The failure of the Omnibus Law in Congress had a “negative” impact among Wall Street investors, who, while hoping that some reforms could be eliminated, did not believe that the process would completely collapse once it returned to committee. Create ““a big concern” and will reduce long-term interest in and trust in Argentina, they say ClarionAND warn of uncertainty of the path that Javier Milei’s government will now follow.
Alberto Ades, CEO of NWI Management LP, According to him, the fall of the law “has a negative impact on investor confidence and above all because it was surprising. It was expected that there would be even more liquefaction, that some reforms would be eliminated, in addition to those already eliminated in the committee discussion, but it was not expected that the process would fail and have to go back to the committee. It was expected that the discussion of the articles could last two or three days, but not that they would return to the commission.”
When asked about the future of reforms, he said that “there are many that require congressional approval and without it it will not be possible to implement them. The question is What attitude will the executive adopt?. There are rumors that they want to hold a referendum. Power is fragmented and the alternative would be to sit down and negotiate. Not everything will work, but at least some fundamental reforms will be made. As the changes begin to work and Milei begins to acquire political capital, further reforms could be introduced. We will see in which direction the Executive will go, it is not yet clear at this moment”, she added.
Jorge Piedrahita, CEO of Partner of Gear Capital, He said that “if we look at all the progress made so far we see that the direction is correct. We must not forget that Milei has achieved numerous macroeconomic successes and we are in the process of a necessary adjustment of relative prices. The situation of the Central Bank has improved, reserves have increased, inflation is decreasing”.
However, he added: “On Wall Street we have observed the government making mistakes that could have been avoided. For example, there are very controversial issues that should have been dealt with separately, such as the privatization of state-owned companies. The collapse of the law worries us enormously.”
“Investors still lack confidence beyond those short-term “traders” who participated in an uptrend in bonds and stocks. But we understand that, due to Milei’s minority in Congress, added to the recalcitrant position of the opposition, trade unionism and social organizations that do not know how to survive without the benefits of the State, serious doubts arise about the governability to achieve the most important changes in the l ‘last generation,’ he said.
“In this context, there is no confidence in long-term direct investments which will not materialize without the implementation of some reforms and with the reasonable hope that the rules of the game will last over time,” he added.
Daniele Kerner, Executive Director for Latin America of Eurasian Group, a consultancy firm that advises investors on political risks in foreign markets, agrees that Milei’s setback will have an impact “negatively” on Wall Street. “The limited optimism that emerged after the elections was already starting to deflate. “I think this makes it clear how difficult it will be to make corrections, and therefore will reduce interest in Argentina even more,” she said.
“There shouldn’t be any surprise about what happened,” Kerner adds. “Milei has always been institutionally weak because he has had no support from Congress or governors and he doesn’t even have experience. He tried to exaggerate with the omnibus law and the decree. He had shown a certain pragmatism in the first steps, and this made it seem like he could negotiate, but now It is no longer clear how much remains.”
As for how he sees the future of the reforms, he said that “it will depend on how Milei reacts. If you show pragmatism and negotiate a possible agenda, there may be a little hope. If you double down, with everything to lose, the interest will evaporate.”
“There is a large political group in Argentina that believes that some reforms are needed and that fiscal adjustment is also needed. But a weak president can’t change everything without negotiating. If Milei approaches moderate groups, I think he can implement a limited agenda. “If you want it all, you will fail,” she added.
Asked what impact the possibility of a plebiscite might have on investors, he said: “I don’t think the view will change much. It seems to me that this would add uncertainty to the process, and if it were rejected it would be a serious blow to the government and its agenda. However, doing so seems very difficult.”
For Piedrahita “the Government must use the Necessity and Urgency decrees more forcefully in the short term. The company gave Milei a reformist mandate and that mandate persists. Reforms can be implemented but the path is tortuous and with multiple problems which, accumulated, could slow down the reformist march”.
Source: Clarin
