MercoPress. South Atlantic News Agency

Argentina: “Blue” dollar rises yet again

Massa wants to avoid an abrupt devaluation ahead of the elections

The “blue” (a euphemism for “black market”) exchange rate between the Argentine peso and the US dollar rose over AR$ 20 -trading at AR$ 550/US$1- for an accumulated increase of AR$37 in the last 11 days after the latest announcements from the Economy Ministry, it was reported in Buenos Aires.

As per the new measures, the PAÍS Tax will be increased to 25% for all services, except for freight -which is taxed at 7.5%- health and education, and concerts -which are already taxed at 30%.

In the case of goods, the PAIS Tax will be 7.5% for all goods, except for medicines and fire-fighting materials; sumptuary goods -already paying 30%-, fuels and goods related to power generation and intermediate inputs related to the basic food basket, which will not pay the tax.

Through these last measures, the Government expects to increase tax collection by 0.8 points of GDP.

The Argentine government also launched a new agricultural dollar at AR$ 340 until Aug. 31.

Last Friday, the blue dollar had reached $529 and the Central Bank (BCRA) lost foreign currency again with the sale of dollars and yuans. On Monday, The BCRA bought US$123 million in the single and free exchange market (MULC), in a day in which the agricultural dollar contributed settlements for US$4.5 million. The Central Bank also participated in the Yuan round with sales worth 410 million, equivalent to around US$ 57 million.

Meanwhile, the credit card dollar (with a 30% PAIS tax rate and 45% profit tax) stood at AR$497.63, while for purchases over US$300 -which has an additional tax of 25%-, it stood at AR$568.72.

The increase in the “blue dollar” took place despite recent announcements that an understanding had been reached with the International Monetary Fund (IMF), which should represent an inflow of hard currency to the country's coffers.

The gap now between the “blue” and the official dollar stands at 94%, the latter closing Monday at AR$ 284.37.

The IMF described Economy Minister Sergio Massa's measures as positive while the last part of the agreement remains to be finalized. A spokeswoman for the organization highlighted the economic package announced by the Treasury to avoid draining foreign currency from the BCRA Bank and to shore up the fiscal front.

“We consider that the measures announced today by the Argentine authorities are positive,” an IMF spokeswoman told TN.

Massa refused to move forward with an abrupt devaluation and proposed a more “moderate” measure to consolidate the reconfiguration of the program.

The technical terms of the understanding are expected to be ready by Wednesday or Thursday, after which the whole project will be sent to the IMF's board for approval.