Argentina’s Peso Surges as Macri Picks Opponent as Running Mate

Argentina’s peso rose sharply on Wednesday and the stock market registered one of its biggest gains in recent years after President Mauricio Macri picked his long-term critic and opposition party leader Miguel Ángel Pichetto as his running mate in the presidential elections to be held in October.

The currency rose more than 2%, while yields on the country’s sovereign bonds fell by 55 base points, the biggest one-day drop since August 2016. In addition, Buenos Aires’ Merval stock index surged by 6%.

In the presidential elections, Macri is running against Alberto Fernández, who was a minister in the cabinet of former President Cristina Fernández de Kirchner, who is running as his vice president.

Pichetto is seen as enhancing Macri’s chances of re-election. Moreover, his nomination, observers say, leaves the presidential contest with just two main contenders instead of three or more, an advantage for Macri, whose popularity has taken a hit amid soaring inflation and consumer prices.

Investors had hailed Macri for his pro-business policies. Soon after taking the oath of office, he agreed to pay a few foreign bond investors, or the so-called vulture funds, who had sued the previous administration in a US court. The decision helped Argentina shake off its status as a pariah in the global financial markets, but the macroeconomic situation remained unchanged.

Argentina received a US$56 billion bailout from the International Monetary Fund (IMF) last year, but had to impose austerity measures as part of the deal. The cost-cutting exercise stoked inflation, pushing up consumer prices and eroding Macri’s popularity.