2023-10-23 02:12:48
The economy is the central issue of the presidential race in Argentina this 2023 and as the votes from the first round are being counted – with Javier Milei, Sergio Massa and Patricia Bullrich leading the work among the five candidates running for the Casa Rosada – the Markets are adjusting to resume their business with an eye on all the news coming out of the South American country, which is plunged into a very severe crisis.
So, what do the markets have in store for this post-election Sunday?
According to experts and political and economic analysts, voters – and, of course, investors – have spent the last few months discussing which candidate would be the one to bring Argentina back on track. However, it is almost an absolute consensus that the Argentines will wake up this Monday (23) still without a clear result and with the possibility of a second round on November 19.
However, it is already expected that the dollar will continue its upward trajectory against the dollar, and the prices of a series of products will also increase due to this exchange rate relationship. After all, two important points of attention in Javier Milei’s proposal, for example, are the dollarization of the Argentine economy and the removal of retenciones, that is, the taxation of exports of agricultural products, which could – even in the long term – increase the competitiveness of the South American nation in international markets, increasing foreign sales and, thus, increasing the inflow of foreign currency into the country.
Such expectations have even caused producers and suppliers from a series of sectors to suspend sales of items of all types, from toilet paper to automotive parts, including food and construction materials, according to reports from the international news agency Bloomberg.
The graph below shows the difference between the official exchange rate and the parallel rate in Argentina, which exceeded 170%.
Official dollar x parallel dollar in Argentina – Graphic: Bloomberg
“Fearing that their dollar deposits cannot be guaranteed by the government, Argentines withdrew almost 500 million dollars from banks last week alone, until October 17, according to central bank data. This represents 3% of total deposits in dollars in the financial system”, says the agency.
Faced with the chaos installed in the Argentine economy, the Argentine Central Bank has already raised the country’s basic interest rate six times this year alone, with the index currently reaching 133%.
Interest rates in Argentina – Graphic: Bloomberg
“Our panel on Argentina’s economic fundamentals shows the most precarious situation in the last two decades. The country has seen deeper recessions, larger current account and budget deficits, and higher debt to GDP. But in 2023, it is Add to that historically low reserves, lack of access to global capital markets, little or no ability to obtain additional funds from the IMF and difficult global conditions,” said Bloomberg analyst Adriana Dupita.
The day after the primary elections in August, the markets recorded a chaotic Monday and October 23rd should be no different. Many uncertainties still accumulate and everything may still have to get much worse before it gets better, also according to experts. Until the result is defined, hopelessness still marks the day of Argentines who yearn for profound changes.
#Elections #Argentina #markets #react #Monday #election