The election of Javier Milei as President of Argentina has sparked concerns among international financial market players regarding the urgent need for reforms and the leader’s ability to implement them. While Milei’s first speech as president-elect was characterized by unexpected moderation, his plan is considered “bold” and could threaten financial stability.
Moody’s Investors Service Vice President Jaime Reusche stated that implementing the proposed reforms would require consensus and good governance. “A Congress divided and social pressures will also influence the incoming president’s ability to implement corrective policies,” he added.
JP Morgan also analyzed the risks associated with implementing Milei’s measures, warning that political maneuvering could hinder bolder reforms, particularly dollarization. The bank predicted a realignment of the anticipated exchange rate, with a level consistent with the parallel exchange rate, to realign relative prices firmly and gradually remove capital controls. However, this decision could not be made for another year.
Regarding capacity for adjustment, JP Morgan believes that quickly closing the fiscal gap in a sustainable manner should be the axis of any stabilization program and a necessary anchor to generate credibility in the future. The bank forecasts a considerable fiscal consolidation effort next year, with a primary fiscal balance consistent with an overall result of -1.7%.
Barclays also focused on governance challenges, warning that Milei would face significant social pressure from various sectors that may oppose his economic policies. The bank concluded that achieving stabilization and strong economic recovery is crucial for maintaining support among middle-income sectors and promoting reforms in the long term.