Argentina’s Economy Minister Sergio Massa Vows to Use All Tools to Stop Peso Slide

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Bloomberg — Argentina’s Economy Minister Sergio Massa vowed to staunch a collapse in the nation’s parallel exchange rates as the peso’s worth slumps to record lows.

The nation will use “all the tools of the state to stabilize this situation,” Massa wrote on Twitter, invoking plans to address currency troubles as officials renegotiate a $44 billion lending program with the International Monetary Fund.

Argentina’s key parallel exchange rate, known by its acronym CCL in Spanish, is in free-fall as locals rush to buy the US dollar amid rampant inflation, falling reserves and speculation over a devaluation of the official peso. The CCL parallel rate has fallen for ten consecutive days to a record low of 484 per dollar.

The peso is now worth less than half on the parallel market than it is in the official one.

(Tweet translation: We are going to use all the tools of the state to stabilize this situation, and in this sense, we notified the IMF of the restrictions that weighed on Argentina and we are going to change them in the re-negotiation of the program.)

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Argentina raised interest rates by 300 basis points as inflation runs at 100%. Price pressures are still elevated in the UK too, but are rising at about a tenth of that pace

“The market consensus assumes that if $5 or $10 billion do not appear, this economic policy will not continue until October. The Central Bank continues to lose reserves and does not have many more to lose. This crisis is more due to a shortage of dollars than to an excess of pesos, Juan Manuel Pazos, head of strategy at TPCG, said by phone interview.

Vamos a usar toda las herramientas del Estado para ordenar esta situación y en ese sentido notificamos al FMI de las restricciones que pesaban sobre la Argentina y vamos a cambiar en la rediscusión del Programa.
— Sergio Massa (@SergioMassa) April 25, 2023

Another parallel rate, known locally as the “dolar blue,” neared a record 500 pesos per dollar on the streets of Buenos Aires, according to dolarhoy.com, a widely used financial-news website that tracks the peso.

Inflation over 100% and a record drought are expected to push the country into recession, spurring plans to renegotiate the IMF program. Against this backdrop, the central bank’s foreign currency reserves fell to a seven-month low last week.

In past programs, the IMF has put pressure on Argentina to devalue its official exchange rate to encourage exporters to bring dollars back into the country and rebuild dwindling reserves.

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President Alberto Fernandez said last week he won’t run for reelection, upending a race within the ruling Peronist coalition to pick a candidate ahead of October elections.

On Tuesday, he blamed the political opposition for extra market volatility.

“This isn’t the first time we’ve seen this,” Fernandez said at a press conference at Casa Rosada. “It’s a permanent practice of Argentina’s political right-wing.”

Soybean exporters have so far sold $1.4 billion of the $5 billion that the government estimated they would sell at the higher exchange rate compared to the official that’s meant to encourage more shipments abroad.

“This program was not successful,” said Pazos. “The soybean producer prefers to keep the grains rather than sell them at 300 pesos because he believes there could be a devaluation.”