Bloomberg
Published Jul 31, 2019 20:16
Updated Jul 31, 2019 22:48
Argentine Candidate Targets Emerging Markets’ Top Carry Trade
(Bloomberg) -- Argentina’s presidential candidate Roberto Lavagna promised to crack down on the most profitable emerging market carry trade if elected in October.
Lavagna, a former economy minister who is polling third before the Aug. 11 primary vote, said he would limit speculative capital inflows, even if that requires forcing foreign investors to deposit at the central bank $30 of each $100 they bring into the country. He established the same rule when he was a minister for ex-President Nestor Kirchner. He said he wouldn’t limit capital outflows, though.
The comments come as investors pile on the carry trade -- buying Argentine peso-denominated bonds with borrowed dollars -- to take advantage of benchmark rates of around 60% and a stable peso ahead of elections. Argentina’s carry trade has been the most profitable in emerging markets in 2019, returning 13% in dollar terms so far this year. Lavagna also criticized President Mauricio Macri for artificially maintaining a stable peso.
“The carry trade dominates the Argentine market,” Lavagna, 77, said in the headquarters of his consulting firm overlooking Buenos Aires’ iconic 9 de Julio Avenue. “We want the least possible intervention in the foreign exchange market -- in the past, measures were applied when necessary, when speculative capital flew in.”
Read More: Man Who Ushered in Argentina’s Last Boom Eyes Presidency
Lavagna is polling in third place, behind opposition candidate Alberto Fernandez and Macri. The election is increasingly polarized, with almost 80% of the electorate split between the top two contenders. Lavagna, who said dropping out of the race before the October vote is out of the question, declined to discuss his expectations for the Aug. 11 primary.
Here are other comments from Lavagna:
Written By: Bloomberg
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