Milei’s Revamp Offers CEOs a Hint of Optimism on Argentina

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(Bloomberg) -- In the early days of Javier Milei’s presidency, Volkswagen AG’s South America chief wasn’t too happy with him. Now he’s part of a chorus of business leaders feeling encouraged about Argentina for the first time in years.

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Milei’s move to devalue the peso after taking office last December, followed by aggressive austerity measures, was badly-needed medicine that dragged the economy into recession.

Companies were left with diminished cash balances and weak demand. But corporate executives like the way the president is eliminating protectionist measures and clearing red tape — and they’re starting to see a path to profits in what has long been a frustrating market.

For Alexander Seitz, Volkswagen’s executive chairman for South America, the turning point came when Milei eased import controls, reducing the financing period from 180 days to 30 days. That makes it easier to predictably pay back suppliers without worrying about currency moves.

“The government measures are going now in the right direction,” Seitz said last week in an interview in Sao Paulo. “I get much more focused on my business and can really work on operational things and not financial arts.”

While Volkswagen is trying to halt its tailspin in Europe after unprecedented job cuts and factory closings, the automaker still posts strong sales in Argentina and Seitz added that its labor deals in South America are separate from other continents.

The cautious optimism of Seitz and other executives, from finance to commodities, has been slow to translate into new investments. Too many companies got burned by Argentina’s earlier turn to market-friendly policies, which ended in 2019 when the statist Peronist party defeated pro-business President Mauricio Macri and returned to power. Investors say they want to see a full removal of currency controls before they are willing to commit.

But a growing sentiment is taking hold that this time is different. Nu Holdings, which in May became Latin America’s most valuable financial institution, is taking a look at Argentina again after ruling it out years earlier. MercadoLibre Inc. is seeing a pickup in sales. Corporate bond activity is up as issuers see a swell of demand.

“It’s impossible to ignore what he’s doing,” Nubank CEO David Vélez said of Milei’s turnaround efforts in an on-stage interview during Bloomberg New Economy at B20 in Sao Paulo. “I think the speed at which the situation in Argentina has been changing has impressed absolutely everybody.”