After the dollar-loving Milei wins the presidency, Argentines anxiously watch the exchange rate

BUENOS AIRES, Argentina (AP) — As soon as Leandro Francisco Diana woke up Tuesday, he reached for his phone like many Argentines on the first business day after the election victory of President-elect Javier Milei.

“I opened my eyes, got my phone and looked for the price of the dollar to see how the country had awakened,” said the 26-year-old Diana, who owns a hardware store with his father in Villa Crespo, a middle-class neighborhood of Buenos Aires.

The exchange rate of the peso with the U.S. dollar has become a widely watched barometer of the nation’s economic health, and is top of mind for millions of Argentines coping with triple-digit inflation. Knowing a further depreciation of the peso will boost the price of consumer goods, they are anxious for signs of what Milei’s victory on Sunday meant for the value of the currency that has tanked against the U.S. dollar in the past year.

Diana, who loves traveling to New York and visited Miami last month, said he had feared he would find on his phone news of a major run on the currency as Argentina emerged from a long weekend. A large depreciation didn’t fully materialize; rather, the dollar’s value in the parallel retail market – popularly known as the “blue dollar” – increased some 13%. He was relieved.

Inflation is running at an annual rate of more than 140%. Uncertainty about prices was rampant this campaign season, with many Argentines stocking up on goods and lining up at gas stations to beat potential post-election price increases. On Tuesday morning, local media were reporting that wholesalers were sharply increasing prices.

Prices are pushed higher by a weaker currency that makes imports more expensive. Milei, an outsider and right-wing populist, has also accused the Central Bank of recklessly printing money in order to fund public spending. Inflation is a chief reason voters elected Milei, who promised drastic measures to curb price hikes including deep public spending cuts and dollarization of the economy.

The morning after his victory, Milei told Radio Mitre that inflation is so entrenched it could take him as much as half his four-year term to fix.

An existing government program forces major supermarket chains to keep prices of certain basic goods roughly one-third below their market value to minimize inflation’s impact on consumers. Still, price increases are common.

On Monday, a national holiday, many clients in one such market stocked up on nonperishables — tuna, water, pasta — in anticipation of a post-election surge, said its manager, Javier, who declined to provide his last name because he was not authorized to speak publicly. The next morning, his market raised prices somewhat for basic goods including milk, butter cheese and pasta.

Milei, a self-described anarcho capitalist, has said he will abolish the Central Bank and has promoted replacing the local currency with the dollar to rein in inflation. He associated his campaign so closely with the idea that supporters at rallies carried giant 100-dollar bills bearing his face.

The government has made access to foreign currency increasingly more stringent, which has caused the parallel market to flourish. While the Central Bank-set price of the dollar is 356 pesos, it is nearly triple that in the main cash exchange, the “blue dollar.”

To obtain that rate, tourists in particular head to the pedestrian Florida street in Buenos Aires, where illegal money changers muttering “Exchange” can be heard every few steps. Officials from the tax agency are scattered along the street, too, but their presence doesn’t serve as much of a deterrent.

Giselle, one illegal vendor, says “Exchange” in several languages to attract potential clients. She voted for Milei and said she is hopeful his dollarization plan will work, even though it would put her out of a job. She sees herself working in health care, perhaps doing patient administration in a hospital.

And she stuffed her freezer with meat before recent price increases, planning for it to last at least through year-end holidays.

“It isn’t exactly full, but there’s a lot in there,” she said, declining to provide her last name because trading foreign currency under the table is illegal. She said she earns a 20% commission on each client she manages to find. “Nowadays, being an employee here in Argentina isn’t really worth it because they pay you so little.”

Among his first statements as president-elect, Milei signaled he will focus first on fixing the numerous distortions plaguing Argentina’s economy, said Maria Castiglioni, director of economist consultancy C&T Asesores Económicos.

Milei has said he wants to implement broad deregulation that would get rid of restrictions on buying foreign currency that hampered foreign trade and led to the proliferation of exchange rates, and unwind price controls. He also said he plans to put the Central Bank’s balance sheet in order and boost its dollar reserves that have been virtually depleted – and then extinguish it.

“It is crucial that the incoming government builds trust to minimize the inflationary impact of all the corrective measures that need to be addressed and implemented in the short term,” Castiglioni said.

Even without a sharp depreciation on Tuesday, Argentines are waiting to see what’s in store for the peso.

Alexi Hoyos, the manager of a butcher shop in a middle-class neighborhood of Buenos Aires, said people already stocked up on beef and are now holding back amid the uncertainty.

Hoyos shared his own prediction: “The increase is for sure coming.”

Diana, the hardware store owner, also expects an increase – at least until Argentina does away with parallel exchange rates and the Central Bank builds up reserves. But he is hopeful things will get better.

“Listening to the radio and looking on the internet, there isn’t any craziness about dollar, dollar, dollar,” he said. “If you don’t see that, it’s an indication of tranquility.”

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AP videojournalist Mauricio Cuevas contributed.