Argentina is the second biggest country in terms of the total area in South America after Brazil. The country is part of G-20 which underlines the fact Argentina has a vast potential to develop its economy.
It is no coincidence that Argentina was an economic power during the twentieth century. However, at the moment, the country is experiencing a severe financial crisis. In this situation, it is not surprising that investors are cautious, and this is a big problem for Argentina.
Recently, current President Mauricio Macri lost the primary election to his opponent. It is a reminder voters are unhappy with the austerity measures implemented by Macri’s administration. The results of the primary election had a negative impact on the stock market. As it increased fears among investors regarding the future of the local economy.
It is worth mentioning that Macri received 32% of votes while his opponent Alberto Fernandez result is far more impressive with 47%. The presidential elections in Argentina are due in October.
The stock market in Argentina
The reaction of the stock market once more underlined the feelings of investors. Without exaggeration, Argentina suffered one of the biggest crashes since 1950. The recent crash of the stock market is the second biggest in more than 50 years. Only this fact is enough to understand the severity of this event.
For example, the S&P Merval Index decreased by 48% on Monday. It is the second-largest drop since 1950. It is important to remember that the Merval Index is the most significant index of the Buenos Aires Stock Exchange.
Another problem is then a dollar-denominated bond with the interest rate of 8.75% suffered after the results of the primary election. Its price fell from 73 cents to about 45 cents.
The Argentine peso decreased and lost 15% of its value against the U.S. dollar. On Tuesday the price of peso continued its demise. Two days ago, the chance that Argentina will stop paying for its debt obligations in the next five years increased to 75% from 49%.
Stock market’s reaction indicates that the local economy is facing severe problems. The results of the next presidential election will have a massive influence on the stock market.