Argentina: The one about how the economy reacts to politics
Just last Sunday the exchange rate was something like 44-45 Argentine pesos per U.S. dollar. By Monday morning it had reached 64 pesos per dollar. That afternoon I checked on the rate every so often, watching it fluctuate as if I were following the live score updates of a sporting event.
Ridiculous inflation is a defining characteristic of the Argentine economy, at least since the days of President Peron, and the reason for the drastic change this time around was the outcome of the primary presidential election. In theory, the primary serves to narrow down each party's candidates to just one who will then officially run for president in October. Since, however, no party presented more than one candidate in the primary election, this was more of a practice round for the real deal in a few short months.
To put it simply, the incumbent did not come out on top in the primary election, and the market reacted to the front-runner (whose vice presidential candidate is a former president herself) being the possible president in the near future. Foreign investors don't seem to like their proposed economic plan, leading to less foreign currency being invested in the country, increasing demand here for the harder-to-get-your-hands-on U.S. dollar, and ultimately ending in inflation.
The day after the primary was a stressful one for businesses and financial institutions. Some businesses closed their sales completely in fear of losing out big time. Some notified that they would not honor previously-quoted prices on products sold and not yet paid for. We were left worried that the peso amount of our new dining room table (to be paid for upon pickup) was going to increase, but as of now the original price has been honored. We had purchased a different table a couple months ago, only to return it when it arrived broken. Thankfully, we were reimbursed for that before the exchange rate changed, so we did not suffer a loss.
If the economy reacts so dramatically to a (seemingly) meaningless primary, we are bracing ourselves for what might happen in October. Cordoba was one of only two provinces in the country where the incumbent did come out on top, so you can imagine the current attitude of the majority of folks around here at this time. Many expect the results of the primary to be repeated in the actual elections...cue complaints and dismal commentary.
Ridiculous inflation is a defining characteristic of the Argentine economy, at least since the days of President Peron, and the reason for the drastic change this time around was the outcome of the primary presidential election. In theory, the primary serves to narrow down each party's candidates to just one who will then officially run for president in October. Since, however, no party presented more than one candidate in the primary election, this was more of a practice round for the real deal in a few short months.
To put it simply, the incumbent did not come out on top in the primary election, and the market reacted to the front-runner (whose vice presidential candidate is a former president herself) being the possible president in the near future. Foreign investors don't seem to like their proposed economic plan, leading to less foreign currency being invested in the country, increasing demand here for the harder-to-get-your-hands-on U.S. dollar, and ultimately ending in inflation.
The day after the primary was a stressful one for businesses and financial institutions. Some businesses closed their sales completely in fear of losing out big time. Some notified that they would not honor previously-quoted prices on products sold and not yet paid for. We were left worried that the peso amount of our new dining room table (to be paid for upon pickup) was going to increase, but as of now the original price has been honored. We had purchased a different table a couple months ago, only to return it when it arrived broken. Thankfully, we were reimbursed for that before the exchange rate changed, so we did not suffer a loss.
If the economy reacts so dramatically to a (seemingly) meaningless primary, we are bracing ourselves for what might happen in October. Cordoba was one of only two provinces in the country where the incumbent did come out on top, so you can imagine the current attitude of the majority of folks around here at this time. Many expect the results of the primary to be repeated in the actual elections...cue complaints and dismal commentary.
So things could be better but they could also be worse, and these sure are exciting times we are living. We have been at a steady 54-55 peso-per-dollar exchange rate for the past few days. Bianca the kitten will keep watch and be back with an economic update at the end of October.
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