Argentina's Financial Markets See Silver Lining Amid Javier Milei's Surprise Primary Win: 'Appetite For Shock Therapy Style Approach'

Despite the initial turbulence, Argentina’s financial markets appeared to be bouncing back following a surprise primary election result favoring right-wing populist Javier Milei, Reuters reports.

The primary elections, considered a precursor to the October general election, saw Milei emerge victorious. He advocates for dollarizing the economy and dissolving the central bank.

The local stock market eventually closed over 3% higher. Both Milei and his conservative coalition contender Patricia Bullrich promise drastic economic solutions for Argentina, a country that has been grappling with 116% inflation and other financial challenges.

“The surprisingly strong showing for far-right … suggests that there is popular appetite for a shock-therapy style approach to deal with the economy’s problems,” commented Kimberley Sperrfechter, Capital Economics Emerging Markets Economist.

However, the upcoming presidential election on Oct 22 might introduce short-term economic disruptions. The primary’s outcome also signaled a decline in support for the left-leaning Peronists, who have dominated Argentina’s political landscape for years.

Investors believe the decline of Kirchnerism, a faction of the Peronists, outweighs concerns about Milei.

“The end to Kirchnerism is a more powerful driver than fears of Milei’s governability,” stated Walter Stoeppelwerth, chief strategist at Gletir SA.

On Monday, dollar-denominated bonds saw a decline and the government devalued the peso by nearly 18% to 350 per dollar. The central bank also raised the benchmark interest rate from 97% to 118%.

The local Argentine stock market benchmark ended at a record high, while the MSCI index of Argentine stocks dropped by over 3%.

Despite the market’s reaction, many believe that any election outcome will lead to improved policy-making in Argentina.

Image Via Wikimedia Commons

Read Next: Argentinian Markets Hang In Balance As Pro-Bitcoin Presidential Candidate Javier Milei Sweeps Primary Election: ‘Did Not Expect These Numbers’