New York (CNN Business)A surprise result in Argentina's primary election sent the country's currency and stocks plunging Monday, with investors fearing that populists could replace the country's current, business-friendly government.
The Argentina peso fell 15.3% against the dollar. Two exchange-traded funds that track Argentina's stocks fell more than 20%.
Alberto Fernández won more than 47% of the vote in Sunday's primary, a major upset that suggests he's highly likely to win the October 27th election against incumbent Mauricio Macri, who received less than 33%. Fernandez's running mate is his left-wing Cristina Fernandez de Kirchner, who was Argentina's president before Macri.
The primary vote essentially functions as a national poll ahead of the election.
Benjamin Gedan, director of the Argentina Project at the Wilson Center called the short term reaction from the markets "absolutely brutal."
Argentina's economy is in a deep recession, with an unemployment rate of 9.5% according to the World Bank, and inflation at 55.8%. Investors are concerned a populist government could default on the country's sovereign debt. Macri had introduced widespread austerity measures, including raising taxes and cutting fuel subsidies, in order to cut government costs after he was forced to seek a $50 billion bailout package from the IMF last year. Those moves appear to have backfired with the public.
UBS said in a note it expect sa Fernández government would seek to renegotiate the IMF agreement, stop paying interest on some short term government debt and reintroduce capital controls. Fernandez is considered more moderate then Kirchner, who nationalized the country's major energy company while she was in office.
Gedan said Argentina's history of swinging between governments with radically different approaches to business is its "Achilles heel."
"There's absolutely no consistency in its approach to the private sector and to private investment," he told CNN International's Paula Newton.
-- Flora Charner contributed to this report
