As Argentina prepares for a crunch presidential election, the old adage rings true: 'it's the economy, stupid'. Inflation is at 138%, net reserves of foreign currency are in the red, savers are ditching the peso, and a recession is looming.
The country goes to the polls on Sunday in a three-way race between shock libertarian front-runner Javier Milei, Peronist economy minister Sergio Massa and conservative Patricia Bullrich, with voters angry amid a harsh cost-of-living crisis.
"This type of inflation is unstable and makes stabilization much more urgent. It is very difficult to control inflation at these levels," he said. Two of the three top presidential candidates, Milei and Bullrich, have pledged to quickly undo capital controls if they are elected. Analysts expect this will lead to a sharp devaluation of the official exchange rate.
The government has agreed an extended currency swap with China to help cover some of its costs, and had to delay some payments to key trade partners such as Brazil.Latin America's third largest economy is on track to shrink 2.8% this year, according to the latest central bank analyst survey, partly due to the impact of the recent drought that cut the corn and soy crops in half.
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