By Lucinda Elliott and Jorge Otaola
BUENOS AIRES (Reuters) -Argentine sovereign debt rose on Thursday and stocks dipped after early gains, as financial markets cautiously welcomed a presidential decree ending limits on exports and taking other steps to deregulate the ailing economy.
Attention has now turned to congress, which has power to strike down the measure from Javier Milei, Argentina’s new libertarian president. Late on Wednesday, he signed a sweeping emergency decree, and demonstrations have already taken place to protest against the government’s sweeping austerity measures and to demand financial support for the poor.
Argentina’s country risk edged down further. After strong opening gains, the Buenos Aires S&P Merval index dipped into negative territory, while over-the-counter sovereign debt advanced 2.9%, after reaching an initial climb of 4% on average.
Argentine bond spreads – the premium investors demand to buy the country’s debt rather than U.S. bonds – have dropped to near their tightest levels since early February, as investors grew more confident of the government’s ability to meet its debt obligations.
The complex decree mandates more than 300 measures. It must soon be sent to a legislative Bicameral Commission. If the commission deems that it is constitutional, the decree remains in force until both houses of congress cast a vote to strike it down.
“Investors are going to be keeping a close eye on the reaction of lawmakers who have the power to block the proposals by rejecting the decree in both chambers of Congress,” said Bruno Gennari at KNG Securities, a London-based fixed-income bank.
Broadly the measures announced were in line with what investors had anticipated: “It is unlikely that we’ll see much of a price impact on bonds in response,” Gennari added.
Milei’s coalition, La Libertad Avanza, currently holds only 15% of lower house seats and less than 10% of the senate.
The president who has pledged economic “shock” therapy told local media on Thursday that the measures announced were “unfriendly,” but that they were necessary to fix the nation’s macroeconomic imbalances. Argentina is battling triple-digit annual inflation, an economic recession and a growing poverty rate.
Argentina was due on Thursday to make a $900 million payment to the International Monetary Fund (IMF), which it plans to settle using a bridge loan from a regional development bank in order to meet its debt obligations with the international lender. CAF, the Development Bank of Latin America and the Caribbean, approved a $960 million loan for Argentina on Dec.15.
Argentina has previously had to use a swapline with China’s central bank as well as a loan from Qatar to make recent payments to the IMF on time.
Following the president’s broadcast on Wednesday some residents of Buenos Aires took to the streets to protest the decree, with several gathering outside congress and others banging pots and pans from balconies. Earlier on Wednesday the first major planned demonstration against the government took place with another march expected on Friday.
“This is ripping off the country, this is impoverishing the population even more,” 63-year-old Graciela Valdez said following the decree. “Here there is no measure taken in favor of the worker.”
(Reporting by Jorge Otaola; Writing by Lucinda Elliott; Editing by David Gregorio)
