Argentina Market Fall May Hurt IDB

As the Argentinian peso drops and stock market implodes amid political developments, Israel's largest conglomerate might find itself a casualty

Presidential candidate Alberto Fernandez speaks during the primary elections, at a cultural center in Buenos Aires, Argentina, August 11, 2019.
\ Agustin Marcarian/ REUTERS

Israel’s largest conglomerate, the IDB Group, may be caught up in Argentina’s market collapse.

The country’s stock exchange imploded by a full 48% on Monday, following a landslide victory won by an opposition candidate in a primary election. IDB is controlled by Argentine businessman Eduardo Elsztain via IRSA, an Argentinian company, which saw its share price lose 38% of its value as well.

Argentinian opposition candidate Alberto Fernandez scored a landslide victory in a primary election, dealing a severe blow to President Mauricio Macri’s chances of re-election, and the shock spilled over into a financial blow: The Argentine peso dropped 17% on Monday, and the country’s stock exchange imploded by a full 48%. This was the largest single-day drop seen on a stock exchange since 1950, aside from Sri Lanka’s 1989 collapse. These are signs of a deep financial crisis in Argentina. Market experts say it stems from financial errors in government policy.

Elsztain declined to address the developments. “Argentina has a history of volatility,” a representative said. “Elsztain’s business portfolio is well diversified. The massive depreciation of the peso should advance agriculture very much.” IRSA controls a major agriculture company, the representative said.

IDB owes 1.2 billion shekels to its series B9 bondholders, who are deliberating whether to ask a court to declare the company insolvent.

In the primary poll, Fernandez, running with former president Cristina Kirchner as his candidate for vice president, received 48% of the vote, compared to 32% for Macri, a sign that Fernandez could be elected president in the first round of voting on October 27.

Kirchner and Fernandez are part of the Peronist movement, which takes populist economic stances. Kirchner is also facing charges on 11 counts of corruption, and her government was accused of economic misdeeds, including allegedly hiding statistics showing the country was facing an inflation rate of 40%. Argentina’s peso and dollar-denominated bonds dropped again on Tuesday as market turmoil spilled into a second day.

With reporting by Snelly Appelberg, Michael Rochvarger and Reuters