London August 14 2023: The Argentine government devalued its currency by near 18% on Monday while the benchmark interest rate will be hiked 21 percentage points to 118%, the central bank said on Monday, as pressure built on Argentina’s financial markets following a primary election.
Congressman Javier Milei, a far-right libertarian who wants to axe the central bank and dollarize the economy, shook up the race towards presidential elections in October by far outperforming forecasts to win some 30% of the vote, the largest share with over 97% of ballots counted.
Markets were betting on a strong performance by more moderate candidates in a ballot that acts as a dress rehearsal for the national election in two months’ time.
The official FX rate will be fixed at 350 pesos per dollar until the October elections, the central bank said. The parallel informal peso dropped near 10% to a record low of 670 per dollar in early trading.
“The move to devalue the currency will help to bring it closer to fair value,” said William Jackson, chief emerging markets economist at Capital Economics.
Far-right politician Javier Milei, who admires US ex-president Donald Trump, has received the highest share of votes in Argentina’s primary election.
The primary, in which presidential candidates from all parties take part, is seen as a key indicator for the presidential election on 22 October.
Mr Milei exceeded expectations by winning 30% of votes, ahead of more established politicians.
Argentine media have described the result as a “political earthquake”.
The primary in Argentina differs from those in other countries, since it is not restricted to party members, but open to all those eligible to cast their ballot in the presidential polls. Voting is also mandatory.
Whoever wins the most votes is therefore seen as a favourite for the presidential election on 22 October.
Opinion polls ahead of the primaries had seen Mr Milei trailing behind the centre-left economy minister, Sergio Massa, and conservative candidate Patricia Bullrich.
But with more than 97% of votes counted, Mr Milei had 30.06% of votes, ahead of Ms Bullrich’s coalition with 28.27% and Sergio Massa’s coalition with 27.24%.
Newspaper La Nación compared Mr Milei’s surge to a tsunami.
Mr Milei is a former TV personality. Despite serving as a Congressmen since 2021, he likes to portray himself as a political outsider.
