Argentina’s peso falls again as Macri tries to shore up support

President unveils raft of emergency economic measures after major political setback

President Mauricio Macri: there are concerns that he may be in denial about his election chances. Photograph: Agustin Marcarian/File photo/Reuters

Argentina's peso resumed its slide on Wednesday as President Mauricio Macri announced a raft of emergency measures aimed at providing relief to a population suffering from the impact of a sharp devaluation following his stunning defeat in primary elections.

The measures, which will cost $740 million (€664 million), included increases in the minimum wage, loans for small and medium-sized businesses, student grants, subsidies for poor families with children and a floor for income tax, as well as a freeze on petrol prices for 90 days.

Mr Macri has launched the new measures as he redoubles efforts to win presidential elections in October after losing by 15 percentage points in primary elections on Sunday to his Peronist rival, Alberto Fernández. The outcome took markets by surprise and led to a collapse in Argentina’s asset prices.

It also fuelled concerns that Mr Macri may be in denial about his election chances, and that the measures will do little to solve a looming governability crisis if the economic chaos worsens and there are no talks with Mr Fernández to smooth a transition, seen now by investors as inevitable.


Mr Macri on Wednesday kept the door open to talks with Mr Fernández. “In the last 48 hours, it has become clear that political uncertainty has caused a lot of damage,” he said, adding that he wanted to meet with the other candidates to help to restore “calm”. He urged them not to see the situation as “a fight between friends” but “a discussion between rivals”.

However, Mr Fernández rejected the proposal. “What the president doesn’t understand is that there isn’t much point [in meeting] ... because we are not going to agree,” he told a local journalist, urging Mr Macri to behave as a president, not as a candidate in the elections.

Record low

The peso fell more than 6 per cent against the dollar on Wednesday to a record low of 59 pesos per dollar. The yield on the country’s government bonds climbed again, with one due to mature in 2028 rising to 18.7 per cent. Yields move inversely to prices. Longer-dated debt, including the century bond maturing in 2117, failed to catch a bid as well. That once-celebrated issuance is now trading at 46.45 cents on the dollar.

The sharp move lower in the peso has heightened concerns of a coming debt default, with the odds of such a move within five years remaining elevated, at 75 per cent. Four-fifths of the country’s debt is denominated in a foreign currency, meaning any weakness in the currency makes repayments a much more difficult task.

Argentina’s Merval stock index fell 3.78 per cent after rebounding nearly 9 per cent on Tuesday after the prior day’s violent move, which saw Argentine equities lose half of their value in dollar terms.

"It's too little, too late," said Siobhan Morden, head of Latin America fixed income strategy at Amherst Pierpont Securities, arguing that it is "game over" for Mr Macri. "There's very little that populism can do to change three years of recession. Voters delivered a vote of no confidence in the primaries. I can't think of anything he could do or say to reverse the electoral outcome." – Copyright The Financial Times Limited 2019