MercoPress. South Atlantic News Agency

Argentine official devaluation of the Peso could reach 50% in the next six months

The rate of depreciation is 4% a month, based on November

The Argentine Peso at the official exchange rate could reach a depreciation of almost 50% by the end of the year at the current rate of erosion, which is also expected to have a downward impact on the parallel market or 'blue dollar, according to local experts.

 On Monday the US dollar at the official market took off at 6.16 Pesos, while the 'parallel' dollar was trading at 9,57 Pesos which means a considerable drop in the gap which during recent weeks was operating over 70%. This also means that during the month of November the dollar appreciated 4% in the official market, over 50% annualized and only similar to the policy adopted by the Argentine central bank at the end of 2008 when the subprime crisis consequences spread to the rest of the world.

According to consultants Quantum and Econometrica if the current government official depreciation rate policy is sustained during the next six months by May 2014 Argentina will again have a balanced exchange rate, in the range of the multilateral average between 1980 and 2013, with a monthly inflation of 2% and with the other reference currencies retaining standing value.

The theoretical exercise means the official US dollar should be in the range of 7.50 Argentine Pesos, and this seems to be the tendency as contracts for the end of July next year work out at 7.30 Pesos, and among privates, it climbs to 7.48 Pesos.

The policy has also established a new descending gap between the official and parallel markets, from 70% to 56%. Apparently if this policy of closing the gap is successful the Argentine government feels is could avoid having a multiple exchange rate, i.e. one for tourism and travelling overseas, another for manufacturing inputs, another for medicine and pharmaceuticals, etc.