Governability Is The Key Challenge For President-Elect Milei In Argentina

DBRS Morningstar published a commentary on Argentina’s presidential run-off election and its implications for policy and the economy.

Key highlights include:

-- Javier Milei defeated Sergio Massa in Argentina's presidential run-off election. The election signals that most Argentines are ready to take their country in a different direction.

-- We expect the next administration to try to implement a rapid macroeconomic adjustment, including fiscal consolidation, currency depreciation, and a reduction in state intervention. Some of Milei's more radical policy proposals are unlikely to have sufficient congressional support to advance.

-- While we view the next administration's willingness to address the country's macroeconomic imbalances positively, Milei's election raises governability risks in terms of his ability to build congressional support and manage social protests.

“We view the next administration's willingness to address the country's economic imbalances positively. However, Milei's election raises significant governability risks.,” says Michael Heydt, Senior Vice President, Global Sovereign Ratings. “If Milei cannot build a congressional alliance to implement a stabilization plan, the result will be paralysis and dysfunction. At the same time, the economic and social stress stemming from a macroeconomic adjustment could quickly galvanize protests and strengthen the opposition.”