By Hernan Nessi

BUENOS AIRE (Reuters), Argentina’s currency crisis could endanger the Peronist party and the Senate.

Today, the official peso’s value is one cent. It was worth exactly 12 as much as the U.S. Dollar 20 years ago. You can find it on the local black market, which thrives under tight capital controls. It’s now only half as valuable.

November 14th legislative elections could see President Alberto Fernandez’s center-left government lose its grip. It would also likely rock the Peronist coalition that was already weakened by a crushing primary loss.

The woes of an ever more schizophrenic currency, the peso (which trades officially at 100 US dollars, but is actually trading at 200 in alternate markets) are driving voter anger. It has been traded at 200 USD in these alternative markets and it sparks devaluation fears.

Marina Smith (42), a travel agent from Buenos Aires, said that inflation and devaluation have an impact on her daily life. “It happens that I perceive the value of something, and don’t know whether it is costly or affordable.”

The pandemic and the unsettled currency have both had a devastating effect on her career. It has been more difficult for Argentines to visit abroad due to capital controls, taxes, and devaluation.

“When I vote I will take these factors into consideration,” she stated, although she didn’t say who she would vote.

The government of Argentina is trying to combat spiraling inflation at an annual rate above 50%. This is made worse by the fears of currency devaluation, higher real-life prices of goods and traders using more costly informal FX rates.

This rate has recently surpassed the 200 pesos per $1 psychological barrier. It is now twice that of the official rate. This gap was created in 2019 by a Peronist victory, which triggered a crash on the market and led capital controls. Since then it has gotten wider.

(GRAPHIC: Argentina’s peso rates – https://graphics.reuters.com/ARGENTINA-CURRENCY/nmovaxxxgpa/chart.png)

“The problem with the exchange rate gap is that it generates a change in incentives, and also in expectations,” said Isaías Marini, economist at consultancy Econviews.

“Now, we have a difference above 100%,” he said. This gap is expected to lead to a decrease in the value of currencies, which will result in an increase for prices.

Argentina’s Minister of Economy Martín Guzmán has publicly said the government will not allow an abrupt devaluation of the peso, though many traders remain skeptical in a country all too accustomed to wage-sapping inflation that governments through the years have failed to bring under control or even explain.

Jorge Giacobbe, a political analyst and journalist said that “it has an immense influence on the collapse public opinion.” He also cited “galloping inflation.”

“The people will feel the pain in this election, but it is because they fear the worst.”

(GRAPHIC: Argentina: Runaway prices – https://graphics.reuters.com/ARGENTINA-INFLATION/nmovaxelypa/chart.png)

“VOTE WITH THEIR POCKS”

After the September primary elections loss, the government introduced spending measures that boosted growth and put money into the pockets of voters.

Transfers from the Treasury to the central bank have risen, while foreign currency reserves are shrinking. This is made worse by Argentines fleeing to dollars as a perceived safety haven despite high prices and restrictions.

(GRAPHIC: Leaking reserves – https://graphics.reuters.com/ARGENTINA-ECONOMY/CURRENCY/gkplgdxzjvb/chart.png)

Pablo Tufarolo is 38 and the owner of a cell phone repair shop and cellphone sales business in the capital.

He stated, “The truth is that I would love to vote blank” or to annul the vote, and lamented the inability of any government to improve the state of the country.

Tense negotiations are ongoing between the government and International Monetary Fund for a restructuring of $45 billion in debts it cannot repay. Any deal must be approved by Congress.

Raúl Olaciregui, a 57-year-old industrial worker in Buenos Aires province, said that people would “vote with their pockets.” The opposition won the primaries in this populous, traditionally Peronist-friendly province.

Olaciregui stated that for a long period we’ve suffered from so much inflation, devaluation and increased prices. What we make is not enough to get to the end the month.

(GRAPHIC: Argentina’s 100-to-1 peso – https://graphics.reuters.com/ARGENTINA-ELECTION/ECONOMY/gdvzydqxxpw/chart.png)