Argentina markets dip as globetrotter Milei shakes up Cabinet

By Thomson Reuters May 28, 2024 | 1:03 PM

By Jorge Otaola and Lucila Sigal

BUENOS AIRES (Reuters) -Argentina’s financial markets dipped on Tuesday after libertarian President Javier Milei, traveling on a U.S. tech tour, shook up his Cabinet, firing his chief of staff and bringing on board the architect of his government’s key economic reform package.

The financial markets, which have rallied hard since Milei took office in December, saw bonds dip around 1% and the S&P Merval stock index lose around 1.5%, as investors digested the first major government overhaul.

On Monday night, Milei fired his Cabinet chief Nicolas Posse and replaced him with current Interior Minister Guillermo Francos, seen as a more outgoing and aggressive deal maker, which is key as Milei’s main reform package faces a hold-up in Congress.

“Francos’ appointment is a very welcome political opening, he’s strong on dialogue, something Posse lacked,” a private financial trader at local bank Macro said on Tuesday, citing the need for results on Milei’s reforms to boost sentiment.

“The market needs laws to come out to begin deregulating the economy once and for all.”

Milei will also bring economist Federico Sturzenegger into a new ministry focused on economic deregulation, new Cabinet chief Francos announced at a press conference, a move to try to bolster the reform package currently heading to the Senate.

Argentine political analyst Juan Mayol said the appointment of Francos was a bold step for Milei, an economist and former TV pundit with little political experience who won a shock election last year pledging to slash state over-spending to overturn a deep fiscal deficit and bring down triple-digit inflation.

“He is a complementary opposite to Milei,” Mayol said, a reference to Francos’ political savvy versus Milei’s showmanship. Milei recently sang in a rock concert, and he has traveled regularly overseas and built ties with global figures like billionaire Elon Musk.

In radio comments, Francos said he had been tasked with handling the political juggling act needed for the government to push laws through, a challenge as Milei only controls a small minority in Congress and relies on winning over allies.

“The president does not have an easy relationship with politics because he does not understand politicians,” Francos said, a nod to Milei’s regular criticism of the political elite. “He sought in me someone to facilitate that dialogue.”

(Reporting by Jorge Otaola and Lucila Sigal; Editing by Adam Jourdan, Leslie Adler and Marguerita Choy)