Argentina’s Economy Minister Sergio Massa announced a 22 percent devaluation of the peso, only hours after his coalition finished third in yesterday’s presidential primary.
The peso jumped from ARS 290 per U.S. dollar to ARS 350, still far from its black-market value of ARS 690.
Argentina has a multiple exchange rate system as the government has for years tried to peg the value of the peso to a much stronger value than market participants. This has cost the country billions in subsidies to importers.
With no foreign currency reserves left and having asked Qatar for an emergency loan in order to postpone the devaluation until after the primaries, Mr. Massa has now accepted a small depreciation of the peso. In exchange, the International Monetary Fund will postpone maturities scheduled for the coming months.
This will give Mr. Massa some financial breathing room between now and the general elections scheduled for October 22, though inflation is also likely to take increase in the coming weeks.
Markets opened lower following the strong performance of libertarian economist Javier Milei in yesterday’s primary vote, but recovered part of its losses later in the day as panic subsided.
Mr. Milei is a pro-market advocate but is feared by much of Argentina’s establishment, which is more protectionist and closely intertwined with the state.
He took 30 percent of votes in yesterday’s primary. The election is often a better indicator of who will be the country’s next president than any opinion polls.
The center-right coalition finished second with a combined 28 percent of the votes, as hawk Patricia Bullrich beat dove Horacio Rodríguez Larreta by 17 to 11 percent.
Mr. Massa took 21 percent of votes, beating left-wing challenger Juan Grabois with 6 percent. Together they accounted for 27 percent, one of the worst totals for the ruling Peronist coalition since its birth in 1945.
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