Argentina’s informal blue dollar exchange rate rose by 20 pesos to AR$1,300 on Friday after the Senate approved public spending measures that the government claimed would endanger the fiscal surplus.

The rate is at its highest since the government partially exited currency controls known as the “cepo” (clamp) in April.

Argentina’s shares and bonds tumbled on the news.

On Thursday, the Senate passed bills increasing pensions, as well as funding for people with disabilities. The Upper House also voted to redistribute national resources to provinces. The previous day, TV host Alejandro Fantino said he had spoken with Economy Minister Luis Caputo and that Argentina was in for three “very rough” months if those initiatives were passed.

“The exchange rate will pass the upper limit of the band, country risk will rise, media outlets will run catastrophic headlines,” Fantino said.

Milei said he would veto all the initiatives passed in Thursday’s session.

Analysts said that Congress’s approval of these public spending increases made market participants fear that inflation and the dollar could tick up again after a period of calm.  Milei claims that the fiscal surplus, obtained through severe public sector cuts, is the “anchor” of his economic plan. Some governors have objected that they have been forced to take on tasks such as public works at provincial level after they were abandoned by the national government.

The S&P Merval and bonds also plunged after the government’s defeat in Congress. The shares that suffered the most in the domestic market were gas company Transportadora de Gas del Sur (-5.8%), followed by banks BBVA (-5.2%) and Grupo Supervielle (-4.3%).

The same three companies led the losses  on Wall Street, where American Depositary Receipts (ADRs) of Argentine companies fell by up to 6%. 

Argentina’s dollar-nominated bonds also plunged, with decreases of up to 1.4%, led by the Global GD41. The Global GD30 and the Bonar AL30 fell 1.1% and 1%, respectively.

Independent financial analyst Gustavo Ber told the Herald that the “noise generated by opposition bills” means that “the evolution of domestic assets continues to be conditioned mainly by the wait for a clearer political scenario” — that is, October’s mid-term elections.