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NEW YORK - Argentina's presidential race is enticing some risk-taking investors to place bets despite the long odds that a new government can steer South America's second-largest economy out of its deep crisis.
"Two thirds of the country is voting for pretty substantial fiscal consolidation, which, as a bond investor, we're obviously quite keen on," said Christine Reed, a New York-based portfolio manager at global investment manager Ninety One. Milei, an economist and member of Argentina's lower house of Congress, wants to sharply cut spending, ease stringent capital controls and eventually dollarize the economy. The moves, in theory, should be positive for markets, but could be hard to pull off in an economy beset by triple-digit inflation, negative net foreign currency reserves, rising poverty and a sliding currency. A $44 billion loan program with the International Monetary Fund also is wobbling dangerously.
"They're supporting someone who's very radical in his views in terms of a real free market and a smaller government," he said of Milei."These are very liberal ideas from an economic perspective, so I think it's a generational change."A key takeaway from the August primaries for investors was the perceived weakness of Vice President Cristina Fernandez de Kirchner, a left-wing populist and former two-term president who has long butted heads with investors.
"We also found a consensus that Kirchnerism would progressively exit the center of the political stage no matter who wins the elections," they wrote in a note.Argentina's bond prices in cents on the dollar trade between the high 20s and low 30s - far below even countries currently in default, like Ghana or Sri Lanka, which trade in the mid 40s.
There is also lingering concern over a possible Milei administration, given his party would likely face a hostile and divided Congress that would try to obstruct any proposed reforms.
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