Right-wing libertarian Javier Milei vowed to “rebuild” Argentina’s battered economy after winning the country’s presidential election.
The former television commentator defeated the Minister of Economy, Sergio Massa, with 56 percent of the votes, after having promised to cut public spending with a chainsaw and “burn” the central bank.
“Today the reconstruction of Argentina begins,” declared the 53-year-old. “There is no room for gradual measures.”
Their plans will be put to the test when Argentina’s financial markets resume trading today after a public holiday yesterday.
South America’s second-largest economy is crumbling under 143 percent inflation and a looming recession.
Eccentric: Argentina’s new president, Javier Milei (pictured), defeated Economy Minister Sergio Massa with 56% of the vote, after promising to take a chainsaw to public spending.
Four out of ten Argentines live in poverty and the country is the largest debtor to the International Monetary Fund.
Milei, who carried a chainsaw during his campaign to symbolize his planned cuts, has pledged to dollarize the economy and get rid of the peso as part of his plan to lift Argentina out of its malaise.
Dollarization would see Argentina peg its currency to the United States in a bid to stabilize the economy.
The politician, who has been compared to former US President Donald Trump, must appoint a minister to lead the central bank that, just a few weeks ago, he said he wanted to burn down.
However, Juan Manuel Pazos, chief economist at Buenos Aires-based financial services group TPCG, said Milei’s first post-election speech set the “right tone” and conveyed the “right message.”
He added: ‘Milei said he is going to reorganize the central bank rather than implode or close it. That detail is important.’
Hans Humes, chief investment officer at Greylock Capital Management, said Milei will achieve more than people expected.
“Many people don’t believe dollarization is viable,” Humes said. ‘I think it will. It will require a little work.
Sergio Armella, an analyst at Goldman Sachs, said: “It is indisputable that a rapid change from the failed economic policies of the past is imperative.
“The accumulated imbalances in the economy have grown too large and must be addressed promptly.”
He said Argentina needs an independent and responsible central bank “free from the clutches of fiscal dominance,” financial liberalization and structural reforms to “make the economy more open, productive and flexible.”
Jefferies analysts Alejandro Aníbal Demichelis and Pedro Baptista said Milei’s victory should “bring positive changes to the country,” such as reducing the budget deficit and eliminating frictions in the economy.
“But they added that the measures are unlikely to be easy or quick.”
“For us, governance and the risk of social unrest are key concerns, as the new administration’s push to eliminate relative price distortions, subsidies, particularly to energy and food, and currency controls could accelerate inflation and currency devaluation in the short term,” the analysts said. saying.
As a popular tourist destination, Argentina’s economy is driven by the service industry, but its agricultural and industrial sectors are also important to the financial system.
The country’s main exports are corn, soybeans and soybean oil, wheat and automobiles, according to the World Bank.
The South American country, however, has been trapped in a long-running economic crisis, with decades of persistently high inflation.
However, price growth skyrocketed after the pandemic to reach a 30-year high in February this year.
