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Dollar in Argentina ‘brushes’ 10 Pesos; urgent meeting of Cristina Fernandez economic cabinet

Saturday, May 4th 2013 - 04:18 UTC
Full article 54 comments
Banker Federico Sturzenegger, the situation is untenable. Banker Federico Sturzenegger, the situation is untenable.
Vice-president Amado Boudou: “speculative activities from 100 or 200.000 people” Vice-president Amado Boudou: “speculative activities from 100 or 200.000 people”

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”.

Categories: Economy, Politics, Argentina.

Top Comments

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  • ArmitageShanks

    ha ha ha ha ha ha ha ha ha ha

    Silly politicians. Don't mix economics and politics.

    May 04th, 2013 - 04:26 am 0
  • Anglotino

    The economic messages coming out of the Argentine government are farcical.

    It is not 100,000 or 200,000 people “speculating” on the currency. It is people attempting to hedge against inflation. But as the government continues to lie about inflation, contrary to all the facts stating otherwise, then people will do what they can to protect themselves from a government that is supposedly working for all 40 million Argentineans.

    I'm reminded of banks in İstanbul when I backpacked there. They were always so crowded. What everyone did was take their pay packet there instantly and exchange lira for US$ to hedge against inflation. Inflation was running around 100% per year and had been for a long time. They wouldn't save in their own currency because it was akin to throwing money away for every day you held it.

    This is what is driving the blue dollar rate. And instead of recognising that and tackling the problems that are causing actual inflation of nearly 30%; or tackling the further loss of competitiveness of an overvalued official exchange rate; or the collapse in foreign investment, the government keeps trying to find conspiracies.

    The conspiracy is, this government that cannot manage the economy.

    People get castigated on here for predicting economic problems in Argentina. But they are never told that they were right when they actually happen.

    The currency is collapsing.
    Inflation is out of control.
    Growth has stalled.
    Reserves are being used to pay debt and hence falling.
    Foreign investment is withdrawing.
    Poverty is increasing.

    Why do people feel they are defending Argentina's honour by denying these things?

    A country is bigger and more than just a government. This government has FAILED and is now trying to hide its failure.

    Argentineans or Argentine supporters are compounding the problem by ignoring it or making excuses.

    May 04th, 2013 - 05:13 am 0
  • Think

    (1) ArmitageShanks

    What a Turnipy comment…. You could as well have written:
    Don’t mix Ebony & Ivory.
    Don’t mix Man & Woman…
    Don’t mix Bread & Water......

    Anyhow, back to reality…..
    This “Dollar Rush” is quite different than the ones I have had the displeasure to witness before….. Some elements are similar, though:
    1) ”.... Argentine industry has lost 30% to 40% of competitiveness in the last three, four years..” (NA: because of the overvalued Peso)
    2) ”…. according to Central Bank figures……. only 12% of the population had dollar savings” (NA: only half of those savings were bigger than U$S 1.000)
    3) “….some business groups seek an abrupt devaluation to benefit their businesses, putting pressure on the government to destabilize it and force an exit”.

    Some elements are quite different:
    1) Argentina has, today, a sound, productive economy.
    2) Argentina’s reformed fiscal system is taxing those that deserve to be taxed.
    3) Argentina has a much reduced foreign debt and international credit dependence.

    Therefore, I am with the Government line of Mercedes Marcó del Pont and Axel Kicillof, on this one…
    1) Continue with the controlled and progressive devaluation of the Argentinean peso to maintain competitively.
    2) Let the ”100,000 speculators” play at will with their ”20 Million U$S a Day Blue Dollar Market” until they choke themselves.
    3) Register and investigate each and every ”big transaction in the “Blue Market”.
    4) Apply the full strength of the law against anybody ”investing” undeclared, untaxed and/or illegal gotten monies in the ”Blue Market”

    No Pasarán
    El Think, Chubut, Argentina.

    May 04th, 2013 - 06:01 am 0
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