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Investors have cheered radical libertarian Javier Milei’s victory in Argentina’s presidential election, despite concerns about a difficult government transition and major economic challenges.
Argentine stocks and bonds rose in trading outside the country after the television economist, whose insurgent campaign strategy was adopted by Donald Trump and Jair Bolsonaro, beat expectations and won 56 percent of the vote in Sunday’s election.
But Milei fell far short of a majority in October’s congressional elections and faces 143 percent annual inflation, crippling domestic and foreign debt and an empty treasury.
“Everything points to this being the worst [presidential] The transition will take place in at least a decade,” said Fabio Rodríguez, deputy director of consulting firm M&R Asociados in Buenos Aires. “There are many, many issues and they are all urgent.”
Milei’s promises to take a chainsaw against the Argentine state, privatize wherever he can and deliver economic shock therapy have thrilled investors and businessmen despairing of the country’s inability to capitalize on its vast natural resources .
Before the second round of voting on Sunday, Milei withdrew some controversial ideas – such as legalizing the sale of human organs. However, in his victory speech he declared that there was “no room for gradualism.”
He had previously promised to eliminate the peso against the US dollar, abolish the central bank and reduce the number of ministries from 18 to just eight. Milei also called for cuts in government spending, which currently accounts for about 38 percent of gross domestic product, by up to 15 percentage points of GDP.
Argentina’s dollar bonds rose around 5 percent in early trading on Monday to their highest level since September, but remained well below their face value. Bonds due 2030 still traded at just 32.2 cents on the dollar.
The Buenos Aires stock exchange was closed for a holiday, but U.S.-listed shares of state-controlled energy company YPF SA – which Milei has promised to fully privatize – rose 38 percent in early trading. U.S.-listed shares of banks Banco Macro SA and Grupo Financiero Galicia SA both rose more than 20 percent.
Inside Argentina, Milei and his defeated rival, Peronist Economy Minister Sergio Massa, argued over who should take responsibility for the broken economy in the three weeks before the president’s inauguration on December 10.
Economists say there is a risk of economic collapse unless measures are taken quickly to restore confidence. Currently, international reserves are depleted and the government is limited to borrowing in local markets at triple-digit interest rates.
Milei refused on Monday to name an economy minister, saying it would amount to his candidacy “to the electric chair” as Massa sought to shift blame for the country’s difficulties onto the new government.
“Milei will take office as the weakest president in Argentina’s history, despite his clear victory in the second round,” said political analyst and adviser Sergio Berensztein.
The president-elect’s insurgent party, La Libertad Avanza, will hold only 39 of 257 seats in the new lower house and has an even worse position in the country’s Senate. He himself was elected to Congress just two years ago and has no leadership experience.
Former center-right President Mauricio Macri has offered his support, but analysts said Milei would need to reach further across the political aisle to cobble together a legislative majority.
“The first question for the ability to govern will be the system of alliances and pacts that Milei will build,” Berensztein said.