Wednesday, July 24, 2024

ECONOMY | 13-06-2024 20:03

Milei looks to keep winning streak alive in crucial IMF meeting

President Milei will walk into a meeting with the head of the International Monetary Fund Friday emboldened by the most successful series of wins since he took office six months ago.

President Javier Milei will walk into a meeting with the head of the International Monetary Fund on Friday emboldened by the most successful series of wins since the libertarian economist took power in Argentina six months ago.

After pulling an all-nighter amid violent protests outside, the opposition-controlled Senate broadly approved Milei’s sweeping package of economic reforms. A day earlier, the Central Bank renewed a US$5-billion loan from China as part of its vital currency swap line. And on Thursday afternoon, fresh consumer price data showed monthly inflation cooling to its slowest pace since January 2022. 

Investors cheered the news. Argentina’s sovereign dollar bonds rose at least a cent across the curve, posting the best performance in emerging-market debt.

That should give Milei confidence as he sits down with IMF chief Kristalina Georgieva on the sidelines of the Group of Seven summit in Italy. His aim is to begin talks on a new programme with fresh funds replace to replace the US$43-billion plan put in place by his predecessor.

“Positive developments should pave the way for smoother negotiations with the IMF,” Kezia McKeague, managing director at Washington-based consultancy McLarty Associates, said by text message. “Though the IMF board’s appetite for a new program remains to be seen.”

What last week appeared to be a messy foreign trip riddled with stops and starts is now shaping up to be a resounding success for Milei, who lingered on the tarmac in Buenos Aires until about 3am Thursday morning, taking off after the reform bill passed, according to people familiar with his travel plans.  

“This is an indubitable success by the government,” Alejandro Catterberg, director of top Argentine polling firm Poliarquía, said by text message.

In Europe, Milei will be embraced by his far-right allies that trounced the left in European Parliament elections, including G7 host Giorgia Meloni. He’ll also meet with weakened French President Emmanuel Macron on the sidelines of the event. 

And the Argentine leader could find himself in the same room with his Brazilian counterpart, Luiz Inácio Lula da Silva. Though the neighbouring heads of state won’t hold a formal bilateral meeting, it will be their first in-person encounter after the Brazilian leftist skipped Milei’s inauguration in December after being derided as a "communist" during Argentina’s presidential campaign. 

Though Milei’s party holds just seven of 72 seats in the upper chamber, his government was able to win approval from senators for its sweeping deregulation bill as well as most of an accompanying fiscal package. While income and property tax proposals were rejected in a chapter-by-chapter vote, they could still be salvaged in a lower house vote expected to take place at the end of the month.

In all, Milei’s reforms are set to attract multi-million-dollar investments to Argentina, ease its rigid labour laws and enable the privatisation of multiple state-run ventures to help put the crisis-prone nation back on a prosperous track. Corporate leaders were quick to praise the legislative victory.

“Clearly this piece of legislation will help the development of the industry,” Marcos Bulgheroni, chief executive officer of Pan American Energy Group and one of Argentina’s most prominent business leaders, told his peers Thursday at an investment conference in Rio de Janeiro.

A measure in Milei’s reform bill, known in Spanish by its acronym RIGI, provides tax breaks and other incentives for foreign investment. Veteran business executives emphasized its importance as the bills near the finish line.

“The bill had generated expectations even among people who didn’t know the text. The day after, with the bill approved, a lot more people who were in a wait-and-see mode will move to identify the opportunities,” José Luis Manzano, president of Integra Capital SA, told reporters at the same event.

by Manuela Tobias & Kevin Simauchi, Bloomberg


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