In times of economic crisis and electoral uncertainty, Argentines take refuge even more than usual in the dollar. The green currency is the traditional savings currency in a country that, unlike its neighbors, has not managed to tame inflation that this year is in the triple digits. But the recent increase in exchange tension has also been fueled by the favorite in the presidential race, the ultra candidate Javier Milei. On Monday, Milei discouraged the renewal of fixed terms in pesos and the use of any savings instrument in Argentina’s national currency, which he considers to be worthless and which he promises to replace with the dollar if he reaches the Casa Rosada. His statements unleashed numerous criticisms on a day in which the peso set a new negative record in the parallel market, the only one that operates without restrictions, by changing at 945 units per dollar. In the first operations this Tuesday, the US currency rose to one thousand pesos.
“The peso is the currency issued by the Argentine politician and therefore it cannot be worth even excrement, because that garbage is not even useful for fertilizer,” Milei said in an interview with Radio Miter. Last week she had already launched another inflammatory statement: “The higher the price of the dollar, the easier it is to dollarize.” Milei’s messages add nervousness to a population with its pockets becoming emptier every day: the rate of increase in prices has been 124.4% in the last twelve months, five points more than the average salary increase.
The Minister of Economy and presidential candidate for the ruling Peronism, Sergio Massa, harshly criticized Milei, whom he accused of adding fuel to the fire for electoral purposes. “Putting people’s savings at risk for a vote is not worth it. There are people who cost their entire lives,” declared Massa. Days before, the conservative Patricia Bullrich, a candidate for the opposition alliance Together for Change, had also denounced the ultraliberal economist’s strategy. “Not everything goes to defend dollarization”Bullrich wrote on social media. “With his proposal he destroys your pocket and makes prices more expensive. All to justify its dollarization. The theory is known: the worse, the better. In the middle, 46 million Argentines who are poorer every day,” he added.
The head of the economic portfolio also accused Milei of putting the financial system at risk and recalled the traumatic wounds left by the 2001-2002 crisis, when a corralito was established that prevented families from withdrawing their savings from the banks. GDP per capita plummeted and poverty exceeded 60%.
The situation is very different from that crisis due to the regulatory changes imposed since then. Banks can only lend foreign currency to the sectors that generate it and their liquidity in foreign currency is today greater than 80%. Even so, financial institutions have come out to defend their economic solidity to try to prevent savers from panicking. For this Tuesday, they requested the Central Bank to send almost 125 million physical dollars, the highest amount for a single day so far in 2023, according to data from the Electronic Open Market. The objective is to guarantee that all clients who come to withdraw the dollars they have in their accounts can do so without problems.
This Tuesday, the Argentine Government unified some of the exchange rates that coexist between the free quote and the official one, fixed at 365 pesos per dollar, to try to reduce the demand for foreign currency. Thus, those known as ‘card dollar’, ‘solidarity dollar’ and ‘Qatar dollar’ became worth 731 pesos, more than double the official price but still below the others.
The latest official measures have not been able to bring much calm and all eyes were attentive to the opening of the exchange market due to the risk of the free fall of the peso continuing in the parallel market. Unlike what happens in the rest of the world, the media in Argentina report daily on the value of the peso against the dollar. Uncertainty will remain at least until the results of the general elections on October 22 are known. The polls show Milei as the winner but without enough support to avoid a second round on October 19.
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