Argentina Election: How should markets react this Monday after the election?

The economy is a central issue in Argentina’s 2023 presidential race, and as first-round votes are counted — Javier Millay, Sergio Massa and Patricia Bulrich lead the way among the five candidates running for the Casa Rosada — markets are adjusting to resume business , given all the news coming from the South American country, which has plunged into a very serious crisis.

So what do the markets expect this post-election Sunday?

According to pundits and political and economic analysts, voters — and certainly investors — have spent the past few months debating which candidate can get Argentina back on track. However, it is almost an absolute consensus that the Argentinians will wake up this Monday (23) still without a clear result and with the possibility of a second round on November 19.

However, the dollar is already expected to continue its upward trajectory against the greenback, and prices for a number of products will also rise due to this exchange rate dependency. After all, two important points of attention in the proposal of Javier Milea, for example, are the dollarization of the Argentine economy and the elimination of retenciones, that is, the taxation of agricultural exports, which can – even in the long term – increase the competitiveness of the South American nation in international markets, increase foreign sales and thus increasing the inflow of foreign currency into the country.

Such expectations have even forced manufacturers and suppliers from a number of sectors to suspend the sale of goods of all types, from toilet paper to car parts, including food and construction materials, according to the international news agency Bloomberg.

The graph below shows the difference between the official and the parallel exchange rate in Argentina, which exceeds 170%.

“Fearing that their dollar deposits may not be guaranteed by the government, Argentinians withdrew nearly $500 million from banks just last week, through Oct. 17, according to central bank data. This is 3% of the total dollar deposits in the financial system,” the agency states.

Faced with the chaos established in the Argentine economy, the Central Bank of Argentina has already raised the country’s base interest rate six times this year alone, with the index currently reaching 133%.

“Our panel on Argentina’s economic fundamentals shows the most fragile situation in two decades. The country experienced deeper recessions, higher current account and budget deficits, and higher debt-to-GDP ratios. But in 2023, this will be compounded by historically low reserves, a lack of access to global capital markets, little or no ability to get additional funds from the IMF and challenging global conditions,” said Bloomberg analyst Adriana Dupita.

Markets recorded a chaotic Monday the day after August’s primary election, and October 23 should be no different. A lot of uncertainty still lingers, and experts say things could get worse before they get better. Until the outcome is determined, hopelessness still marks the day for Argentines who yearn for profound change.