Panic in Argentina’s financial markets following Macri’s defeat

Financial markets reacted with panic over the possibility that Peronism would return to power in Argentina. A day after Alberto Fernández’s blatant victory in the primary election, the peso plummeted at the opening of the foreign exchange market. An hour later, the coin had lost 30 percent of its value. To buy a dollar it took 60 pesos, up from 45 (or less) last Friday. Shares of Argentine companies were down more than 50%.

Markets clearly support Macri. His reaction on Monday was even more virulent than expected after experiencing a journey of euphoria last Friday, following the release of polls that pointed to the current president’s triumph by a small margin – a scenario far removed from Sunday. The staggering 15-point gap between Fernández and Macri, 47 percent to 32 percent, paves the way for the former Kirchner chief of staff to the presidency. If the result is maintained in the October general elections, Fernández would be elected head of state without the need for the second round. Macri anticipated Sunday night to a complicated Monday. After acknowledging his defeat, he asked Alberto Fernándezthat collaborates with the governability. “I will do my part, as always; today’s winners also have their responsibility,” he said at the coalition headquarters Together for Change.

Peronist Frente de Todos’s candidate is seen as more moderate than his running mate, former President Cristina Kirchner. Still, during the campaign, he said his government will reduce the current record interest rate of the Central Bank of Argentina (60%) and will seek a renegotiation of the $57 billion loan contracted by Macri to the International Monetary Fund (IMF).

The depreciation of the peso was seen early on, when major banks sold the dollar at over 50 pesos a unit in their online operations. But the Argentine currency plummeted as foreign exchange operations began, reaching 61 pesos on some big screens.

On Wall Street, Argentine papers were suffering a terrible Monday, especially those of banks and energy companies. Financiero Galicia Group shares fell more than 57.5%, Supervielle Group shares nearly 60%, Pampa Energía shares were down 43% and YPF shares were down 36.7%. The technology company Mercado Libre also lost 12%, less than the others.

The sudden devaluation of the peso had an impact on other regional economies. This morning, the real depreciated 1.5%, the Mexican peso 1.46% and the Chilean peso 0.85%.

The quotation of the dollar is of essential importance in Argentine political and economic life. It is the savings currency that Argentines use to protect themselves from recurring crises. Its value greatly influences inflation, not only because of the increase in imported parts and products, but because factories and stores raise prices quickly to try to minimize possible losses. In recent months, the Central Bank has sold dollars to keep its currency value stable.

Leave a Reply

Your email address will not be published. Required fields are marked *