Case Karina Milei: Argentina announces currency intervention

The Treasury of Argentina stated that it will intervene in the foreign exchange market as the country’s assets sink amid a series of political and economic setbacks for Argentine President Javier Milei, ahead of a crucial vote this Sunday (7).
The decision is a turnaround for the government, which had repeatedly celebrated the peso floating freely within established bands, and continues the government’s efforts to stabilize the exchange rate.
Authorities have significantly increased interest rates for rolling over more public debt, repeatedly raised reserve requirements, and increased exchange restrictions on banks.
The Secretary of Finance, Pablo Quirno, posted on his X account (formerly Twitter) on Tuesday that the Treasury will act in the foreign exchange market to contribute to its ‘liquidity and normal operation’.
Sovereign bonds plunged, with bonds maturing in 2035 falling by $0.016, trading at the lowest level since April, according to indicative price data compiled by Bloomberg.
The currency dropped 1.6%, reducing previous losses of up to 2.8% compared to Friday’s (28) close, as trading resumed strongly after the US holiday on Monday (1) drained liquidity.
The government has struggled to ease pressure on the currency while facing corruption allegations ahead of the election in the province of Buenos Aires set for Sunday (7).
Audios attributed to Diego Spagnuolo, then director of Andis (National Agency for People with Disabilities), indicate that the president’s sister, Karina, would benefit from the alleged kickback scheme along with her closest advisor, Eduardo Lule Menem.
Karina allegedly charged 3% of the kickback paid by Drogaria Suizo Argentina – the company responsible for distributing drugs. Spagnuolo, who was Milei’s personal lawyer and close to the president, was fired from the agency.
On Monday, a federal judge in Argentina prohibited media from publishing recordings made inside the Casa Rosada.
The disclosure of the allegations ‘is an example of investors’ lack of confidence even after just over 18 months of Milei’s presidency’, evaluated Walter Stoeppelwerth, Chief Investment Officer at local brokerage Grit Capital Group, in a report on Tuesday.
‘Most investors see this electoral cycle as a referendum on President Milei’s performance in the first two years of his term,’ he noted.
Another setback for Milei’s administration came from the election in the province of Corrientes last Sunday (31), in which the government-backed candidate finished fourth. The underwhelming performance confirmed fears that the president’s strategy of competing in local elections without forming alliances has the potential to fail.
Now, attention turns to the vote on Sunday in the province of Buenos Aires, which represents nearly 40% of the country’s population and has consistently voted for the opposition Peronist movement. Investors see it as a key signal of what is to come in October when all of Argentina goes to the polls to renew a large part of Congress.
Strategists at Morgan Stanley view the elections as ‘a short-term hurdle for the economy, reforms, and the market,’ but still see attractive valuations, as the ongoing momentum of reforms does not appear to be priced in.