MercoPress. South Atlantic News Agency

“Blue” dollar knows no ceiling in Argentina

A devaluation of around 20% is expected after the Aug. 13 PASO elections

The “blue” (a euphemism for “black market”) dollar went up again Thursday in Argentina hitting a new all-time high of AR$ 570 at the end of the day as the Aug. 13 Simultaneous, Mandatory, and Open Primary (PASO) presidential elections loom over, it was reported in Buenos Aires.

At some point, the US currency traded at US$ 577. The gap with the official exchange rate stood at 105.10%, also a new maximum since May 30 last. So far in 2023, the informal dollar accumulates an increase of AR$ 221 after closing last year at AR$ 343.

According to financial circles in the Argentine capital, the Central Bank's (BCRA) dwindling reserves combined with the President Alberto Fernández administration's latest regulations, push the exchange rate upwards within a usual process of electoral dollarization accentuated by the expectation of acceleration in inflation.

Meanwhile, the credit card dollar for expenditures abroad with a 30% PAÍS tax rate and a 45% income tax surcharge stood at AR$ 509.82, while for purchases over US$300 -which have an additional tax of 25%-, it was quoted at AR$ 582.66.

The BCRA bought US$ 168 million in the single and free foreign exchange market (MULC), Thursday as the agricultural dollar -at a special rate of AR$ 340 until Aug. 31- contributed settlements for US$157 million.

In this scenario, Economy Minister and presidential hopeful Sergio Massa said that the sharp rise in the price of the parallel dollar was due to “speculative” behavior.

“There is a speculative thing, especially from some sectors, which first bet that Argentina was not going to be able to face its debt in pesos and it succeeded; that it was not going to be able to close its situation of agreement with the IMF and it succeeded; that it was not going to be able to transit the damage that the drought was doing to the Argentine economy by losing 21 billion of exports,” Massa argued from Córdoba. “And the last bastion they have left is to speculate on the blue dollar,” he added.

Massa also insisted the country's coffers had taken a blow 21-billion-dollars loss “due to the drought” while forecasting that July's inflation would be around 6%, although the official report will not be disclosed until after the PASO elections when Argentine traders also expect a devaluation of the Argentine peso of around 20%, according to a Bloomberg report.

“There is no doubt that the troubled South American nation will have to devalue its currency to cope with the growing crisis. Economists from the main opposition party say it is inevitable, companies are rushing to refinance and investors are increasingly hedging with cash, bonds, and futures, while the Central Bank consumes reserves to prop up the peso. In a July report, the IMF estimated the real exchange rate gap at 15-20%,” Bloomberg said.