The government of Alberto Fernández in Argentina announced an increase in the official exchange rate to 350 Argentine pesos per dollar, which represents a 22% devaluation, and an increase in the interest rate of Central Bank of the Argentine Republic (BCRA) of 21 basis points, up to 118%. These are urgent measures that try to contain the effect of the surprise triumph of the libertarian deputy javier milei in yesterday’s PASO elections.
On this side of the Río de La Plata, the elections were followed with expectation. The Argentine economic situation had a strong impact on consumption and collection so far this year and considerably affected the numbers for the tourismgenerating a deficit in that sector of 205 million dollars only between April and June.
He Central Bank of Uruguay (BCU), he Ministry of Economy and Finance (MEF)and the Advisory Fiscal Council (CFA) not only do they periodically monitor the situation in the neighboring country, but they have been categorical: the economic delirium in Argentina represent one of the greatest risks faced by Uruguay in the short and medium term.
However, the current scenario with javier milei establishing itself as the first force in the Mandatory and Simultaneous Open Primaries (PASO) yesterday, and the economic response of the Peronist government -whose space was third- and the reactive reaction of the market were not among the main lines of analysis.
What measures did the Argentine government announce after the triumph of Javier Milei?
The Central Bank of Argentina raised the official exchange rate to 350 Argentine pesos until the general elections on October 22. The monetary entity thus devalued the official currency by 22%.
The retail dollar in the National Bank It was at a sale price of 365.54 Argentine pesos. At the same time, the quote equates the official dollar to the so-called “agro dollar” that was arranged weeks ago to encourage exports.
He MEP dollarused by Uruguayans traveling to Argentina and choose to use their international credit cards and some electronic wallets, is located after the announcement at 619.66 Argentine pesos per dollar.
At the same time, the Argentine monetary authority also raised the reference interest rate by 21 percentage points, taking it to 118% in order to absorb pesos in the market.
In the informal market, meanwhile, the Dolar blue it broke a new all-time high, trading at 670 Argentine pesos for sale. This means that for every 100 dollars that a Uruguayan exchanges in a “cave”, he will receive 67,000 Argentine pesos.
What will be the impact of the Argentine measures on the Uruguayan economy?
The new official exchange rate in Argentina will further increase the price gap between the two countries. Although historically this measurement is based on the blue dollar, with the provision of the BCRA the difference in the real exchange rate increases.
It should be remembered that in June, according to data from the BCU, the difference in the real exchange rate with Argentina was 55%, considering the price of the Dolar blue.
In the current scenario, Uruguay will face a complex panorama at the economic level, of deepening of different variables that already impact the activity of the country and the State accounts. Above all, in terms of tourism and domestic consumption, which is increasingly carried out on the other side of the border; and the drop in tax collection, which puts the government in a financial bind in the last stage of management prior to the elections.
This year, according to data from Exante, a domestic consumption growth 3% for this year. However, of this total, half (1.5%) will be carried out in Argentina. This translates not only into the drop in sales of local businesses —especially those in the coastal departments— and the immediate effect on employment; but also in a lower collection due to the drop in economic activity, which already fell by 2.2% in June, mainly as a result of VAT and imesi to fueland 0.6% during the first semester.
Next long weekend in Uruguaythat of Friday the 25th of this month, will serve to once again measure the impact of the exchange difference with Argentina. In previous long weekends, the lines to cross the borders and do food tourism in the neighboring country reached several kilometers.
The upcoming September holidays, as happened with the winter holidays, also show the postcard of an outbound tourism highly concentrated in taking advantage of the exchange difference in destinations of Argentina.
Source: Ambito
