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Argentina expects “flood of dollars” and lower rates by next March

Tuesday, February 2nd 2010 - 12:51 UTC
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The report published Sunday was attributed to Economy minister Amado Boudou The report published Sunday was attributed to Economy minister Amado Boudou

Argentina's currency may weaken against the US dollar in the next few weeks, but by March there will be a “flood of dollars” into the local economy, Economy Minister Amado Boudou was quoted in an interview in the Sunday edition of La Nacion.

An excellent harvest at reasonable international prices and access to voluntary money markets, (once the pending debts problems are solved) should be decisive for such a scenario.

The government is prepared to let the currency slide as far as 3.95 Argentine pesos per dollar, the average figure used in the 2010 budget, from the current 3.83, according to the report in the Buenos Aires newspaper.

A weaker peso improves the country's fiscal accounts without any effort, the report said.

Once the government completes its highly anticipated debt swap and revenues from the harvest of agricultural products start to flow in, the trend will reverse and there will be pressure on the currency to appreciate, according to the report.

The government is preparing to launch this month an offer to swap up to 20 billion US dollars in face value of defaulted bonds which weren't included in a 2005 swap. The ministry is talking to holders of those debts and is filing documents with the US Securities and Exchange Commission.

The report said the minister expects the country's interest rate to fall after the debt swap is completed and that will allow the government and the private sector to borrow more.

The government's main goals are to win over investors and, second, to defend in Congress the use of central bank reserves to be able to pay down government debts, according to the report.

The minister expressed a third goal, which is to ensure that inflation doesn't take off.

The government will work “very hard so that there is monitoring and so that the prices don't get out of hand” Boudou said.

Categories: Economy, Argentina.

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