Argentina: Chronicle of a default foretold, continued
As Latin America’s Leaders Hail Democracy In Havana, Cuba’s Beatings Intensify, but rather than try some networking at Davos, Cristina visited with what’s left of Fidel,
Argentina’s central bank has shed $1.25 billion of its dwindling foreign-currency reserves since it devalued the peso last week, even as the currency came under renewed pressure on Thursday.
he devaluation has so far failed to achieve what is believed to be its main goal: to close the confidence-busting gap between the official and black-market rates. The gap has narrowed in recent weeks.
The bigger the gap between black-market and regulated rates, the more the Argentine public fears the official exchange rate is overvalued and vulnerable to another devaluation.
Another measure aimed at deflating the black market also appears to be falling flat.
Starting Monday, Argentines were allowed to buy limited amounts of dollars for savings for the first time in about 18 months. The tax agency said it had authorized purchases of more than $137 million in dollars through Thursday afternoon.
However, Argentines opted to pay a 20% tax and withdraw $125 million from the banks instead of taking advantage of attractive interest rates and tax breaks for dollar deposits, the tax agency said. Many people still remember the 2002 crisis, when the government forcibly swapped dollar savings for devalued pesos.The Kirchner administration has borrowed more than $29 billion since 2010 from the central bank to pay its creditors, while government fuel imports and falling gold prices have also dented reserves.
If that money doesn’t stay in the banks, the central bank will likely take additional measures to stem dollar outflows. The central bank could takes losses of between $8 billion and $9 billion to individuals this year under the measure, according to estimates from BNP Paribas.
The trend has some investors and Argentines wondering if the country might struggle to pay its foreign debt and buy enough imported goods to keep its economy going.
As you can tell from the title of this post, I consider it a certainty.
Prior post: Argentina: Chronicle of a default foretold
Tags: Fausta's blog