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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.

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. 

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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. 

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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.” 

Even with the economy mired in recession, companies are optimistic that an incipient recovery isn’t another one of Argentina’s many false dawns. 

MercadoLibre, the Latin American e-commerce and financial technology giant, reported an uptick in sales in Argentina with the economy showing signs of a pickup. Speaking about the trend, Andre Chaves, the head of its Mercado Pago payments unit in Brazil, said that’s prompting the company to begin ramping up lending activities.

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“Now that things are improving, we are accelerating again very fast in Argentina,” Chaves said in an interview. “The lending environment has improved significantly and as you have a little bit more predictability — you know, inflation rates and interest rates — we are more comfortable in extending more loans as well.”

Executives still have a tempered economic outlook over the next year as the country emerges from one of its worst downturns with more than half of Argentines living in poverty. 

Argentina ranks 126 out of 190 nations on the ease of doing business, just ahead of Iran, according to the World Bank. Foreign investment remains low and the private sector has cut salaried formal jobs for 11 consecutive months through July, according to government data. 

“There won’t be a miraculous explosion of growth next year,” Fabian Kon, chief executive officer of Grupo Financiero Galicia SA, Argentina’s top private bank, said in an Oct. 18 interview on the sidelines of the Coloquio IDEA business conference in Mar del Plata. “But the important thing is not that the country grows so much this first year, but rather that it does so in a sustainable way over the next five years.” 

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It’s created a chicken-or-egg dilemma in which the government beckons companies to hire and invest, while executives ask the government to lift capital controls faster. But that’s something Milei and Economy Minister Luis Caputo are unwilling to do yet, even as they try to sketch out a firmer timeline ahead of midterm elections next year.  

The government’s aversion has triggered public calls for Milei to nix currency rules from corporate leaders like billionaire Paolo Rocca, chief executive of steel and energy conglomerate Grupo Techint. Others, meanwhile, are more resigned to the uncertainty of Caputo’s plan to dismantle the scaffolding of Argentina’s currency and capital controls. 

To invest, they want to see the libertarian deliver on his word to remove the restrictions while keeping inflation and the peso under control. 

“For those in the business sector, it’s up to us to be patient,” Gabriela Renaudo, who oversees Visa Inc.’s operations in Argentina, said at the Mar del Plata conference.

It’s not just about moving money in and out of Argentina. Companies are also still grappling with recruitment and retention headaches that began during the previous government. Tech companies like Oracle Corp., which boasts nearly 480 workers in Argentina, are adjusting employee peso salaries to inflation, while competitors abroad are vying for the same pool of talent with job offers in dollars. 

Many companies have yet to invest in new projects after Milei passed business-friendly reforms that provide tax incentives for projects over $200 million in certain industries. Most executives foresee a tough recovery ahead. 

“It’s going to be a marathon, not a sprint,” Gustavo Salinas, Toyota Motor Corp.’s Argentina chief, said in an interview. “I would like to run the 100-meter race and be able to win it, but one has to run slowly but surely to reach the 42 kilometer mark.”

—With assistance from Daniel Cancel.

(Updates with context in sixth and 17th paragraphs)

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