Argentina devalues peso, hikes rates post-primary elections.
OAN’s Abril Elfi
12:19 PM – Tuesday, August 15, 2023
In response to pressure on Argentina’s financial markets following a primary election, the Argentinian government decreased the value of its currency by nearly 18%.
On Monday, the central bank said the Argentinian government devalued its currency by roughly 18% and increased the benchmark interest rate by 21 percentage points from 97% to 118%.
Javier Milei, the presidential candidate who has voiced admiration for Trump, won the largest percentage of primary votes for the upcoming October general election on Sunday.
The 52-year-old claims he wants to get rid of the country’s central bank and replace the peso with the American dollar.
Millei has strong opinions that have shaken up the country’s election decisions. He has reportedly stated that sex education is destroying families and wants schools to get rid of it, as well as saying that climate change is a lie.
He has also proposed the “deregulation of the legal market” for guns and “the protection of its legitimate and responsible use by the citizens,” and said that the sale of human organs should be legal.
Argentinian President Alberto Fernandez’s claims that his administration had run out of money and options to defend an unsustainable exchange rate after suffering defeat in the primary election reportedly heavily impacted the decision to devalue the peso.
According to the central bank, the official foreign currency (FX) rate will remain set at 350 pesos to the dollar until the October elections.
People in Argentina who couldn’t access the dollar on the official market rushed to purchase the currency on the streets of Buenos Aires, driving the unofficial exchange rate down as much as 12% to about 690 pesos per dollar.
William Jackson, Chief Emerging Markets Economist, warned that keeping the value of the peso steady until the elections will result in it being “severely overvalued.”
“The move to devalue the currency will help to bring it closer to fair value,” Jackson said. “But the fact that the peso will be held steady until the election, rather than be allowed to fall gradually (as has been the policy up till now) will just result in the currency becoming severely overvalued again in the coming months.”
Millei will compete in a three-way race on October 22nd against Former Security Minister Patricia Bullrich, and Peronist coalition candidate and Economy Minister Sergio Massa.
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