Blue dollar rises 10% and bonds fall 12%: Argentine market shows first effects of Milei’s victory

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There are many controversial promises made by the candidate in the most varied spheres, but in the economy, the adoption of the dollar as the country’s official currency and the closing of the Argentine Central Bank stand out. Javier Milei, candidate for the presidency of Argentina, celebrates with allied politicians at an event in the city of Buenos Aires on August 13, 2023 Stringer/REUTERS Far-right opposition candidate Javier Milei surprised and was the most voted in Argentina’s primary elections, held this Sunday (13). The economic proposals, which could set Argentina’s monetary policy on fire, have added uncertainty to the electoral scenario and are worrying the financial market. There are many controversial promises made by the candidate in the most varied spheres, but in the economy, the adoption of the dollar as the country’s official currency and the closing of the Argentine Central Bank stand out. The impact began this Monday (14) with the so-called “pre-market” by Wall Street, which showed Argentine bonds falling by up to 12%. The blue dollar, known as Argentina’s parallel exchange, which had closed at 605 pesos on Friday, before the elections, opened the day at around 670 pesos, up about 10%. This is a new historic low for the parallel dollar, which reached 610 last Thursday. In addition, Argentina’s central bank devalued the peso by almost 18% on Monday and set the official exchange rate at 350 pesos to the dollar, according to Reuters. The source also said that the exchange rate will be fixed at that rate until the presidential vote in October. The monetary authority also decided to raise the basic interest rate by 21 basis points, to 118% per annum. Finally, Argentina’s stock market fell sharply at the start of business this Monday due to urgent selling after the primary results. The main S&P Merval .MERV stock index fell 3.5% to 463,471 points. The scenario was already one of complete uncertainty, but Milei’s victory in the primaries added fervor to the Argentine succession. “Don’t let them blame me for the dollar problem,” Milei told El Clarín newspaper. The candidate also stated that his dollarization proposal is made for people who understand monetary theory and “not for donkeys”. Milei also commented that he will have no problems in negotiations with the International Monetary Fund (IMF), as his economic program has a “deeper adjustment” than that proposed by the body. Argentina has an outstanding loan of US$ 44 billion (R$ 210 billion) with the IMF, and has gone through several episodes of difficulty in meeting the maturities. This year, the country has been suffering the worst drought in the country in almost a century, which has had negative impacts on the agricultural sector, its main source of foreign exchange. The credit was contracted in 2018 during the management of Mauricio Macri (2015-2019). Who is Javier Milei: far-right candidate leading primaries in Argentina Argentine elections The primaries in Argentina are a mandatory vote to define the candidates who will run for the presidential elections, which take place in October. By law, all parties are obliged to hold primaries — even if there is only one candidate and this is just a formality — and all political fronts go through the primaries on the same day. According to the newspaper “Clarín”, Milei, from the ticket “A Liberdade Avança”, presented himself – and was seen as such – as a character who came from outside to fight the bad practices of politics. The final vote takes place on October 22nd.

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