RIO DE JANEIRO, BRAZIL – The Argentine peso is in its umpteenth distressing situation. The “supercut” imposed last week on the foreign exchange market has blocked the Central Bank’s foreign exchange drain, but has exacerbated the anxiety of entrepreneurs, savers, and speculators.
The blue dollar (parallel, free or illegal, according to who defines it) exceeds 140 pesos, compared to 130 pesos earlier this month or, for the sake of comparison, 37 pesos two years ago. The official exchange rate, which is applicable to importers and exporters, stands at 75 pesos. The difference between the official and the parallel rate is increasing daily. Banks have not sold dollars for four days.
Argentine citizens can buy up to US$200 per month. But the eagerness to buy dollars (considered the best way to protect savings against inflation, or even to achieve a little extra income by buying dollars at the official exchange rate and reselling them on the parallel market) was depleting the country of its reserves.
Since last Wednesday, September 16th, in addition to the already-existing 30 percent tax on the purchase and sale of dollars, which in practice pushed the official exchange rate (75) to over 100 pesos per euro, a further 35 percent tax burden was created, discounting the tax on profits at the end of the year. But the efficiency of this new discouraging exercise is still unknown: banks have not sold US money for four days.
One of the conditions that the Alberto Fernández government established last week was that beneficiaries of state benefits would not be entitled to purchase the monthly US$200. And this is the problem banks are currently facing: they say it takes a long time to determine whether or not a customer is receiving benefits, so they chose to stop selling. For how long? No one knows.
The government’s decision, announced by the Central Bank, also impacts companies, which can only have access to 40 percent of the dollars they need to meet their debts in US currency. After reaching an agreement with the public debt creditors in dollars, the government in practice forced companies to renegotiate their own private debt to comply with the limitations on access to US currency.
This situation caused a new increase in country risk, which exceeded 1,300 points, a drop in the price of public debt bonds (3.5 percent on Monday) and a slight depression in the stock market.
Source: El País