The victory of the libertarian Javier Milei in the primaries of Argentina provoked a new devaluation, of 22%, of the peso against the dollar in the official exchange rate this Monday (14).
The official exchange rate was quoted at 350.05 pesos for sale at the beginning of the day, according to market operators, after having closed at 287.35 pesos last Friday (11).
Argentina applies strong restrictions to the exchange market, which forces the official dollar to quote at half the price of parallels, which is why the market expected the Argentine government to comply with a requirement of the International Monetary Fund (IMF) and apply an exchange rate jump in the official quotation to close this gap.
The Central Bank of Argentina also raised the monetary policy rate by 21 percentage points, so that the annual nominal interest rate on the 28-day Letters of Liquidity (Leliq) rose to 118% (or 209% in effective annual terms).
“The monetary authority considers it convenient to readjust the level of interest rates of monetary regulation instruments, in line with the recalibration of the official exchange rate level”, highlighted a statement from the Central Bank.
The institution explained that the objective is to “anchor exchange expectations and minimize the degree of pass-through to prices, tend to positive real returns on investments in local currency and favor the accumulation of international reserves”.
In the parallel market, the informal exchange (known as blue) jumped 75 pesos today in the first operations and, after closing at 605 last Friday, rose to 680 pesos, while the so-called “financial dollars”, which are operated through of titles, increased between 7% and 12% reaching a value of up to 645 pesos.
The surprising result that gave victory to Milei, who proposes to dollarize the economy, eliminate the Central Bank and cut public spending, brought strong pressure on the exchange rate and fixed and variable income markets in Argentina at the beginning of this week.
Although the candidate – who obtained 30.04% of the votes (with 97.4% of the polls counted) – is a “pro-market” candidate, investors were afraid of the election result, as reiterated by stock traders, adding that As of today, uncertainty reigns.
Freedom Advances, Milei’s subtitle, received the most votes in the general election preview on October 22, leaving the opposition coalition Together for Change (center-right) in second place, with 28.27%, within which the winner was the former Minister of Security Patrícia Bullrich, while the governing party União pela Pátria (Peronist) finished in third place, with 27.27%, and will be represented in the presidential elections by the current Minister of Economy, Sergio Massa. (With information from the EFE Agency)
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