MercoPress. South Atlantic News Agency

Argentine peso slides under “managed devaluation”

Rate between U$ and Peso

The Argentine peso continued to slide against the US dollar on Monday having lost four cents closing at 3.62. This has been the non official Central Bank policy of “managed devaluation” to help boost the country's exports and keep pace with the currency depreciation of Argentina's main trading partner, Brazil's Real.

The gentle day by day erosion is expected to see the US dollar reach 3.90 to 4 Argentine pesos in the coming six months, which has been the ongoing demand of Argentina's exporters, both manufacturers and farmers: "a US dollar with a floor of 4 Argentine pesos". Argentine and Brazilian officials have begun a round of talks on bilateral trade because Brazilian industrialists claim Argentina applies obstacles to exports and Argentine manufacturers complain bitterly about the "invasion" of foreign goods, and in the case of Brazil spurred by a much more "flexible currency". The Argentine government is concerned with the magnitude of the trade misbalance with Brazil and has promised support for some labour sensitive manufacturing sectors. In this scenario the president of the Central Bank, Mart?n Redrado, a respected economist has managed to keep a reasonable independence in spite of the overwhelming influence of the presidencies of Nestor Kirchner first, and now his wife Crisitina Fernandez de Kirchner. Redrado has opted for the gradual depreciation approach because he fears scaring investors or bolstering an already highly sensitive but still incipient flight of money. Since the financial crisis broke out in the last quarter of 2008, the Brazilian currency has devalued in the range of 40% and Chile's, another strong Argentine trade partner in the range of 25 to 35%. Redrado must also carefully manage the gradual erosion of the Argentine peso against the US dollar because exporters are tempted to delay the conversion of greenbacks into the local currency.