The phenomenon worries the IMF, whose head, Kristalina Georgieva, said the country faces “dramatic challenges”.
One month after the new restrictions imposed by the Central Bank of Argentina to access foreign currencies, the exchange rate tension in the local market does not subside and the price of the US dollar has reached a new all-time high in the informal market, widening the gap with the official value.
The episodes of exchange rate jumps are not new in Argentina, where its citizens have lived for decades pending the price of the US currency, since it is its safe haven value against a national currency that loses value in a scenario of persistent high inflation.
This phenomenon has led to periods of strong exchange rate restrictions, such as the so-called “stocks” that prevailed between 2012 and 2015, which were reinstated in September 2019 and which for a month has added new limitations to access to dollars in an attempt of the Central Bank to halt the sharp fall in its monetary reserves.
Even with these additional restrictions, since the imposition of the new restrictions, 1,653 million dollars of monetary reserves have been lost, which closed on Wednesday 14-O at 40,848 million dollars.
“Definitely, something had to be done. But the general consensus is that the measures have not been enough. The exchange measures were very negative and that can be seen in how the exchange rate continues to skyrocket,” Juan Tripier, senior manager, told Efe. from the consulting firm First Capital Group.
The gap phenomenon
The greater limitations for people and companies to buy dollars in the official market led to a greater demand for alternative channels (financial and the informal market) and a sustained rise in prices, increasing the difference in values with the official quotation.
Since the imposition of the new restrictions, the so-called “blue dollar” (informal) rose by 30.5%, reaching a record of 171 pesos per unit on Thursday 15-O, 107.2% more expensive than the value of sale to the public in the state bank Banco Nación.
That difference was 65.8% a month ago, just before the announcement of the new measures.
Even more worrisome to analysts is the 116% gap between the official wholesale dollar and the so-called dollar “counted with settlement” (CCL), which is achieved by buying stocks or bonds locally with Argentine pesos and selling them in dollars on Wall Street.
The CCL, which hit 167.43 pesos per unit on Thursday, is sought by companies and its value may have an impact on production costs, with an eventual inflationary effect in an economy where consumer prices grew at a year-on-year rate of 36 , 6% in September.
Last Wednesday, the Argentine president, Alberto Fernández, assured that there will be no devaluation, as predicted by many experts in the face of the alleged unsustainability of such a wide gap.
The phenomenon worries the International Monetary Fund (IMF), whose head, Kristalina Georgieva, after stating that Argentina faces “dramatic challenges and is in a serious recession”, was concerned on Wednesday 14-O about the “divorce” that “is expanding “between the official exchange rate and the other quotes.
“The gap between the” blue dollar “and the dollar that governs the single free exchange market reached 120% and nothing can prevent it from continuing to rise for a simple reason: that economic agents cannot find a place to protect their savings Citizens have taken the peso as a secondary currency, they want to get rid of it as soon as possible, “said economist Salvador Di Stefano in a report.
There are many reasons for the rise in the dollar. After a strong monetary expansion amid the health crisis caused by the coronavirus, investors with surplus pesos are looking to convert them into dollars in the absence of more profitable investment alternatives.
There is also demand for dollars for import operations, in a scenario where exports fail to take off.
“Argentina has a clear imbalance of pesos, the State spends more than it comes in and this is financed with monetary issuance. On the side of dollars, more come out of those that come in and the logical result is a fall in the Bank’s reserves Central. In short, there are excess pesos and dollars are scarce, “said Di Stefano.
The background is a macroeconomy with serious imbalances, in the context of a recession that is going through its third year, deepening the fall in 2020 to close to 12%, according to official and private projections.
“The underlying issue is confidence. There is a crisis of confidence in the face of different government measures. All companies are looking for ways to cover themselves. There must be a plan and concrete measures to support the private sector,” observed Tripier, from First Capital Group .