What to Expect In Argentina In the Run-Up to Milei’s Investiture

How will the dollar, debt and Argentine assets perform in the coming weeks? Fernando Marengo, of BlackTORO Investments, and Salvador Vitelli, of Romano Group, spoke to Bloomberg Línea’s La Estrategia del Día Argentina podcast

Milei, da Argentina
November 21, 2023 | 05:30 PM

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Buenos Aires — Javier Milei’s election as president of Argentina on Sunday is shaking the foundations of the country’s political scene, and in turn, generating great expectation in the financial markets, something that was evidenced by the historic rise of 40% for oil company YPF’s shares on the NYSE on Monday.

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With a radical discourse, highly disruptive economic proposals, and awaiting a roadmap to dispel the haze regarding their implementation, Argentina is preparing for a new stage that promises significant changes in the relationship between the state and the private sector.

In the meantime, Mirgor, one of the main companies benefiting from a long-lasting policy of industrial protectionism in the province of Tierra del Fuego, plummeted more than 8% on the Buenos Aires Stock Exchange on Tuesday, while the leading index of that market, the S&P Merval, climbed more than 17%.

In a conversation with Bloomberg Línea via X Spaces, Fernando Marengo, from BlackTORO Investments, and Salvador Vitelli, from Romano Group, shared their first impressions and projections for Argentine assets, in the run-up to Milei taking office on December 10.


At the same time, the two analysts reviewed some of the most urgent imbalances of the Argentine economy, which the future libertarian head of state will have to start dealing with in just 19 days.

You can listen to the podcast here, in Spanish:

The dollar, dollarization and the exchange rate

Uncertainty regarding the dollar and the future of the Argentine peso began to be felt this week in the financial markets, after Milei’s surprise victory by a wide margin and after Monday’s holiday.


According to Vitelli, from Romano Group, in several market segments, including futures, linked dollar and cash with settlement (CCL), there is a predisposition to an upward correction of the exchange rate, since most of the agents had discounted a Massa victory last week.

However, ambiguities persist in areas such as the equity market.

On the other hand, the market is still waiting for clear answers from Milei. Meanwhile, with the implementation of a 50/50 scheme for export settlements, half to the official dollar and half to the CCL, Massa is seeking to cushion exchange rate pressure. However, there is concern that this measure will be unsustainable over time and will only relieve the pressure temporarily.

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Vitelli also suggested that the lack of clear statements may generate significant challenges in exchange rate policy.


Marengo, of BlackTORO Investments, considers that the rapid dollarization proposed by Milei has practical challenges and that, in the short term, an adjustment of the official exchange rate may be more feasible.

“It seems to me that the main challenge of the peso debt is that it takes place under a scenario of dollarization that is unlikely to be applicable, at least not in the short term, or at least not in the current context of dollar scarcity.”

Salvador Viteli, Romano Group

Argentina’s debt and the upcoming maturities

Argentina’s debt is another of the most pressing concerns for the future administration of Javier Milei. With important commitments with the IMF and private creditors in the short term, the incoming government faces a challenging scenario, while the Central Bank’s reserves are in the red by more than $10 billion, according to private estimates.

In this sense, Vitelli highlighted the importance of a renegotiation with the IMF to avoid a default, although he added that the country will probably need to ask for waivers. The flexibility of the organization and the synchronization of interests between Argentina and the Fund will be fundamental to avoid a default scenario, he added.

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Vitelli’s analysis also addressed Milei’s criticism of China and how this could affect Argentina in terms of using swaps as payment currency. This aspect underlines the challenging horizon of international financial relations under the new government.

Nevertheless, the Argentine market is reacting positively to the president-elect’s proposals and statements, especially in strategic areas such as the energy sector, he added.

“I would say that the main problem of the Argentine economy is a problem of confidence, if you look at the current account deficit, the fiscal deficit, the debt level, how much of the debt is in private hands, all of those are not worrying numbers for a normal country, to put some adjective on it. You have a maturity of $5 billion [in private hands, in 2024] which should not be anything worrying to face.”

Fernando Marengo, BlackTORO Investments

An economist by profession, Marengo focused his analysis on the issue of confidence in the Argentine economy. He pointed out that, although the deficit and debt numbers are not alarming for a “normal” country, the lack of confidence and the constant demand for full payment by creditors complicate the dynamics.

Marengo then delved into peso maturities, highlighting that debt held by non-institutional private parties for next year is approximately $5 billion. He explained that, under a scenario of confidence and compliance with commitments, these maturities should not represent a significant concern.


“If the government succeeds in the expectation of lowering the inflation rate and the market will want to redeem everything that has been indexed to the long fixed rate once gains are ¡made from the adjustment of the long fixed rate.”

Fernando Marengo, BlackTORO Investments

Vitelli also mentioned the possibility of the government opting to prepay some peso debt instruments, but stresses that this will depend on market conditions and government decisions

YPF and Argentine assets

For Marengo, the rise of YPF and the optimistic outlook for Vaca Muerta, plus the promise of a government that fulfills its commitments and respects private property, gives a boost to the stock and bond market linked to the energy sector.

The analyst also highlighted Argentina’s energy potential, especially in gas and oil. The change in the rules of the game and the focus on efficiency can boost production and exports, reducing dependence on imports and improving external accounts.

-- Translated from the Spanish by Adam Critchley

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