back up to first place, gaining over nearly a million and a half extra votes through a mix of spending policies and also re crafting his campaign message. Well, thing is, how are markets expected to react to all this? Well, Chris, I think that’s a great question. We’re going to probably see more pressure on Argentina’s currency. Excuse me. We’re going to see

more pressure on Argentina’s exchange rate. The peso is and we have multiple exchange rates here. The official exchange rate is controlled by the government, but the parallel rate

has been fluctuating with a lot of volatility recently. That’s probably going to continue in the weeks leading up to this runoff vote. And bond investors are probably not going to be happy either. They have soured on the current government run by Sergio Massa, with bond prices trading around $0.30 on the dollar or less. And many are fear that Melaye wouldn’t be able to govern the country with a

fragmented Congress and policies that just seem too radical for a country that has tended to go left for for many decades. So this is not going to be an outcome that bond investors like. And the currency will probably see pressure in the coming days. So the thing is, what are some of the challenges that Argentina’s next president will inherit? I mean, this is a ludicrous question because it’s a program go all day. Absolutely. I mean, it’s it’s really impressive that the economy minister overseeing such an economic crisis in Argentina has a carved out a path,

a clear path to the presidency. And whether it’s Masa or me as Argentina’s next president. Either one will inherit titanic challenges. And inflation is at 138% annually. That’s the highest level since Argentina was exiting hyperinflation back in the early 1990s. The economy is going into a recession and Argentina has to pay $44 billion back to the IMF, the International Monetary Fund over the next several years. So how do you reset the economy, cool inflation and find a way to pay back the IMF, not to mention Wall Street creditors after Argentina defaulted in 2020? It’s a

really difficult tightrope action, tightrope activity to try to thread the needle on. And it’s not clear that Masa or me has the answer. And markets will be on edge for the next few weeks leading up to this key runoff vote.