Argentina is heading towards its seventh currency devaluation in 20 years, analysts say, as pressure builds on the peso and investors lose faith in the government’s ability to stabilise the economy. The country struck a deal to restructure $65bn of foreign debt in August, shunting debt repayments far into the future. But financial markets remain fragile. Bond prices have dropped back down to distressed levels, equity prices have collapsed and the gap between the official and black market exchange rates is widening. Analysts and investors think that with just $1bn in liquid reserves to hand, Argentina’s central bank will be forced to tighten restrictions on imports and reset the peso at a new, much weaker value.
The sectoral agenda took a new impulse last week to develop value chains in competitive industries to export more. The government is betting on the wine sector, and through a plan developed together with the companies, they hope to increase to $1 billion the sales of bottled wine. Instruments such as increasing reimbursements to 7%, soft loans and support in commercial missions integrated to achieve it.
The Central Bank (BCRA) sacrificed some $3.1 billion of its reserves in interventions on the local exchange market since last August 4; the figure comes from the balance obtained in the 45 wheels after that announcement, considering that the official data updated until last Tuesday, October 6: in 40 of them it had to sell. The reserve crisis feeds back by impacting on the exchange gap, the country risk rate (which today is close to 1400 points and rises 38% after the debt renegotiation) and accelerating the withdrawal of dollar deposits from the banks, a stock that contracted 10% (fell by more than $1.7 billion) since mid-September.
The gap between the official exchange rate and the other dollar quotations is ruinous for the Argentine economy. However, it is also a business reserved for some privileged groups that have access to the official dollar at an exchange rate of 78 pesos, while acquiring foreign currency through the dollar stock exchange exceeds 144 pesos, and the dollar "contado con liquidez" is 155 pesos. With this, the triangulation of official dollars between importers and "ghost" companies abroad has resurfaced—also, the incentive to corruption manoeuvres with official entities.
In September, Argentina again registered the second-highest inflation in Latin America, after Venezuela. Although the National Institute of Statistics and Census (INDEC) will only publish last month's data this Wednesday 14th, private consulting firms have already estimated that the result was around 3%.