The unofficial Argentine peso dropped to a historic low last Tuesday, exacerbating the crisis provoked by the resignation of former Economy minister Martín Guzmán earlier this month.
The nation’s black market exchange rate, known locally as the “dólar blue,” topped 300 pesos per dollar on Tuesday, according to the website Dolarhoy.com.
The contado con liquidación parallel but legal exchange rate, derived from buying international shares locally and selling them abroad, advanced even further to 308 pesos per dollar, also a record.
The drop of the parallel exchange rate pushes the difference with the official exchange rate to 137 percent. The gap has been around or beyond 125 percent for eight consecutive days, the longest streak since hyperinflation crippled the Argentine economy in 1989-90, according to Portfolio Person Inversiones (PPI), a local broker.
“It should be noted that during the financial turbulence of October 2020, the gap was maintained for only three days above this threshold, and later it was decompressed by a fiscal and monetary package launched by then minister Martín Guzmán,” PPI analysts led by Joaquín Bagues wrote in a memo to clients. The new Economy Minister Silvina Batakis, “does not appear to have the political backing to implement similar measures in the current scenario.”
The growing gap only adds fuel to the chorus of economists, investors and operators calling on the government to devalue the currency in order to reduce the imbalance between the official and parallel exchange rates. Argentines are already dealing with the prospect of 90 percent inflation by the end of the year after the departure of the economy minister triggered overnight price rises.
Argentina, which devalues the official peso daily through a system of “crawling pegs,” last week allowed it to depreciate at the fastest pace of the Alberto Fernández administration but continued to rule out the possibility of a one-off devaluation.
“The possibility of a one-off devaluation has increased considerably,” wrote PPI, “however, we believe that the government will find a way to avoid at all costs a sudden devaluation.”
by Bloomberg / Scott Squires & Patrick Gillespie