The failure of the Omnibus Law in Congress has a “negative” impact among Wall Street investors, who, although they hoped that some reforms could be eliminated, did not believe that the process would completely collapse upon returning to committee.
It generates “
enormous concern”
and will reduce long-term interest and confidence in Argentina, they tell
Clarín
, and
warn about the uncertainty
of the path that Javier Milei's government will now take.
Alberto Ades,
Managing Director of
NWI Management LP,
said that 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 that had already been eliminated in the discussion in committee, but it was not expected that the process would fail and that it would have to return to committee.
It was expected that the discussion of the articles could take two or three days, but not that it would return to committee.”
Asked about the future of the reforms, he said that “there are many that need the approval of Congress and without that they will not be able to be done.
The question is
what attitude the executive branch will take
.
There are rumors that they want to call a referendum.
Power is fragmented and the alternative would be to sit down and negotiate.
Not everything will work out, but at least some fundamental reforms will come out.
As the changes begin to work and Milei begins to gain political capital, then additional reforms could be introduced.
We will see in which direction the Executive goes, it is not clear yet at this time,” he added.
Jorge Piedrahita,
CEO of
Gear Capital Partners,
said that “if we see all the progress made so far we see that the direction is correct.
We must not forget that Milei achieved several macroeconomic successes and we are in the process of a necessary adjustment of relative prices.
The situation of the Central Bank improved, reserves increased, inflation is falling.”
However, he added: “On Wall Street we have been observing that the Government has been making mistakes that could have been avoided.
For example, there are very controversial issues that should have been treated separately, such as the privatization of state companies.
The fall of the law causes us enormous concern.”
“Investors still do not have confidence beyond those short-term “traders” who participated in an upward trend in bonds and stocks.
But we understand that due to Milei's minority in Congress, added to the recalcitrant position of the opposition, unionism and social organizations who do not know how to survive without benefits from the state, serious doubts arise regarding governability to carry out the most important changes in the last generation," he said.
"In this context,
there is no confidence in long-term direct investments,
which will not materialize without the implementation of certain reforms and with the reasonable hope that the rules of the game will last over time," he added.
Daniel Kerner,
Executive Director for Latin America of
Eurasia Group,
a consulting firm that advises investors on political risks in foreign markets, agrees that Milei's setback will have a
“negative”
impact on Wall Street.
“The limited optimism that appeared after the election was already beginning to deflate.
I think that makes it clear how difficult it is going to be to make corrections, and therefore will reduce interest in Argentina even more,” he said.
“There should be no surprise with what happened,” adds Kerner.
“Milei was always institutionally weak because she did not have support in Congress or governors and she does not have experience either.
She tried to do too much with the omnibus law and the decree.
“She had shown some pragmatism in the first steps, and that made it seem like she could negotiate, but now
it is no longer clear how much of that remains.”
Regarding how he sees the future of the reforms, he said that “it will depend on how Milei reacts.
If she shows pragmatism, she negotiates a possible agenda, there may be a little hope.
If she doubles down, having everything to lose, interest will evaporate.”
“There is a large political group in Argentina that believes that certain reforms are necessary, and that a fiscal adjustment is also necessary.
But a weak president cannot change everything without negotiating.
If Milei approaches the moderate groups, I think he can implement a limited agenda.
If he wants everything, he will fail,” she added.
Asked about the possibility of how the possibility of a plebiscite would impact investors, he said: “I don't think the vision will change much.
It seems to me that it would add uncertainty to the process, and if it is rejected it would be a very strong blow to the government and its agenda.
Doing it anyway seems very difficult.”
For Piedrahita, “the Government must use the Necessity and Urgency decrees more forcefully in the short term.
Society gave a reformist mandate to Milei and that mandate persists.
The reforms can be implemented but the path is winding and with multiple problems that, accumulated, could put a brake on the reformist march.”