Argentina’s peso tumbled for the third day since PASO, or primary elections, against the U.S. dollar, to 59.4 pesos per dollar. The peso declined 31 percent against the dollar in three days, as of Aug. 14. President Mauricio Macri said he would freeze fuel prices for 90 days and increase the country’s minimum wage as he seeks to mitigate the inflationary impact of this week’s peso devaluation.
Left-wing candidate Alberto Fernández bested the fiscally conservative incumbent Macri in the primary by more than 15 points, winning more than 47 percent of the vote, noted Bloomberg. The primary is meant to winnow the slate of candidates, but in reality it serves as a nationwide poll to preview the official vote for the presidency, still 10 weeks away. Macri will stay in the race, but investors and pundits consider his deficit in support too vast to make up.
“We have this long transition where it looks like Alberto Fernández is going to be the president, but he still has to be elected,” Daniel Kerner, Eurasia Group Managing Director for Latin America, told Bloomberg. “With the market tanking and the government not knowing how to manage it – and actually playing on this fear – we are entering a very, very delicate situation in Argentina for the next several months.”
Macri could still force a runoff if he manages to claw back enough support from the front-runner and other lower-tier candidates before the official election on Oct. 27 to bring himself within 10 points of Fernández. As long as Fernández also receives less than 45 percent of the vote, there would be a runoff on Nov. 24, giving Macri more time to spin his comeback narrative. Should Fernandez ultimately win, he would take office on Dec. 10.
Argentine farmers had resorted to sitting on their soy harvests as a hedge against election-induced volatility in 2019. The share of soy output traded by farmers is currently the lowest since at least 2014. Farmers sold and priced 22.6 million mt of soy crop through July 31, according to government data. That is 41 percent of the harvest, compared with 53 percent at the same stage last year.
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Inverted scale
Source: Bloomberg, Green Markets
President Marci implemented free-market reforms in 2015 by eliminating and/or removing export taxes on soybeans, corn, wheat, and beef through macroeconomic stabilization, deregulation, and market-orientated policies. Area planted to corn, soybeans, and wheat in Argentina rose to 29.9 million hectare in 2019, up 10 percent from 2015 (pre-reform policy). Urea, phosphate, and potash demand has risen to support the additional acreage.
Argentine fertilizer year-to-date (Jan.-June) imports are 167.5k DAP (up 130 percent), 192k urea (up 236 percent), 21k MOP (down 9 percent), and 76.5k UAN (down 45 percent) compared to the same stage last year, according to Trade Data Monitor. Year-to-date Argentina UAN imports are at their lowest levels since 2014. Russian UAN exports to Argentina are down 32 percent in 2019, while U.S. UAN exports to Argentina are up 66 percent to date.
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Source: Trade Data Monitor, Green Markets