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.