At Boedo Automotive in Argentina’s capital, rows of shiny new cars are for sale. But two days after the overwhelming primary election thumping for conservative President Mauricio Macri sent the Argentine peso into a tailspin, not a single customer walked through the door Tuesday.
Carlos Avoguadra, the shop’s owner, sat behind his desk, ill at ease.
“We woke up on Monday with serious problems, with a skyrocketing exchange rate,” said Avoguadra, a 70-year-old who has been selling cars for more than half his life. “I’ve been through a lot of difficult times, but never like this.”
He is just one of many small-business entrepreneurs voicing uncertainty after voters handed a resounding victory to a left-leaning, populist ticket whose vice presidential candidate is former President Cristina Fernández. She was widely known for butting heads with investors during her 12 years in the presidential palace, both as president and as first lady for her predecessor and late husband, Nestor Kirchner.
Official results gave her slate, headed by Alberto Fernández as the presidential candidate, about 48% of the votes in primary voting that featured 10 parties with presidential nominees. Macri and his running mate, Miguel Ángel Pichetto, got 32%, suggesting the incumbent’s team faces a steep uphill battle going into the Oct. 27 general elections.
The powerful showing by the Fernándezes, who are not related, sent a shiver through the markets of this South American country, where investors tremble at the thought of the high spending, trade restrictions and state interventionist policies implemented during Cristina Fernández’s presidency.
On Tuesday, the currency was trading at about 58 pesos to the dollar, or about 25% weaker than its Friday close. The devaluation was accompanied by a 38% drop in the Merval stock index and is expected to lead analysts to drastically revise the 2019 inflation outlook of 40% further upward. Last year, inflation reached 47.6%, which was the highest since 1991.
As markets respond to the political turn, many small business owners already battered by the long-running economic struggles under both Fernández and Macri are again feeling bewildered and fearful.
Avoguadra, who has been working in the automotive sector for some 40 years, said he was about to finalize a sale that totaled 1 million pesos, or the equivalent of about $20,000 last week. When the peso slumped following the primaries, however, the wholesale dealership he buys from wanted to raise the cost of the car, and the deal fell through.
Avoguadra now contemplates shuttering his business completely amid months of declining returns.
“The idea is maybe to close the shop,” he said melancholically. “Or dedicate myself to something else.”
Matías Carugati, head of Economics at Management & Fit, told The Associated Press that costs tied to the dollar rose by a quarter in the first two days of the week, leading many to hold off on sales until exchange rates settle and uncertainty eases.
“The Argentine businessman is a survivor and is used to going on the defensive,” Carugati said.
So many are once again relying on their smarts.
Alejandro Nigro, owner of a pasta sales business, told AP that he is waiting for his wholesale flour provider to let him know about new prices.
“With what just happened, at some point I’ll hear about the price increase. Flour is always bought according to its international price in dollars,” he said.
“When things go crazy, you have to hold on, wait, keep prices as reasonable as you can, reduce (profit) margins,” Nigro said. “And when you can’t withstand it anymore, you have to raise the price. Unfortunately, that’s the way it is.”
Associated Press journalists Jésica Brumec and Paul Byrne contributed to this report.