Argentines will on October 22, 2023 move a step closer to deciding who will run the $600 billion economy engulfed by a deep crisis that involves runaway inflation, a dearth of US dollar reserves and an electorate with little trust in its currency. Regardless of who wins the race between libertarian populist Javier Milei, center-left economy minister Sergio Massa and center-right ex-minister Patricia Bullrich, the next government will have to deal with a gargantuan pile of debt and a peso so weak that the leading candidate is on a platform to scrap it.
Investors arrive to the election looking at an economy in recession as a crippling drought hit the key agricultural sector. Inflation runs at 138 percent, local interest rates stand at 133 percent and the black-market peso has lost over 60 percent of its value this year. The gap to the official rate is above 150 percent. On the line is the survival of the country’s $43 billion program with the International Monetary Fund and the possibility that Argentina defaults on its debt for a 10th time
“The next government will face substantial execution challenges in a context of accelerating inflation (and) lack of meaningful FX reserves,” said Alejandro di Bernardo, investment manager for fixed income – EM debt at Jupiter Asset Management.
Recent rising government spending was “being financed by central bank monetization, which had the unintended consequence of fueling inflation expectations even further,” added di Bernardo. Polls show primary vote surprise victor Milei in the lead. Ruling coalition candidate Massa has expanded subsidies and cut taxes as he jockeys with Bullrich for the second spot in an expected November runoff. Polls were widely misleading ahead of primaries, adding to uncertainty. https://shorturl.at/bwHSY
Source: IBP