Peso plunges further, bonds down again on fears Argentina could return to populism 



BUENOS AIRES, Aug 13 (Reuters) - Argentina's peso and dollar-denominated bonds dropped again on Tuesday as market turmoil spilled into a second day following opposition candidate Alberto Fernandez's landslide victory in a primary election that dealt a severe blow to President Mauricio Macri's re-election chances.

The peso lost 9.32% of its value to reach 59 per U.S. dollar. The currency had hit an all-time low on Monday of 65 to the dollar, a drop of 30%, on fears that a Fernandez government could take Argentina back to interventionist economic policies.

Fernandez, who has former President Cristina Fernandez as his running mate, pulled off a stunning upset in the primary with a wider-than-expected 15-point lead over Macri, a free market proponent.

Monday's crash in the peso unnerved global equities investors, with markets already jittery over the Sino-US trade war and protests in Hong Kong.

"Yes, Argentina is a small economy. However, the last thing global markets want to see is another market-friendly government fall to populism and/or geopolitics," said Rabobank strategist Michael Every.

In an interview Monday, Fernandez said he was willing to collaborate with the current government after his primary triumph on Sunday sent the peso, stocks and bonds reeling.

Argentine assets had not recorded the kind of simultaneous fall seen on Monday since the South American country's 2001 economic crisis and debt default, Refinitiv data showed.

After an initial tentative move high on Tuesday morning, traders said the market turned and left dollar-denominated bonds down roughly 10 points down across the board, though volume was low.

The primary results showed Fernandez, a former cabinet chief, was well placed to win October's general election in the first round. He blamed Macri for the market turmoil.

"The dialogue is open, but I don't want to lie to Argentines. What can I do? I'm just a candidate, my pen doesn't sign decrees," Fernandez said in an interview with Argentine TV channel Net TV broadcast on Monday.

Fernandez, regarded as a moderate within the Peronist movement, has said he would seek to "rework" Argentina's$57-billion standby agreement with the International Monetary Fund if he won the general election. He has proposed an economic and social pact to combat inflation, which is running at 55%.

Macri, a scion of one of Argentina's wealthiest families, came to power in 2015 on promises to kick-start Latin America's third-largest economy via a liberalization wave.

But the promised recovery has not materialized and Argentina is in recession.

Investors were still assessing the damage caused by Monday's crash. Argentina's country risk rose 164 basis points to 1,631, the highest since 2009.

The cost of insuring against an Argentine sovereign default jumped again on Tuesday, according to data from IHS Markit. Markit's calculations price the probability of a sovereign default within the next five years at more than 72%.

Analysts also predicted the peso's fall would continue. BAML said it expects the exchange rate at 70.5 by end-2019 and 106.6 by end 2020. </s> BUENOS AIRES, Aug 13 (Reuters) - Argentina's peso closed weaker again on Tuesday following a second day of market turmoil triggered by opposition candidate Alberto Fernandez's landslide victory in a primary election that dealt a severe blow to President Mauricio Macri's re-election chances.

The peso closed 4.29% lower at 55.9 per U.S. dollar after touching 59 to the dollar earlier. The currency had hit an all-time low on Monday of 65 to the dollar, a drop of 30%, on fears that a Fernandez government could take Argentina back to interventionist economic policies.

"The market thinks Fernandez will likely default and impose capital controls and renegotiate with the IMF. In a nutshell, the market thinks Fernandez is the return of populism," said Claudio Irigoyen of Bank of America Merrill Lynch (BAML).

Fernandez, who has former President Cristina Fernandez as his running mate, pulled off a stunning upset in the primary with a wider-than-expected 15-point lead over Macri, a free market proponent.

Monday's crash in the peso unnerved global equities investors, with markets already jittery over the Sino-US trade war and protests in Hong Kong.

"Yes, Argentina is a small economy. However, the last thing global markets want to see is another market-friendly government fall to populism and/or geopolitics," said Rabobank strategist Michael Every.

The weaker peso quickly translated into higher prices on Argentine store shelves. Some shops selling household appliances in the capital Buenos Aires, at a loss for how to price their products amid the fluctuating exchange rate, stopped printing price tags and instead asked customers to inquire.

There was also doubt over the future of an "essential goods" program introduced by Macri in April to fix low prices through October for 64 basic food products. The secretariate of trade did not respond to a request for comment on whether the government would renegotiate the prices with companies.

Buenos Aires resident Florencia Nagy, 31, said, "The atmosphere has been tense" in the city.

"A lot of anger, a lot of confusion, many people thinking that leaving the country could be an option," said Nagy, who said she voted for candidates from more than one party in the primary.

In an interview Monday, Fernandez said he was willing to cooperate with the current government after his primary triumph on Sunday sent the peso, stocks and bonds reeling.

The primary results showed Fernandez, a former cabinet chief, was well placed to win October's general election in the first round. He blamed Macri for the market turmoil.

"The dialogue is open, but I don't want to lie to Argentines. What can I do? I'm just a candidate, my pen doesn't sign decrees," Fernandez said in an interview with Argentine TV channel Net TV broadcast on Monday.

Fernandez, regarded as a moderate within the Peronist movement, has said he would seek to "rework" Argentina's$57-billion standby agreement with the International Monetary Fund if he won the general election. He has proposed an economic and social pact to combat inflation, which is running at 55%.

Macri, too, deflected responsibility for the financial volatility, saying at a news conference on Monday that the opposition should "self-criticize" its own policies in the wake of the market reaction.

Macri, a scion of one of Argentina's wealthiest families, came to power in 2015 on promises to kick-start Latin America's third-largest economy via a liberalization wave.

But the promised recovery has not materialized and Argentina is in recession.

'JUST AN EXAMPLE'

Though Argentines are accustomed to a decades-long cycle of peso weakness and inflation, the severity of this week's market reaction resonated on the streets of Buenos Aires, with some bracing for a long period of economic hardship.

"If we get the same result (as the primary) in the October election, the country will be worse off," said Jazmin Lia, a 25-year-old student who said she voted for Macri in the primary.

"What's happening with the exchange rate and the collapse of the market is just an example of what will happen," Lia added.

Carolina Fiuza, 31, blamed Macri for the market volatility and said it seemed more like a "strategy than a reality." She said she wasn't worried about the market meltdown.

"I see people desperate for the peso value to increase, I see everyone thinking that it will devalue even worse in October. In the end, I think everything will be work out, as always," said Fiuza, who voted for Peronist candidate Roberto Lavagna in the primaries.

Argentine assets had not recorded the kind of simultaneous fall seen on Monday since the South American country's 2001 economic crisis and debt default, Refinitiv data showed.

Investors were still assessing the damage caused by Monday's crash. Argentina's country risk rose 164 basis points to 1,631, the highest since 2009.

Index provider MSCI said it has not yet considered reclassifying the recently upgraded Argentina stock index out of emerging markets despite the massive spike in volatility and decline in prices.

Argentina's century bond fell over six points on Tuesday to trade at 51 cents on the dollar, compared to around 75 cents on Friday according to MarketAxess data.

As concerns rise about Argentina's ability to meet its debt obligations, investors are looking closely at the government's ability to roll over its peso maturities, including short-term notes known as 'Letes.'

"Markets will be sweating bullets each time one of these maturities come due," Jeffries Fixed Income said in a note to investors.

The cost of insuring against an Argentine sovereign default jumped again on Tuesday, according to data from HIS Markit. Markit's calculations price the probability of a sovereign default within the next five years at more than 72%. </s> BUENOS AIRES, Argentina — Argentina's Central Bank on Thursday increased its benchmark interest rate to 60 percent — the world's highest — in an effort to halt a sharp slide in the value of the peso, which plunged to a new record low.

The peso has tumbled more than 50 percent so far this year, prompting Argentina to seek a $50 billion financing deal with the International Monetary Fund.

But President Mauricio Macri has struggled to calm markets and bring confidence to Argentines who continue to lose purchasing power to one of the world's highest inflation rates. Macri said Wednesday that he is now is asking for an early release of the IMF funds.

The peso slipped about 7 percent against the dollar Wednesday and was down another 15 percent by midday Thursday, when it was trading at 39.6 to the dollar.

The Central Bank said in a statement that it was hiking its benchmark interest rate in response to the current currency scenario and the risk of greater impact on local inflation. The rate had been set to 45 percent earlier this month. </s> Argentina’s Central Bank on Thursday increased its benchmark interest rate to 60%, the world’s highest, in an effort to halt a sharp slide in the value of the peso, which plunged to a record low.

Argentina’s Central Bank on Thursday increased its benchmark interest rate to 60%, the world’s highest, in an effort to halt a sharp slide in the value of the peso, which plunged to a record low.

The peso fell more than 15% against the dollar on Thursday, trading at 40.5 per greenback, after slipping about 7% the day before.

The Central Bank said in a statement that it was raising its benchmark interest rate by 15 percentage points to 60% in response to the currency problems and the risk of greater impact on local inflation, which is already running at about 30% a year.

The tumult in the exchange market came a day after President Mauricio Macri said he was asking for an early release of some IMF funds under a 50 billion US dollar (£38 billion) backup financing arrangement approved earlier.

Some experts said the announcement, combined with the interest rate hike, had the unintended effect of fuelling the crisis of confidence.

“I think today’s interest hike announcement will do nothing but leave investors even more jittery,” said Monica de Bolle, senior fellow at the Peterson Institute for International Economics.

Macri has struggled to calm markets and bring confidence to Argentines who continue to lose purchasing power.

Many are frustrated with job losses, higher utility rates and a rise in poverty levels.

Many also have bad memories of the IMF and blame its free-market economic policies for contributing to the country’s worst crisis in 2001-2002, when one in every five Argentines was unemployed and millions fell into poverty.

Seeing journalists filming screens showing the exchange rates in central Buenos Aires, Ruben Montiel, 55, burst out: “Macri is an embarrassment,

“You can’t live like this. The prices of everything go up on a daily basis,” he said. “There’s no work, utility rates have gone through the roof, people are sleeping on the streets.”

Macri, a pro-business conservative who came to office in 2015, had promised to trim Argentina’s fiscal deficit, reduce poverty and curb inflation.

He cut red tape and tried to reduce the government’s budget deficit by ordering layoffs and cutting utility subsidies, but it triggered labour unrest.

Then in December, officials announced a rise in the inflation target, which caused investors to begin doubting Macri’s commitment to taming price rises.

Meanwhile, the peso slumped against the dollar as rising US interest rates lured investors to pull greenbacks out of Argentina.

That caused jitters among Argentines, who have been used to stashing away dollars as a cushion since the 2001 crisis, when banks froze deposits and put up sheet-metal barricades as thousands of protesters unsuccessfully tried to withdraw their savings.

Dozens died in protests and looting in December 2001 as the economy unravelled and Argentina eventually suffered a record 100 billion dollar (£77 billion) debt default. </s> BUENOS AIRES (Reuters) - Argentina’s election primary on Sunday will determine President Mauricio Macri’s chances of winning a second term in October, with the country’s embattled peso currency expected to take a fresh beating next week if the business-friendly leader fares worse than expected.

As the main political parties have already chosen their nominees, Sunday’s vote will serve as a grand opinion poll on Macri’s chances of beating the main challenger, Alberto Fernandez of the left-leaning Peronist party.

The big question is whether Fernandez or Macri can win in the first round of the general election on Oct. 27. To avoid a second-round runoff in November, one candidate would have to clinch at least 45% of the October vote.

“The most important thing on Sunday is to see who passes 40% by the most votes. That’s the candidate most likely to get 45% in October and become president,” said Julio Burdman, a Buenos Aires-based pollster.

Opinion polls show Fernandez in the lead, which is not surprising given the weakness of Argentina’s economy under Macri.

As unhappy as they are about Argentina’s recession and high inflation, business leaders - and many well-to-do voters - say they are more concerned about a possible return to populism and intervention in the markets under the Peronists.

So rich Argentines may get nervous and ditch the peso if Macri performs poorly in Sunday’s primary.

“The potential panickers are middle- and upper-class Argentines, who will sell their pesos if it looks like Fernandez is going to win the presidency. This would pressure the exchange rate,” Burdman said.

The peso has already weakened 17.3% so far this year to 45.6 per U.S. dollar after a 55% swoon against the greenback in 2018.

Fernandez has chosen Argentina’s previous president, Cristina Fernandez de Kirchner, as his running mate. Both say they want the government to exert more control over the economy.

Kirchner is facing multiple corruption charges, all of which she denies. Critics say she nearly bankrupted the country after years of high deficits and heavy-handed currency controls that scared off investment and spurred capital flight during her two terms as president.

But she remains loved by millions of low-income Argentines who remember generous welfare spending by her administration.

Macri became president in late 2015, promising a new era of sustainable growth. Three and a half years later, the economy is shrinking while 55% inflation makes it harder for poor families to feed themselves.

Polls show Fernandez likely to get up to five percentage points more support than Macri on Sunday.

“If results are in line with expectations, the outlook for the government would be positive, because a small distance between Fernandez and Macri could be reversed between now and October,” said Mariel Fornoni, an analyst at polling firm Management & Fit.

“A more severe defeat for Macri on Sunday would complicate matters going into October, especially because the government would have to contain the market’s loss of confidence,” she said. </s> BUENOS AIRES, Argentina — President Mauricio Macri said Tuesday that Argentina has begun talks on a financing deal with the International Monetary Fund following a sharp devaluation of its currency and amid a difficult "global scenario."

Argentina was forced recently to impose three interest rate hikes to halt a sharp devaluation of its peso.

Macri said he's in talks with IMF Director Christine Lagarde to obtain a flexible credit line to combat economic woes at home and a complex situation worldwide that he said includes rising interest rates, higher oil prices and a depreciation of emerging market currencies.

"The problem we have is that we're one of the countries that depends the most on external financing," Macri said in a televised address. "Faced with this situation, and preventively, I've started conversations with the International Monetary Fund ... A few minutes ago I spoke with Christine Lagarde, and she confirmed we would start working on an agreement today."

He did not say how much Argentina is asking.

The peso fell to a historic low versus the U.S. dollar and Argentina's debt sank in price last week after a string of monetary and fiscal policy decisions that have been criticized by investors.

The government's woes began in December when investors began doubting its commitment to curb consumer prices after it announced a rise in its inflation target to 15 percent. Argentina then lifted its benchmark interest rate to 40 percent and tightened the fiscal deficit target.

"Today we're here to complement those announcements," Treasury Minister Nicolas Dujovne said in a press conference, adding that IMF financing was the best option to protect Argentina from global risks.

Many Argentines have bad memories of the IMF, believing its policies contributed to Argentina's worst economic collapse in 2001. The crisis was so bad that one of every five Argentines was out of work. The peso, which had been tied to the dollar, lost nearly 70 percent of its value. Banks froze deposits. More than 20 people died in protests and looting as the economy unraveled. Argentina eventually defaulted on a debt of more than $100 billion and saw a revolving door of five presidents in just two weeks.

But Dujovne reassured Argentines, saying that the IMF "today is very different than the one we knew 20 years" ago. "It has learned lessons from the past, and I repeat — it has helped our gradual program (of policies)."

Macri, a conservative, came into power in 2015 promising to cut government spending to boost Argentina's troubled economy. But while Macri struggles to reduce the country's high fiscal deficit and tame inflation, Argentines continue to lose purchasing power and many are growing frustrated with rises in fuel and transportation costs.

Argentina's Merval stock index recovered after Macri's announcement, and was falling about 3 percent after starting the day down at about 5 percent. The peso also bounced back to close at 22.8 per dollar after having plunged to a record low of 25.5 earlier in the day.

The IMF flexible credit line is designed specifically for countries with strong fundamentals, a track record of solid policy implementation, and a commitment to continue to implement sound policies and take appropriate corrective action whenever warranted, Goldman Sachs economist Alberto Ramos said in a research note.

"It is unclear to us if Argentina truly fits this description: while the authorities are certainly orthodox and market friendly and committed to implement sound policies, the country's fundamentals are hardly strong," he said. </s> The government of Argentina has decided to abandon the 21-percent value-added tax (VAT) on essential food products to compensate price hikes amid a collapse of national currency peso, President Mauricio Macri said

BUENOS AIRES (UrduPoint News / Sputnik - 16th August, 2019) The government of Argentina has decided to abandon the 21-percent value-added tax (VAT) on essential food products to compensate price hikes amid a collapse of national currency peso, President Mauricio Macri said.

"I made an unparalleled decision which has not ever been made in our country. We will abandon the VAT for essential goods bought by Argentinian families ... This measure will be in effect until the end of the year," Macri said in a national address, aired live on his Twitter late on Thursday.

As of Friday, the VAT will not be included in the price of bread, milk, butter, pasta, rice, flour, canned fruit, vegetables and mate.

Buenos Aires residents told Sputnik that prices had already surged by 20 percent, including the prices on goods produced inside Argentina.

"The prices for nearly anything have grown by at least 20 percent. I do not know what to do," Elena, a resident of the capital said.

Earlier this week, the peso dropped by around 30 percent � from 46-47 pesos to 60-64 pesos per US dollar � amid the political instability in the country.

The decrease in the national currency rate followed the announcement of the results of the primaries ahead of the election scheduled to be held later this year. According to them, opposition alliance Front of All led by Alberto Fernandez gained over 47 of the vote, while Macri's Together for Change coalition gained only 32 percent.

However, on Thursday, Argentina's largest state bank, Banco Nacion, sharply strengthened the peso, so the dollar cost 58 pesos instead of 63 pesos, which was the case on Wednesday. </s> • The Central Bank of Argentina raised its benchmark interest rate to 60%.
• On Wednesday, Argentine President Mauricio Macri said he has asked the International Monetary Fund to speed up bailout payments to the country.
• Watch the Argentine peso in real time here.

Argentina's central bank hiked rates by 15 percentage points to 60% on Thursday after the peso continued to slide despite the country already having the highest borrowing rates in the world.

The Central Bank of Argentina raised its benchmark interest rate up from 45% after the peso slid more than 8% to fresh lows. It is the worst-performing emerging market currency of 2018.

The rate hike comes as the International Monetary Fund, which has extended Argentina the largest credit line in its history, considers speeding up bailout payments to the country. Argentine President Mauricio Macri said on Wednesday he had requested IMF do so in order to "eliminate any uncertainty that was created before the worsening of the international outlook."

As part of the three-year standby agreement, the government has received $15 billion so far and was poised to get an additional $3 billion next month.

Citing a ballooning debt burden and a weakening peso, the rating agency Moody's on Tuesday cut its growth forecast for Argentina. It estimates gross domestic product will contract by 1% next year, compared with previous expectations for a 3% expansion. </s> BUENOS AIRES, Argentina — Argentina’s Central Bank on Thursday increased its benchmark interest rate to 60% — the world’s highest — in an effort to halt a sharp slide in the value of the peso, which plunged to a record low.

The peso fell more than 13% against the dollar on Thursday, closing at an all-time low of 39.2 per greenback, after slipping about 7% the day before.

The Central Bank said in a statement that it was hiking its benchmark interest rate by 15 percentage points to 60% in response to the currency problems and the risk of greater impact on local inflation, which is already running at about 30% a year.

The tumult in the exchange market came a day after President Mauricio Macri said he was asking for an early release of some IMF funds under an US$50 billion backup financing arrangement approved earlier.

Some experts said the announcement, combined with the interest rate hike, had the unintended effect of fuelling the crisis of confidence.

“I think today’s interest hike announcement will do nothing but leave investors even more jittery,” said Monica de Bolle, senior fellow at the Peterson Institute for International Economics.

“I’m finding it difficult to understand why, after yesterday’s announcement about front-loading more of the IMF funding, the government thought the hike was warranted. Hyperactivity starts to look like desperation.”

Macri has struggled to calm markets and bring confidence to Argentines who continue to lose purchasing power. Many are frustrated with layoffs, higher utility rates and a rise in poverty levels.

Many also have bad memories of the IMF and blame its free-market economic policies for contributing to the country’s worst crisis in 2001-2002, when one of every five Argentines went unemployed and millions fell into poverty.

Seeing journalists filming screens showing the exchange rates in downtown Buenos Aires, Ruben Montiel, 55, burst out: “Macri is an embarrassment!

“You can’t live like this. The prices of everything go up on a daily basis,” he said. “There’s no work, utility rates have gone through the roof … people are sleeping on the streets.”

Macri, a pro-business conservative who came into office in 2015, had promised to trim Argentina’s fiscal deficit, reduce poverty and curb inflation. He cut red tape and tried to reduce the government’s budget deficit by ordering layoffs and cutting utility subsidies, but it triggered labour unrest.

Then in December, officials announced a rise in the inflation target, which caused investors to begin doubting Macri’s commitment to taming price rises.

Meanwhile, the peso slumped against the dollar as rising U.S. interest rates lured investors to pull greenbacks out of Argentina.

That caused jitters among Argentines, who have been used to stashing away dollars as a cushion since the 2001 crisis, when banks froze deposits and put up sheet-metal barricades as thousands of protesters unsuccessfully tried to withdraw their savings. Dozens died in protests and looting in December 2001 as the economy unraveled and Argentina eventually suffered a record $100 billion debt default.

“The government will need to shuffle its cabinet and strike deals with provincial governors for next year’s budget,” said Argentine economist Marcos Buscaglia. “In the short-term, the government just needs to stop this crisis.
After Argentine President Mauricio Macri comes second in Argentina's primary elections, the country's peso loses 15% of its value against the US dollar.