The week in emerging markets, including our most read, five things we have learned and some long reads for the weekend. Plus the week in a chart: the Argentine peso Read more
Did the Argentine peso’s 10 per cent tumble on Thursday bring it closer to the country’s black market exchange rate? Surely a devaluation of that magnitude would help nudge the official peso rate closer to the black market reality?
Perhaps not. As the following charts show, the official rate is still well off the black market rate – known as the “blue dollar” rate, suggesting further pressure on the official peso to depreciate. Read more
Suddenly, it feels like 1997 all over again. The biggest one-day swoon of Argentina’s peso on Thursday was more than a little reminiscent of the day 16 years ago when the Thai baht was driven into free fall, triggering a wave of contagion through Asia, writes James Kynge.
However, economists said that such similarities only go so far. While there are clear vulnerabilities or evidence of economic mismanagement in several emerging markets, including Venezuela, Ukraine, Turkey and South Africa, the frailties that Argentina succumbed to are not broadly representative. Read more
There is no relief in sight for the Argentine peso, which on Friday continued its dizzying descent against the dollar in the black market.
The peso fell another 1.9 per cent to hit a new record low of 11.63 pesos per dollar in the black market, according to Argentine daily La Nacion. Read more
Here’s a question to wow them with at the next pub quiz: what’s the best-performing EM currency over the past six weeks?
Answer – probably, Argentina’s “blue” peso – if you were to look at the widely-watched black-market dollar rate from the other way around. Argentina’s blue rate is the name for the illegal exchange rate that is widely-followed now that Argentina’s official peso has become a virtually unconvertible currency. 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
When it comes to saving options in Argentina, it’s not so much a case of “all that glisters is not gold” but, perhaps, “the only thing that glisters is gold”.
Let’s face it, saving is hard with galloping inflation and an outright government ban on buying dollars specifically to save. Buying dollars for any other purpose is hardly much easier, and who would want to save in pesos when their value is on the skids? Read more
Argentina has an impressive ability, it seems, to bite the hand that feeds it: farming.
It’s an impression reinforced by Rabobank’s latest Argentine agribusiness outlook. Argentina’s farming sector, which makes up nearly 60 per cent of total exports ($47bn in 2012, and that was a bad year because of drought), is a key economic breadwinner, bringing home the dollars that are essential to an economically choppy country still with debt in default and cut off from international capital markets. 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
Another Argentine expropriation. Another which the government confidently expects “won’t cost the state a penny”.
After Cristina Fernández’s government took over energy company YPF in April (Congress approved the expropriation of 51 per cent of the company in early May), for reasons of national interest (and for which it hopes not to have to pay anything), now it is the turn of banknote-printing firm, Compañía de Valores Sudamericana (CVS). 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
- The problem with high inflation is that you need to print more banknotes.
A lot of them. And quickly.
This issue hung over Argentine President Cristina Fernández de Kirchner’s triumphant Wednesday unveiling of a new design for the country’s 100 peso banknotes, featuring the profile of former First Lady and fictionalized Broadway mainstay Eva Perón, commonly known as Evita. 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