President Cristina Fernandez called an urgent meeting on Wednesday evening of her economic team following a day of hectic trading in the currency exchange market which had the US dollar climb to 8.75 Pesos in the parallel market, expanding the gap with the official rate to almost 70%.
Attending the meeting were Economy minister Hernan Lorenzino, Deputy Minister, Axel Kicillof and the president of the Central bank Mercedes Marcó del Pont.
The 8.75 Pesos to the dollar of Wednesday represented a 10% increase in the value of the US currency in the parallel market and is attributed to the decision by the Tax revenue office, Afip to increase to 20% (from 15%) the extraordinary levy on travel, tickets and shopping overseas.
The previous week according to Buenos Aires City currency traders the Central bank would intervene at certain points to steer the value of the dollar avoiding peaks in the parallel market, however this week the bank has been absent.
Since the beginning of the year the US dollar in Argentina in the so called marginal market has soared 29% and the Central bank has lost over 2.2 billion dollars in international reserves which now stand at 41.1 billion dollars.
The current policy called the ‘dollar clamp’ and first implemented over two years ago is geared to ensure the Treasury and the central bank sufficient dollars since Argentina still has no access to the global voluntary money market because of its pending litigations with bondholders from the 2001/02 massive default.
For that reason it must work on its two surpluses: trade and budget. Policy to implement the first is well known by the complaints from trade partners. The second is out of control with a huge deficit that keeps fuelling inflation forcing savers to look for refuge in other strong currencies.
This week’s 20% levy on purchases overseas follows the first one of 15% first applied by the government of Cristina Fernandez on 3 September 2012. At the time the official dollar rate was 4.65 Pesos and the ‘tourist dollar’ the climbed to 5.34 Pesos with a gap of 19% with the parallel market that was then trading in the range of 6.37 Pesos for the greenback.