One veteran Argentina investor who has long backed Economy Minister Sergio Massa’s presidential bid is telling nervous traders the candidate isn’t as bad as they think.
The nation’s bonds, which mostly trade below 30 cents on the dollar, slumped after Massa came in ahead in a Sunday first-round vote, forcing a run-off with outsider Javier Milei on November 19. Traders called the result the worst possible scenario for markets.
But to Hans Humes, the chief executive and founding partner of Greylock Capital Management, the exact opposite is true. Massa, he says, is better equipped to steer the nation through much needed fiscal changes. It’s unclear whether or not the country will veer in that direction, but Humes — who has stayed bullish on the debt even as bonds slumped time and time again — is sticking to the investment now too.
“It’s kind of an ideal scenario,” Humes said. “You’re way better off with a centrist Peronist embarking on the reforms that need to be done than a polarising figure.”
Humes is well-versed in taking a positive approach to the serial-defaulting country. He’s made a living restructuring distressed debt from troubled nations including Greece, Ukraine, Venezuela and, of course, Argentina.
He said the nation’s US$65 billion in bonds offer investors an entry point to bet on a potential economic rebound if the incoming government slashes the fiscal deficit, lifts capital controls and realizes its potential as a global grains powerhouse.
Massa’s track record as economy minister doesn’t discourage Humes, who says he is better equipped to build consensus than Milei, the libertarian outsider whose signature plan to shutter the Central Bank and ditch the peso for the US dollar.
“There should be much more market confidence around Massa,” Humes said. “I think people will see that this guy is competent — and a safe pair of hands. I think people will get to see what he can actually do.”
Argentina’s bonds edged higher on Tuesday, following a steep selloff after Massa pulled off a surprising comeback in the first round of voting. Since placing third in an August primary, the economy minister has revved up spending, granting welfare cheques to workers, bonuses for retirees and tax cuts for 99 percent of the population. It’s a strategy investors fear will only worsen an economy on the verge of its sixth recession in a decade and grappling with 138 percent inflation.
Many expect Massa and Milei to moderate their messages ahead of next month’s run-off to bring in voters who loathe the fiscal largesse of Argentina’s left-leaning incumbent party, but are terrified of Milei’s right-wing radicalism.
“The election is now a race to the centre,” Humes said. But in markets, “given where price levels are and negativity in the market, there’s a very good opportunity for Argentina to significantly exceed expectations.”
by Scott Squires, Bloomberg
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