Between Aug. 12 and Aug. 13, Argentines withdrew over $700 million from their bank accounts, or 2.3% of total dollar deposits in the financial system, Bloomberg reported, reflecting fears of a run against financial institutions.
Following primary elections, which showed a wider than expected lead by Peronist opposition candidate Alberto Fernández, Argentines rushed to bank cashiers in the midst of a selloff that saw local assets tank. A repeat performance in the October presidential elections would see the Peronists retaking power in 2020.
The sudden withdrawal of funds can be partially explained by the precedent of the 2001 liquidity crisis, which led to the so-called 'corralito,' when the government restricted and then ceased dollar withdrawals, in an attempt to withstand a widespread run on banks. In early 2002, dollar deposits were converted to pesos at a disadvantageous rate.
Bloomberg reported it was the largest two-day withdrawal in more than five years, with an immediate effect on reserves kept by Banco Central de la República Argentina.
Foreign reserves held by the regulator fell to $63.7 billion on Aug. 15, down from $66.3 billion reported Aug. 9, before the primary elections took place.
BCRA's interventions in the exchange market also explain the fall in reserves, as policymakers have sought to prop up a falling peso. Despite the sale of over $503 million during the week by the central bank to contain the local currency, the peso lost 23.7% of its value against the dollar.