Argentina’s Currency Plummets Under Attack from Far-Right Candidate

Javier Milei is still just a candidate to be president of Argentina. But he is already single-handedly delivering one of Latin America’s biggest economies a financial shock.

The value of Argentina’s currency is plummeting under criticism by Mr. Milei, a hard-right libertarian who has become the leading presidential candidate by promising to replace the Argentine peso with the U.S. dollar.

On Monday, Mr. Milei continued his attacks on the peso by discouraging Argentines from holding any investments in the currency. “The peso is the currency issued by the Argentine politician and therefore is worth less than excrement,” he said on a popular radio show. “That trash is not even good as manure.”

The peso’s unofficial rate, which reflects the market’s valuation of the currency and drives prices in Argentina, fell 7 percent on Monday and then another 10 percent by Tuesday afternoon.

At that unofficial rate, $1 bought 1,035 pesos as of Tuesday afternoon, the first time the peso had crossed the 1,000 mark against the dollar. Before Mr. Milei won a primary election on Aug. 14, $1 bought 660 pesos. In April 2020, at the start of the pandemic, the figure was 80 pesos.

The escalating crisis prompted Argentina’s Central Bank, which Mr. Milei has promised to shutter, to issue an extraordinary statement on Monday afternoon that “Argentina maintains a liquid and solvent financial system” and that it backs Argentine bank deposits.

On Tuesday, the nation’s largest banking associations urged candidates “to show responsibility in their campaigns and public declarations.”

Mr. Milei, an eccentric economist who wants to upend the country’s government and financial system, is the front-runner in Argentina’s presidential election on Oct. 22, though the race, polls suggest, could still go to a November runoff.

His ascent has dominated the national conversation and accelerated the peso’s decline.

The morning after Mr. Milei surprised the nation by finishing first in presidential primaries in August, market pressures forced the government to devalue the peso by 20 percent.

Mr. Milei’s comments are causing “a spike in inflation or an eventual banking problem, which is what he is encouraging,” said Marina Dal Poggetto, an Argentine economist and former analyst at Argentina’s Central Bank. “What you are seeing is the beginning of a run that may or may not stop. We have to see what happens on October 22. Milei still hasn’t won.”

Mr. Milei has embraced comparisons to Donald J. Trump and Jair Bolsonaro, Brazil’s former far-right president, and has made headlines for his denials of the role of humans in climate change, his harsh criticisms of the pope and his aims to ban abortion and legalize sales of human organs.

But the centerpiece of his campaign has been his sometimes professorial lectures on economic policy designed to persuade voters that he alone can fix Argentina’s soaring inflation.

The country is in the midst of one of its worst financial crises in decades, with annual inflation now topping 120 percent and prices at many stores and restaurants changing weekly, if not faster.

With prices racing so high, Argentines now must travel around with large wads of cash, which is worth less and less each day. The Argentine government issued a 2,000-peso bank note this year, but already it is worth less than $2.

To buy big-ticket items, such as property or cars, Argentines pay with $100 U.S. bills. To get those bills, Argentines often have to buy from illegal currency exchangers who stand in downtown Buenos Aires offering dollars like drug dealers, because the federal government, short on dollars, has put strict limits on how many dollars people can buy a week.

Sergio Massa, Argentina’s finance minister and Mr. Milei’s principal opponent, accused Mr. Milei on Monday of deliberately trying to destabilize Argentina’s currency to wreak havoc ahead of the vote. “In order to gain one more vote, he is gouging people’s savings,” said Mr. Massa, a center-left politician from the party that has led the country for 16 of the past 20 years.

Patricia Bullrich, a center-right presidential candidate, blamed both Mr. Milei and the current government in an interview during a campaign stop on Tuesday. She said the government was trying to lower taxes without cutting spending, while Mr. Milei was “throwing gas on the fire.” She added, “It’s unconscionable.”

On Tuesday, Mr. Milei responded to the criticism that his comments were worsening the economic crisis by posting online a video compilation of him comparing the peso to excrement over years of television punditry. “It is shameful the spectacle that politicians are putting on trying to gain political capital out of the economic disaster by inventing who is responsible,” he said. “If you want to find those responsible, look in the mirror, you shameless people.”

At an event with business leaders last week, Mr. Milei said that the lower the value of the peso, the easier it would be to dollarize Argentina.

If elected president, Mr. Milei is likely to face major challenges in accomplishing his proposals. Mr. Milei has said that he will likely need a $40 billion infusion of dollars to switch Argentina’s official currency, though it is unclear he would get that much money. Argentina is already struggling to pay its $44 billion debt to the International Monetary Fund.

Mr. Milei has also said that Argentina’s Congress would have to approve many of his proposals, which include deep cuts to government spending, the elimination of many taxes and privatizing all of the nation’s state companies.

His nascent Liberty Advances political party would likely control a small share of the seats in Congress, forcing him to forge alliances with other parties that he has labeled criminal.

Argentina has struggled with high inflation for decades, including a bout of hyperinflation in the 1980s when customers were rushing to buy items before clerks wielding price guns could make another round of increases. But spiking prices, driven by the weak currency, have roared back over the past two years.

Some of Argentina’s problems have been driven by global economic factors, like the pandemic and the Ukraine war, but much of it, economists say, is because the government has overspent to pay for free or deeply subsidized universities, health care, energy and public transportation. To finance all that, Argentina has often printed more pesos.

The result has been an increasing lack of confidence in the currency, which has forced the government to create more than a dozen separate exchange rates for the peso, because its own official rate no longer reflects the market’s valuation.

The new rates include one for tourists, one for soybean exporters and one for Argentines who were traveling to Qatar to watch their national football team win the 2022 World Cup. The so-called Blue Dollar is the most important parallel rate — set by a small group of financial companies and listed live on television news programs — and is how most Argentines transfer their pesos to dollars on the underground market.

On Tuesday, seeking to assuage some market fears, the government consolidated several of those rates into a new rate that at least one accountant called the Election Dollar.

Natalie Alcoba and Lucía Cholakian Herrera contributed reporting from Buenos Aires.