Has Milei Fixed Argentina?
Since early this year, that seems to have been the general sentiment among American observers, at least, after Argentine President Javier Milei gave his country a budget surplus for the first time in 12 years.
It took Libertarian President Javier Milei nine and a half weeks to balance the budget and create a surplus.
— The Redheaded libertarian (@TRHLofficial) February 20, 2024
NINE. AND A HALF. WEEKS. pic.twitter.com/P3gIDn8XYW
Economist Philip Pilkington remains skeptical, though. He elaborated why in the thought-provoking X thread below. Before we get to it, two quick investing notes.
- In a post last week, we wrote about when to exit a winning Tesla trade., a bet that the stock would hit $395 by December 27th, that we bought for a net debit of $1.
— Portfolio Armor (@PortfolioArmor) December 13, 2024
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Now on to Philip Pilkington's informative thread.
What Is Actually Happening In Argentina?
2/ The main positive headline is that the Milei government’s cuts have created a government surplus. They have, but this is a distraction as the government deficit was never causing the inflation. pic.twitter.com/7BlS7MgyQs
— Philip Pilkington (@philippilk) December 18, 2024
4/ Talk of growth is greatly exaggerated and like much else in the pro-Milei propaganda sphere is based on (often dubious) forecasts. The economy is still contracting. But even if growth returns this is not the core issue. pic.twitter.com/pf8ZhAZWHl
— Philip Pilkington (@philippilk) December 18, 2024
6/ Interestingly the much quoted black market exchange rate has risen in recent months - giving the opposite signal. Frankly, either Argentineans have lost the ability to set this rate properly or the data is fake. The real exchange rate data is the actual data. pic.twitter.com/pRHJ5hJ6nW
— Philip Pilkington (@philippilk) December 18, 2024
8/ It’s getting wild with banks moving to issue USD credit cards. In the case of a peso depreciation peoples’ credit cards balances could shoot up 50-80% overnight. American credit card companies are loving the Milei government though. (🤔) pic.twitter.com/wFMiq5Vt8Y
— Philip Pilkington (@philippilk) December 18, 2024
10/ Very likely that the peso takes another whack if USD borrowing dries up. But the longer the USD borrowing goes on for the less sustainable the debt pile will be when the peso is forced to adjust in line with fundamentals. pic.twitter.com/d5YXh4qwqL
— Philip Pilkington (@philippilk) December 18, 2024
11/ And then what happens? My guess is the Peronists get back in the driving seat, become quite anti-American as the USD borrowing sours and the Milei era looks embarrassing. Then the Peronists finally dump America and cosy up to the BRICS. Wait and see, I suppose.
— Philip Pilkington (@philippilk) December 18, 2024
END/ pic.twitter.com/088dfRWPSr
