Market Update: Argentina Midterm Elections
Argentina held midterm legislative elections last week and it was not good news for the presiding government.
Frente de Todos, the ruling coalition, lost its majority in Congress for the first time in 40 years. It won around 30% of the vote compared to 38% won by the main opposition, Juntos por el Cambio.
President Alberto Fernandez’s party also lost in its key stronghold of Buenos Aires province, which surrounds the capital.
With 35 Senators, two short of the majority, the government will need to negotiate with the opposition and independent parties in order to pass new laws. President Fernandez called for dialogue with Juntos por el Cambio. However, cooperation is unlikely as the opposition sees this as an attempt to share the political costs of the government’s economic plan, which includes the major challenge of reaching an agreement with the IMF over the Argentina’s massive debts.
Juntos por el Cambio now has 31 Senators. There were six representatives elected from provincial parties, of which three typically vote with Juntos por el Cambio, and two align with the government. The remaining Senator remains a big question mark.
How Have Argentina’s Midterms Impacted the Blue Chip Swap Spread?
Argentine currency controls remain a hurdle for businesses looking to send money into and out of the country. The Blue Chip Swap represents an efficient, cost-effective alternative to the traditional FX market.
The spread – the difference between the Blue Chip Swap rate and the “official” Argentine Peso/US Dollar exchange rate – was 114% at the end of Friday, November 20. That means you could get more than double the amount of money from a Blue Chip Swap than you would through a conventional foreign currency exchange.
The spread reached 117% in the week leading up to the midterms. It fell to 109% on Monday, November 15, the day results were announced, before widening again over the course of the week.
We will continue to monitor capital controls in Argentina and the impact of the new political landscape on the Blue Chip Swap Spread. Cash Management is a leader in providing cross-border treasury services to businesses with operations in Argentina.
For more information on how to manage your Argentine Peso exposure, call us on +1.604.643.0101.
Cash Management Group
604.643.0101 | Email us
More on Market Updates:
Market Updates
Our market commentary breaks down the latest business, financial and money news. If you’d like to receive all of our market update emails, send us an email by clicking the subscribe button. If you found this content helpful, share it widely!