Financial panic threatens Macri
In a climate of great economic and political uncertainty, the financial market of Argentina yesterday had a second consecutive day of infarction due to fear of a suspension of debt payments. The market seems to distrust the government of Mauricio Macri, who loses popularity before his rival, the ex-president Cristina Fernández, six months before the elections.
The turbulence increased the pressure for Macri to abandon his project of aspiring to reelection. But the head of government of the city of Buenos Aires, Horacio Rodríguez Larreta, from the same political space, came out to confirm that the aspirant "is Macri" and warned that "the candidates are decided in Argentina, not on Wall Street."
It was in the middle of a currency escalation. The dollar, which had gone from 43.5 to 45 pesos on Wednesday, climbed yesterday to 47.50 in two hours. At the same time, debt bonds collapsed, as did shares in the local stock exchange and the titles of Argentine companies listed in New York, while insurance rose against an eventual default.
Aware that the polls show Fernandez almost ten points ahead of Macri in a second round, although the former president did not confirm whether she will compete, businessmen and investors already publicly state that the governor of the province of Buenos Aires, María Eugenia Vidal, shares political terrain with Macri but with a better image. Also, the partners of the governmental alliance want another applicant. But it is not easy to change the candidate in the middle of the crisis and with the economy in a deep recession. The climate is so tense that government sources attributed the financial turbulence to the release of a book by Cristina that goes on sale today and is already sold out.
The dynamics of panic
The Country Risk by JP Morgan, which had started on Wednesday at 845 points, closed in 963 and yesterday reached 1012. The Central Bank sold 51 million euros to quell the fire and committed to future operations. Later it also had to raise the interest it pays to banks for the Liquidity Letters (Leliqs). Since August, the monetary authority places those papers exclusively among banks. To avoid the dollarization of funds, it proposes a peso rate well above inflation (54%) for one-week operations.
The benefit of the banks to stay in pesos is the price that the Government pays to curb a dynamic of panic, in exchange for deepening the recession. Thus the Central Bank only tempered the nervousness. The dollar closed at 46 pesos and the Country Risk returned to 960 points, the second highest in the region after Venezuela.
The convulsion comes just one year after 2018 when the dollar traded at 20 pesos and ended at 35. Then the difficulties of Argentina to finance itself in the bond market led Macri to the International Monetary Fund, which granted him a loan of 51 billion. But the program is not working. The devaluation of 2018 led to a 54% price increase. With the Central Bank already committed not to issue pesos. March inflation was 4.7% and the trend would remain in April far from giving a signal of improvement.