When the oppressive heat in Buenos Aires becomes just too much to bear at the height of the austral summer, those who can afford it prefer to jet off to cooler climes to see in the New Year.
But some may have been forced to rethink their holiday plans after the Argentine government moved to stem an alarming decline of foreign currency reserves by bumping up the price at which it sells dollars to Argentines travelling abroad, in what amounts to a stealth devaluation. Read more
Dollars in Latin America may be the currency that many people think in, but only Ecuador and Panama have them as legal tender. That said, in some countries, some items are priced, and can be paid for, in greenbacks and you can even draw them out of ATMs.
Dollars are an especially sensitive subject in Argentina, where foreign exchange controls are rigid and the black market rate has soared to twice the official rate.
So here’s one provocative idea: ditch the peso in Argentine entirely. Dollarise. Read more
It’s been a tough 24 hours for the people who run the Argentine economy.
A day after President Cristina Fernández de Kirchner promised that there would be no devaluation of the peso under her administration, everything seemed to go sideways.
First, the black market dollar – known as the “blue” dollar – broke through the Messi barrier. Read more
Watching Argentina’s unofficial exchange rate is suddenly like being at an auction: on Wednesday it has risen breathlessly, hitting 8.75 pesos per dollar. Yesterday it was 8.27 pesos, Monday it was 8.08. And breaching the 8-peso barrier was a milestone in itself. What’s going on? Read more
Argentina has a problem: people save too much.
That, at least, is how the national stock market regulatory body sees things. Argentina is awash with pesos – some 380bn in bank deposits, for example – yet only 8 per cent of even the most educated social classes has ever invested in a market instrument. Read more
Wiping 20 per cent off the value of the Argentine currency this year “isn’t off the wall”. So says Guillermo Moreno, the internal trade secretary and one of the tough guys in the government of Cristina Fernández.
What is this – rare honesty from an administration that denies the country has a problem with inflation? Read more
Argentines continue sprinting away from their peso as if it were slathered with avian flu virus. After hitting a record high yesterday, the black market (or “blue”) dollar in Argentina hit another high on Thursday, of 7.54 pesos to the dollar, the local daily La Nación reported. Read more
Here’s a timely reminder that Argentina’s problems go far beyond its legal wrangling with its “holdout” creditors.
Wednesday saw another day of intense trading in the unofficial dollar market as Argentines fled from the peso to the US dollar. The black market, or “blue” rate, hit a record high of 7.52 pesos per dollar. That is 52 per cent more than the government’s official rate of around 4.96 pesos per dollar. Read more
For Felipe, an Argentine freelancer who works in the media, opening a bank account recently meant catching the ferry across the River Plate to Uruguay.
“I’m losing 40 per cent of my salary just because of the exchange rate,” he says. “That could pay a month’s quota at my daughter’s school or a small mortgage.” Read more
It was nice while it lasted.
Like a harried engineer using his fingers to patch a leaky dyke, on Thursday the Argentine government announced yet another currency restriction aimed at stopping the bleed of foreign currency from its central bank.
This time the target was overseas credit card purchases, which up until now were not limited. Read more
The Argentine government has come up with another rule designed to clamp down on dollar holdings: mutual funds are now being obliged to value their foreign investments at the official exchange rate.
Is this another example of Argentina shooting itself in the foot? Read more
In an interview with Radio Continental on Friday, Argentine central bank president Mercedes Marcó del Pont confirmed news reports that the government was considering means to stop guarantees in the country’s futures markets from being written in dollars or other foreign currencies. Read more
Argentina’s clampdown on foreign currency purchases has claimed another victim: peso-denominated bonds. Argentina’s inflation-linked peso bonds have lost an average of 15 per cent so far this year, reports Bloomberg, quoting data compiled by Barclays.
On the surface, the bonds certainly look attractive. The inflation-linked Argentine bonds due in 2033 yield 14.3 per cent plus the official annual inflation rate, according to Bloomberg. But that plus is the problem. The annual inflation rate as reported by INDEC, the national statistics agency, sits at 9.9 per cent. But many private economists say that INDEC has woefully underreported inflation since the Argentine government intervened in INDEC in 2007, and that the current annual rate is closer to 25 per cent. Read more
The Argentine government formally announced on Thursday that its citizens will no longer be able to convert their savings from pesos to dollars, something many Argentines do to hedge against inflation and devaluation.
Driving the point home in an interview published Friday in the pro-government newspaper Pagina/12, Argentine central bank president Mercedes Marcó del Pont noted that the exchange restrictions also applied to real estate buyers purchasing dollar-denominated properties. “People doing these transactions will have to make the payments in pesos,” she said. Read more
Argentines have lately been dusting down a tried and tested shopping experience: “deme dos” – or “I’ll take two of those”.
Over the years, whenever things are perceived to be expensive, or hard to get at home, smart Argentines who can buy goods abroad have tried to do so – and while they’re at it, they like to stock up. I’ll take two, thank you.
They’re at it again. Only this time, Argentines are using their credit cards aboard to get around the government’s restrictions on dollar buying. Read more
Another day, another dollar restriction. As Argentines found the tax agency was now blocking them from buying dollars to save, banks are also reportedly facing a clampdown.
According to this report in El Cronista Comercial, a business daily critical of the government, the central bank has also clamped down on banks buying dollar-denominated bonds and paying for them abroad. Read more
Clamping down on imports, as Argentina has done, is one way of trying to spur domestic production. But introducing regulations that then make life tough for exporters looks bizarre, if not suicidal – especially when you’re trying to grow your way out of an economic downturn.
Here is a case in point: Argentine wine has a great reputation for quality and affordability – indeed, in April wine promoters staged a major worldwide celebration of its flagship varietal Malbec. Read more
Argentina’s attempt to duck a scary subject by trying to introduce an important legal reform in a hush-hush way, seems not to have worked out too well.
The subject is pesification – a word guaranteed to send shivers down the spines of Argentines who remember all too well how their decade-long dollar peg was ditched after the country’s $100bn default in 2001, forcing a return to pesos amid a brutal devaluation. Read more
Odd but true: Argentina’s unofficial dollar market moves more cash per day than the stock market.
With a history of recurring financial crises, Argentines have a well worn routine: seek refuge in the dollar. It’s particularly true if the dollar is perceived to be cheap, or if there is any political uncertainty.
So with foreign exchange controls in place since last year seeking to stem the outflow of dollars, it’s no surprise that the parallel dollar market is busy – even if buying dollars on the street costs some 4.93 pesos per dollar, some 12 per cent more than the official 4.4 rate. Read more
Foreign exchange controls in Argentina may have made it harder for people to get their hands on dollars, but has far from dampened their desire to do so.
Look at what is known in English as the blue chip swap (BCS) rate (the Spanish name is contado con liquidación or just contado con liqui) - a mechanism whereby assets are bought in Argentina in pesos and sold abroad in dollars. It’s a legal way of getting dollars out of the country – something the government is desperate to avoid. Read more