Argentina faced a tumultuous financial situation as the peso experienced a steep 20% devaluation in response to the unexpected success of far-right candidate Javier Milei in the primary presidential election. The unique election format allowed all Argentines to choose from 22 potential tickets, serving as a crucial popularity test before the upcoming general election in October.
Javier Milei, a political outsider advocating for dollarization of the economy, surpassed expectations by securing 30% of the votes, outperforming right-wing candidate Patricia Bullrich at 28% and Economy Minister Sergio Massa at 27%.
This outcome reflected a clear rejection of traditional political groups that had overseen economic turmoil marked by debt defaults and currency crises. With a staggering 115% year-on-year inflation and escalating poverty rates, the peso's value had plummeted.
The peso's value against the dollar soared from 298.50 on Friday to 365.50 after Monday's devaluation, marking the largest single-day devaluation since December 2015. Simultaneously, the informal "blue dollar" surged to around 680 pesos, a notable shift in response to the election.
Alberto Fernandez, the incumbent president, opted not to seek re-election, leaving the field open for a competitive battle among the top three primary finishers.
Javier Milei, likened to figures such as Donald Trump and Jair Bolsonaro, celebrated his victory by declaring, "We have managed to build a competitive alternative that will put an end to the parasitic, thieving, useless political caste." His unorthodox stance on climate change, central banking, abortion, and gun access further drew attention.
Patricia Bullrich, the former security minister, advocated for a rigorous audit of social assistance programs, budget cuts, and liberalized currency controls.
Economy Minister Sergio Massa, wrestling with inflation, made progress negotiating the terms of a substantial $44 billion loan from the International Monetary Fund.
The Central Bank of Argentina responded with a sharp increase in its benchmark lending rate, escalating from 97% to 118%, aiming to mitigate exchange rate concerns and minimize price repercussions.
In the aftermath, both Argentine shares on Wall Street and dollar bonds experienced a significant dip of around 10%.
