Listed Argentine government bonds Wall Street and other international markets reacted negatively this Monday, down close to 10%. A plaza has opened in Buenos Aires after far-right Javier Millel’s surprise victory in Sunday’s primary elections, according to the EFE news agency. Also, the Argentine currency, the peso, was devalued by 22% by the Central Bank of Argentina this Monday. The country imposes strong restrictions on the foreign exchange market to prevent its currency from depreciating continuously against the dollar. The supervisor also decided to increase the monetary policy rate by 21 percentage points to 118%.
“The surprise of the result could put pressure on the foreign exchange market and fixed and variable yield markets,” says an analysis by fund manager Grupo SBS, which has already been observed in Argentina Global bonds this morning. Argentina Global government bonds drop to 9.7% amid rising uncertainty“warns the SBS report after the surprise election result in the primaries this Sunday, where Javier Milei received 30.04% of the vote (97.4% counting).
Freedom Advances, the formation of Milei, He became the person with the most votes to run in the presidential election held on October 22.Homeland (Peronist) struggles with 27.27 percent, leaving the opposition coalition Juntos por el Cambio (center-right) (center-right) in second place with 28.27% and the pro-government Union in third, in which former Security Minister Patricia Bullrich was selected to run in the presidential election. Economy Minister Sergio Massa will also be present.
The market reacted negatively because Milei was He offered to dollarize Argentina’s economy, although some experts said such a measure would be difficult to implement.Due to the low amount of international reserves, net ones as of today are about 10 billion dollars negative.
Dollarization of Argentina’s economy
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Demand for the peso in Argentina is low, 12% of GDP, and there are fears that the dollarization proposal will further fuel the pursuit of dollars. Moreover, Milei proposes to abolish the Central Bank and “chainsaw” public spending in a country that has suffered from high inflation for decades.it climbed almost 116% last June.
The fund manager believes Milei’s proposals could also put pressure on the state’s revenue in pesos. “We will be able to evaluate this situation further and as days pass and Milei’s different statements and the potential performance of the other ‘asset class’ (asset class) and his team, as well as the statements of IMF (International Monetary Fund) officials, points to SBS reminding that the board of directors of the institution, which has $45 billion in debt, has not yet approved a payment of $7.5 billion. dollar.