Argentina is on the brink of a financial crisis once again. Current leader Mauricio Macri’s loss to left-wing opponent Alberto Fernandez in the primary election has caused a swarm of financial repercussions. The S&P Merval, Argentina’s main stock market plunged 48% on Monday. It was then second largest drop of any major stock index since 1950. The Argentine peso dropped 15% versus the US dollar on Monday as well. These losses extended on Tuesday. The wide margin of Macri’s loss is what triggered the financial earthquake. Investors were expecting him to be defeated, yet not to the extent that he was.
Now the future appears uncertain. The looming probability of a sovereign default on the country’s IMF loans is sending investors scrambling for cover. The emerging political scenario is causing concern around South America and beyond. Should the Peronists return to power, Argentina will once again be ruled by a leftist government. Brazil’s right-wing President Jair Bolsonaro is publicly warning of a possible Argentine refugee crisis affecting his country in the future. Brazil is already contending with waves of Venezuelan immigrants streaming into the northern region of the country, fleeing the economic and political crises in their homeland. The possibility of a second refugee crisis at Brazil’s southern border is unpalatable to say the least.
After the downturn in global markets yesterday stemming from global recession fears, it would appear that the Argentine headache will add to the increasing concerns among investors about the health of the global economy, as well as the growing influence that the geopolitical climate has on markets and national economies this summer.