For a third consecutive day the ‘blue’ dollar which trades in Argentina’s informal market established a new record and after having brushed 10 Pesos in earlier trading finally closed Friday at 9.84 (buying price) and 9.88 (selling price) Pesos.
This means the price of the greenback in Argentina’s informal market, as people flock to get rid of their local currency, has soared 44 cents in a week and the gap with the ‘official’ rate which ended trading on Friday at 5.20 Pesos selling price, has reached 90%.
“There are plenty of buyers, but people wanting to sell dollars are scarcer and scarcer. Nobody wants to get rid of the dollars in Argentina, not even tourists”, said Buenos Aires city financial quarter money traders.
“Despite the rain we’re literally flooded with demands for dollars and we have been forced to work on weekends. Because of inflation, people collect their salaries and rush to turn them into foreign currency”, added the money traders.
“The blue keeps increasing because it’s the lifesaver for those wanting to get out of Pesos” said Javier Gonzalez Fraga, a former president from the Argentine Central bank.
With the latest advance, the ‘blue’ dollar in Argentina has ballooned 44.49% since the beginning of the year, while the official rate has only increased 5.5%. The rush on the dollar is reflected in the Central bank’s international reserves which lost 911 million last month and now stand at 39.535 billion, which is the lowest in six years.
The situation called for an urgent meeting at midday convened by President Cristina Fernandez and the cabinet chief Juan Manuel Abal Medina together with Economy minister Hernan Lorenzino, Deputy minister Axel Kicillof, Domestic Trade Secretary Guillermo Moreno, the president of the Central bank, Mercedes Marcó del Pont and the head of the tax revenue office Ricardo Echegaray.
Ms Marcó del Pont who was scheduled to open a central bank conference on the international crisis had to suspend her attendance and rush to Government House.
People fear the Argentine government might decide to create a two tier system with weekly or daily auctions of dollars, similar to what has been implanted in Venezuela, which also bans the holding or hoarding of US dollars.
“The government of President Cristina Fernandez has put itself into a trap, at some point it will have to do something: the mismatch between the two markets in untenable. Two more years of this and manufacturing will be devastated: Argentine industry has lost 30% to 40% of competitiveness in the last three, four years”, said Federico Sturzenegger, president of the Buenos Aires City bank.
However Vice-president and economist Amado Boudou stressed the “blue” dollar phenomenon is connected to speculative activities of “not more than 100 or 200 thousand people” while “the government works for 40 million Argentines”.
“The official foreign exchange policies aim at having an exchange rate which is competitive for exports but also inclusive for consumption,” he added.
“Some may want a higher exchange rate, others a lower one, but the government must work for 40 million Argentines” Boudou added. He said “prices are not raised by the government” and defended the “controls” President Cristina Fernández is implementing to “look after the people’s pockets.”
Likewise lawmaker Roberto Feletti from the ruling coalition admitted the government is having trouble offering options to promote Peso savings.
“We are in a process toward the promotion of Peso savings with different instruments we are having trouble putting forward,” the former Economy Deputy minister added.
Referring to the ‘rush’ on the dollar he said that according to Central Bank figures, in 2011, “when the exchange market was open, only 12% of the population had dollar savings”.
Feletti questioned some business groups that “seek an abrupt devaluation to benefit their businesses”. He added “they are putting pressure on the government to destabilize it and force an exit”.