00:00Millet's coalition needs to score more than 34 percent in the upcoming midterm elections to push through legislation to bolster the economy.
00:07Polls show support for him is flagging. Is it true these elections really could go either way at this point?
00:15Hey, guys. Well, I think what's really important is that it seems like a done deal that Millet can secure a third of the seats in the lower House of Congress.
00:23That is something that investors are widely expecting that would help protect Millet's vetoes, which have been overturned as the opposition has tried to push through spending bills recently.
00:34But what Millet's team has already talked about publicly is that they're not going to get a simple majority, which is what they would need to pass the economic,
00:41the deep economic reforms on labor and taxes that Millet has promised both voters and investors who are waiting to see how this vote turns out.
00:51So it's really going to be something of a make or break moment for Millet's economic agenda.
00:55And of course, this 40 billion dollar U.S. rescue package from coming from the Trump administration.
01:01If it's not a make, but rather a break moment, what does it mean Monday or come Monday when we think about markets and policy or changes in policy out of Argentina?
01:14Well, we will definitely be looking at how the sovereign bonds perform as well as the currency.
01:18There has been market speculation that the Millet administration has pushed back against.
01:25Treasury Secretary Scott Besson has also pushed back against it, that there would be some overhaul of Argentina's currency policy.
01:32Investors have been thinking that this is a necessary change because the peso is widely seen in markets as overvalued.
01:39If Millet is not able to secure that one third of seats in the lower House of Congress that gives him something of a legislative shield and negotiating power with other blocs in Argentina,
01:50you could see a lot of pressure on the peso and on those sovereign bonds and potentially a policy change.
01:56We are expecting Monday or soon after the vote for Millet to overhaul his cabinet.
02:01His foreign minister already resigned this week.
02:03There's a new minister in place.
02:06So we expect a wider change in the cabinet that's supposed to help consolidate power and help Millet build his coalition.
02:15You know, Patrick, we've spent some time this week talking about this $20 billion swap deal this week.
02:20And, you know, it's not a monolith by any means, but how would you characterize Argentine support right now coming from the U.S. in this?
02:30I mean, this is just how do you characterize it?
02:34Well, I think it's a bit ironic in the sense that if you think about beyond the currency swap line, which is $20 billion,
02:42Millet campaigned as a president two years ago on dollarizing Argentina, and now he has the U.S. Treasury buying Argentine pesos.
02:50So it's a bit of a turn of the tables, but there's three pillars.
02:56There's the currency swap line, the buying of the pesos, and the negotiations that are still underway for Wall Street financing of another $20 billion for Millet
03:04that are meant to dispel any investor concerns that Argentina can make upcoming debt payments.
03:09It's really unprecedented U.S. support for Argentina.
03:13But, of course, President Trump himself conditioned that support on Millet's party winning these midterm elections.
03:20So then what happens if his party doesn't win the midterm elections?
03:24Right, exactly.
03:25So there's been these new conditions introduced that we have to see.
03:31And what exactly is defined as a win, of course, you could look at the national level,
03:36but these results are going to be coming in Sunday night province by province.
03:39And, of course, in Buenos Aires province, where a third of Argentina lives, Argentines live,
03:45that has overwhelmingly a huge number of seats.
03:49So that'll be a top battleground, and we'll be looking at some of the key interior provinces
03:53where Millet now needs to make up the ground that he's lost
03:56because this whole market sell-off and U.S. rescue package came together
04:00after Millet lost the local election in the province of Buenos Aires.
04:04So if it's a worst-case scenario, of course, the first eyes will be gone.
04:09Scott Bessant and how he reacts and if the support is still in place.
04:13You know, Patrick, one of the things I think we've been trying to get our head around,
04:15I don't want to come off like an obnoxious American,
04:18but it's just why is the U.S. singling out Argentina for support?
04:23What do we need to understand about the Argentinian economy or its role in South America?
04:30What do we need to understand why this is an important relationship
04:33and for the U.S. to provide support here?
04:36Well, I think there's two key differences.
04:39One is, as Scott Bessant called Argentina a systemic ally or something to that effect,
04:44his word was systemic, and I think it's statistically hard to make the case
04:49in the sense that if the Argentinian economy collapses,
04:52I mean, Brazil doesn't even sneeze next door, let alone the rest of the region.
04:56But when you think about the geopolitical relationship,
05:00there's a lot at stake in the sense that Argentina has big lithium, uranium,
05:05other rare earth reserves, copper, gold, I could go on.
05:10So that could be a key concession from Argentina to the U.S.
05:14in exchange for this financial support.
05:18And then, of course, China.
05:19China has a space station in Argentina.
05:21China has an $18 billion swap line with the Argentine Central Bank.
05:26Scott Bessant has made clear that Millay has to be committed to getting China out of Argentina
05:30without explicitly saying what that looks like in real terms.
05:34So there's a lot of geopolitical issues on the table,
05:38a lot of sort of strategic interests in terms of natural resources here.
05:43But from a statistic or economic perspective, Argentina is not systemic,
05:49neither to the U.S. nor to the Latin American economy.
05:53And I will say the post that the U.S. Treasury Secretary Scott Bessant put out,
05:56Argentina is a systemically important U.S. ally in Latin America,
06:00and the U.S. Treasury stands ready to do what is needed with it in its mandate to support Argentina.
06:05All options for stabilization are on the table.
06:07That was on September 22nd.
06:09So this is going back.
06:09It's a whatever it takes approach, really a Mario Draghi-style approach by Scott Bessant here.
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