Paradox in the markets: Javier Milei postponed the dollarization plan in Argentina and the United States reacted well

The dollarization dream will have to wait in Argentina. A few days after his victory in the second round of the presidential elections, Javier Milei backtracked on one of his central campaign proposals, thus postponing the currency change until later. Paradoxically, the United States received the news with sympathy, which generated an increase in the price of Argentine bonds in dollars.

It didn't take long for the president-elect to begin outlining his new cabinet, which will go from 18 ministries to 8. With most of the names confirmed, Emilio Ocampo's arrival at the Central Bank (BCRA) was expected to be made official sooner rather than later since he was Milei's trusted man to carry out the famous dollarization proposal. However, due to disagreements with the future Minister of Economy, Ocampo declined the proposal.

It turns out that Milei, due to his alliance with former president Mauricio Macri, could appoint Luis Toto Caputo to head the economic portfolio, a man very close to the former president. He was even part of his management as Secretary of Finance and as president of the BCRA.

As Voz Media learned, the methodological discrepancies between Ocampo and the future Minister of Economy made the former decide to step aside. His place could be taken by Demian Reidel, a very prominent physicist who lives in the United States and who defined himself as the "uncoverer of stocks." Regarding his training, he has a Master's Degree in Financial Mathematics from the University of Chicago and a doctorate in Economics from Harvard University.

Adding to the situation was the distancing of Carlos Rodríguez, who advised Milei financially throughout the campaign. The economist spoke of an "unwavering decision" on his X account, formerly Twitter. However, the Office of the President-Elect reiterated that Milei's decision to close the Central Bank "is not negotiable."

The market reaction

Although Argentine bonds in dollars skyrocketed after Milei's victory, they rose again a little after it was confirmed that Ocampo would not be president of the BCRA, ratifying at least a delay in the dollarization proposal. That resulted from a more "moderate" proposal from Milei in that regard, confirmed with the probable arrival of Caputo and Reidel to his administration.

"Securities due 2030, some of the most liquid, jumped more than two cents, pacing gains in emerging markets. Notes have jumped across the curve since Monday, with bonds maturing in 2046 up more than five cents — though the debt still trades at distressed levels, with bonds exchanging hands between 30 and 37 cents on the dollar, "Bloomberg reported.

According to Jeff Grillis, head of emerging markets debt at Aegon Asset, the decision signaled that the new president "will bring change, it may not be as radical a change as what he advocated during his campaign."