Miguel Pichetto became a gravitating figure on Wall Street. As his We Make Federal Coalition bloc frustrated the passage of the Bases Law and forced a change of direction in the shock plan, the MP is seen as a key lever in tipping the political scales in favor of Javier Milei’s government . As, In recent weeks, foreign funds had requested it.
“They want to talk to opposition figures, Pichetto is in great demand and has had meetings with various funds”said a source in New York. The contacts were not confirmed by the MP, but the truth is that interest has intensified in the last two weeks with the arrival of banks and investment funds in the country and with the trips of local operators from Buenos Aires to the Big Apple .
Hedge funds accompanied Barclays, UBS and Citi, while a delegation from HSBC will land next week. Some appreciate Milei’s willingness and ability to pay the debt, but there are also questions about governance. “How long can it last? They came more from the political side than from the economic one”said one economist who received them.
The fall of the Basi law led Milei to tighten spending cuts (on salaries, subsidies and transfers to the provinces) and to unleash an open war with the governors. In this scenario, Pichetto appears as a possible beacon in the face of political uncertainty. “Clashes with Governors and Congress are not looked upon favorably by investors”the congressman said last week.
Mauricio Macri’s former vice presidential candidate knows many of the funds that closely follow the Argentine situation, such as VR Capital and BlackRock. He met them and Barclays in April 2019 during a tour of the United States, where he sought to allay fears about debt payments due to a possible return of Kirchnerism to power, which ultimately happened.
Now, in New York, there is a climate of optimism which is reflected in the rally in government bonds over the last 10 days, with increases of up to 12%. Several funds purchased some of these dollar securities just as the government announced in advance the fiscal and financial surplus recorded in January and the slowdown in inflation to 20.6% in the same period.
But in the meetings held in recent days by funds and banks, doubts also emerged about the feasibility of the adjustment in a recession context. According to a recent HSBC report, “the key challenge for the government remains how to maintain social and political support for a stabilization plan that depends on significant fiscal adjustment and involves a severe recession.”
Barclays expects the economy to decline by 4% in 2024. So the bet is on Argentine bonds for 3 to 6 months, which is reflected in the fall of financial dollars and the exchange rate gap. “External investors like the changes, Milei says he will strictly respect the zero deficit, others wonder if it is politically sustainable”said Javier Timmerman of AdCap.
Pichetto is in favor of handing over the mandate to Milei, but is cautious about what he defines as “a hard blow for the middle class”.. “There is an adjustment that is developing and we need to have political sustainability,” he said last week after the failure of the omnibus bill and criticism of Caputo for an apparent lack of dialogue with governors.
This Monday, the Minister of Economy received the IMF’s number 2, Gita Gopinath, and her team, who landed on a surprise trip to Buenos Aires to follow the program closely. The Fund also questioned the direction of the illegal fiscal adjustment and the social situation in a context that, according to Caputo, will be “very harsh” in the coming months.
Strictly speaking, the government expects a recovery only in the third quarter. Perhaps for this reason, last Friday, the CEO of Citi, Jane Fraser, asked the minister how she could help him, during the meeting she had at Casa Rosada with the chief of staff, Nicolás Posse. Foreign banks say they are in good health, so they could accelerate the recovery.
Source: Clarin
