Argentina's central bank is currently losing international reserves at an average of 47,5 million dollars per day or 8 million per hour, according to the latest figures on the bank's accounts which is increasingly used by the government of President Cristina Fernandez to honor foreign debt and finance the budget.
Last Friday following the payment of 224 million dollars on interests from sovereign bonds issued by the current administration, the level of reserves dropped to 34.278bn dollars, the lowest in six years and eight months, which is before Cristina Fernandez took office for the first time.
So far this year the erosion is above 9bn dollars, which is three times last year losses (3,1bn) and one and a half those of 2011, when the dollar clamp and a ban on hoarding the US currency was implemented. So far this year is only comparable to events of the major default of 2001, when Argentina lost 19bn dollars signaling the definitive end of the one dollar-one Peso conversion box.
All this is happening against all odds because the Central bank with its daily interventions in the market no longer manages to keep on hold the contained demand in the form of all kind of barriers to impede access to the greenbacks even when tourist and remittance dollars are strictly limited and so are for the financing of imports.
At the beginning of the year the Argentine central bank forecasted that with interventions in the domestic foreign money market it would finally manage net purchases equivalent to 12.5bn dollars, and even went further with expectations of recomposing the level of international reserves even after paying sovereign commitments in dollars.
But ten months later all those forecasts have collapsed: international reserves continue to drop and the bank just managed to recover 700 million dollars from the domestic money market. It also had to disburse 3.6 million dollars per day to impede that market forces establish the level of the official exchange rate for the dollar.
The purchase of US dollars in the local market has been profitable for the Argentine central bank in nine of the last ten years, with the exception of 2008, when the sub-prime crisis. For example in 2011, the bank profited with 3.4bn dollars and in 2010 with 9bn,
The bank also ignored or did not contemplate the incentives of the parallel market for the US dollar created by the clamp, since prices have always been between 50% and 70% above the official rate.
This has been particularly evident with tourism with a massive outflow of Argentines and contraction of incoming foreign tourists. A recent estimate from the Tourism ministry showed that landing tourists only exchange 30% of their dollars at the official rate, and for the rest appeal to the parallel market.
In effect data from the Ministry of Economy showed that in the first half of the year the Central bank had purchased 1.45bn dollars, while expenditure by landed tourists was estimated at 4.2bn in the same period. The difference was channeled to the parallel market.
This compares unfavorably with last year when the bank absorbed 54% of these sales and before the dollar clamp (2011) that percentage was between 75 and 80%.
Likewise the bank has offered grains and oilseed exporters to cancel their pre-financing loans in Pesos and replace them with dollar credits from foreign banks overseas. Furthermore they can turn the dollars into the 'whitewashed' bonds Baade, which are paid an interest that can easily compensate overseas financial costs. With this mechanism, which avoids Argentine banks, the central bank expects an inflow of 1.5 to 2bn dollars.