Benzinga - by Neil Dennis, Benzinga Staff Writer.
Argentina’s new president Javier Milei faces a general strike after spending just a month in office.
What Happened: Protesters have taken to the streets in response to a recent reform bill, and unions have planned a general strike for Jan. 24, while the country’s equity market has started showing signs of strain.
The CGT, one of Argentina's oldest and most powerful union groups, announced the planned strike Thursday following a raft of unpopular reforms, including Milei’s decision to sack 5,000 government employees to cut costs.
Milei was the unexpected winner of an election run-off in mid-November — a close result — but one that appeared to please the market at first, lifting the Global X MSCI Argentina ETF (NYSE:ARGT), an exchange-traded fund that tracks Argentine stocks, by 24% since the election.
The country is battling an inflation rate of 160%, which Milei has stated will pass 200% if immediate measures are not taken. Even with a record-high interest rate of 133%, inflation is not cooling.
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Which Argentina Reforms Are In Dispute?
The Reform Bill, which Melei has sent to parliament, contains 664 articles, which include the privatization of 41 public companies, reforms on debt restructuring and overseas sales of government bonds, higher export taxes, as well as constitutional reforms that would cede legislative power to the presidency for a time.This comes just two weeks after the president announced a currency devaluation by 54% that brought the Argentine peso down to 800 versus the dollar.
Milei’s grip on parliament is not a strong one, however. His coalition, La Libertad Avanza, controls only 15% of the seats in parliament’s lower house.
How Have Markets Responded?
Broadly speaking, it appears investors are not fully in tune with the reforms. Of the 23 companies on the S&P Merval index, 17 of them lost ground in the past week while the Merval index fell 2.5%While this might not sound too surprising, it has to be measured against the long-term performance of the Merval to show its real significance.
In the year to date, all 23 constituents of the Merval have gained. The strongest of which is from electricity distributor Edenor (NYSE:EDN), which is up 577%, while the weakest year-to-date performance is from pharmaceuticals company Laborotorios Richmond, which is up 80%.
Over a three-year timeframe, the strongest performer is natural gas distributor Transportadora de Gas del Norte, up 4027% over the period, while the weakest performer is Bolsas y Mercados Argentinos with a 35% gain.
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